REAL TALK: Are you Prepared if Your Business is Sued?

It is estimated that over 627,000 new businesses are started each year; a number that is rapidly increasing with technology, social media, and the ability to create businesses purely online. On top of that, statistics show 90% of ALL businesses are involved in a lawsuit at any given point in time during their operation.

90%! Whether you’re currently a large business, small business, have thousands of clients knocking at your door, or just starting out, you’re a business exposed to being sued, and are held to many of the same rules and regulations as Fortune500 companies. While you may be in the 10% now, there’s a good chance you’ll encounter some kind of lawsuit in your business, and it’s important you are prepared for if and when it does!

So…what are my top tips?

#1: Get a GOOD Client Agreement in Place

The #1 thing I recommend you get in place is a GOOD client agreement or contract. Not one that has been given to you by someone else that *might* work for your business, or one you have written yourself by cutting and pasting online. As business owners, there is real money at stake (and a lot of it!) if you make crucial errors, so it’s not the time to play lawyer or try to save costs and reuse an agreement from someone else. If you don’t have one that was written by a lawyer specifically for you, or a template that you purchased from an attorney in the online space (like myself) – add this to the TOP OF YOUR LIST. Templates will run you about $400 (get yours here), hiring an attorney will likely cost about $1,000. Either way – far less than the cost of a lawsuit!

#2: Remove ALL “guarantee” language from your sales pages and marketing

Second thing: watch what you say in sales pages and in discussions with potential clients regarding guarantees and over-promising. In the online space and coaching world, it has become common place for business owners to promise revenue milestones, numbers of clients they’ll gain by joining a program, or guarantee specific transformations in their business or life.

While it may be 100% true that some (or even most!) of your clients have experienced these results, it’s extremely important to remember that not everyone will likely get those results. You don’t have control over what they’ll do: how much time and energy they’ll put into your program or coaching, what else they have going on, what it is they’re trying to achieve, etc. and the last thing you want is for a client to start claiming it’s YOUR fault they didn’t get results, especially when you’ve guaranteed them on the sale page.

It’s better to have fewer clients who are clear on what you’re offering and want your services regardless of guarantees, than to fill up a program or package with clients who came in based on your guarantee of a certain number of clients, sales, or specific transformation.

Why?

A couple reasons. First, it’s actually illegal to engage in this type of “guarantee” advertising as the FTC has come out with clear laws relating to advertising and what counts as false or deceptive marketing.

Second, it’s a fast way to create disgruntled clients who give their hard-earned money expecting a large return on investment, a rapid transformation, or to hit certain numbers, only to realize after the fact these things are outside your control, and you cannot guarantee their success within your program or package.

So yes, while guarantees may be flashy and eye-catching, it’s a good idea to take them off your sales page and out of your marketing.

#3: Have GOOD Contractor or Employment Agreements

Have a GOOD contractor agreement ready, for when you are hiring contractors to perform work in your business. Often times lawsuits may stem from contractors or employees who are upset about being terminated, or have an issue with some aspect of the relationship. Just like with the client agreement, it’s vital to also have good, clear, well-written contracts between your company and your contractors. These relationships are typically project-based, and you have much less control over and interaction with the contractor. Making sure you are both on the same page from the beginning, and have a proper agreement that reflect that, is HUGELY important!

 If you’re going to hire employees (which are different from contractors), make sure you have an employment agreement that clearly and accurately describes the employment relationship, terms associated with employment, and how the employee may be terminated.

While a lawsuit may not be completely preventable, you can certainly take a LOT of the risk out of the equation by following these three tips.

Need templates for any of these documents? CLICK HERE

*Disclaimer: While I am a licensed attorney, I am not your attorney, and this does not constitute legal advice. This blog post is intended as legal information only, which may or may not be applicable to your personal situation. Please consult an attorney if you need legal advice on any of the above, or have any specific questions regarding your business

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