Even for small and medium businesses (SMBs), the chances of a suit are more likely than you’d think: according to Forbes, 90% of businesses are engaged in a lawsuit at some point. Yes, do take proactive steps to separate business from personal assets, create a formal business structure (i.e. LLC, S Corp, C Corp) to beef up limited liability protection, and purchase business insurance that will cover legal fees. But, the truth is, there is no bulletproof strategy to getting around a suit. Should you find your business in one, how do you keep it afloat? With your reputation, sales figures and brand image up in the air, how do you encourage customers to keep coming back? Here are 5 ways to make the most of your lawsuit and help prevent customers from walking away. (Plus learn why a Wyoming Secretary of State business search is a good idea.)
1. How Much is Your Business’ Reputation at Risk?
Are you in a minor scuffle with a former disgruntled employee? Or is it a product safety-related class action lawsuit? First and foremost, discuss with your attorneys, PR, business partners, and board members what’s at stake.
Not every lawsuit needs a press statement from the CEO. In fact, sometimes any press at all can continue to add to the negative buzz. Take Apple’s class action lawsuit regarding handbag searches, for instance (which Apple won). Given Apple’s behemoth status and the little impact the suit would have on its sales, CEO, Tim Cook, never released a statement—because he didn’t need to. Long story short, ask yourself: do you need to release a PR statement? Will your customers benefit from that?
2. Prevent PR Statements from Contributing to the Negative Buzz
As we mentioned, not every suit needs a press statement. However, innocent until proven guilty does not always hold up when it comes to PR. Not saying anything could be the nail in the coffin that insinuates guilt with a capital G. If you have weighed your business’ reputational risks and, after much discussion, decide it is necessary to release a statement, do so with tact: focus on values that are critical to the company. Use this PR moment as an opportunity to apologize to customers—reaffirm your mission statement.
3. Perhaps It’s time for a Rebrand?
Use this situation as an opportunity to change your brand’s image and remind your customers where your company stands. Firstly, listen to what customers have to say about your company: sift through reviews (as hard as it may be) and browse social media. Also, go over buyer personas, and discuss with an experienced brand consultant ways to reform your business’s image to attract your target audience. Not to mention, conduct new target audience research and consider a rebranding campaign.
Know that several companies have gone through rebranding and come out more successful than before: Pabst Blue Ribbon, for example, expanded its audience to include the biggest beer market in the world, China. Harley-Davidson, meanwhile, made its product more reliable to better fit its image.
4. Boost Company Morale During Tough Times
Let’s face it, the stress of a lawsuit impacts more than just the boss: depending on the suit, fearful employees may be unsure if they’ll still have a job. Also, since resources, time, and money are put towards the suit (litigation lawyers cost US corporations over $20 billion per year), some employees may bear the brunt of the—huge—workload. Work-related stress alone causes more deaths per year than diabetes or Alzheimer’s. Plus, if left unchecked, employee stress could indirectly come through, hurting your brand and driving customers away.
Save your employees’ health and rescue your business by offering more company incentives: bonuses (if you are financially able to), company lunches, or more paid vacations. Coca Cola did this in 2000 after two years of mishaps: reorganization that threatened 40% of jobs at headquarters, tanking sales in Asia, product recall in Europe, and a discrimination lawsuit filed by minority employees in Atlanta. Coca Cola needed to boost now-spiraling employee morale; they announced several changes, including better compensation, closed Friday afternoons during summer, and paid holidays.
5. Try to Settle Disputes Outside the Courtroom
Stave off expensive legal fees, a potent brand-altering lawsuit, and hours spent in the courtroom by using alternative dispute resolution (ADR) tactics, from mediation and arbitration to neutral evaluation and a settlement conference.
Mediation and Arbitration
Mediation involves a mediator (neutral party) helping both parties work out the dispute both are happy with. Similar to mediation, a neutral person (arbitrator) hears each side to the argument; then, after going through evidence, makes a nonbinding or binding decision. Binding decisions are final and parties waive the right to a trial. Nonbinding, as its name suggests, are not.
Evaluation and Settlement Conference
Now a neutral evaluation is when an evaluator hears out the case and discusses the strengths and weakness of each side. From there, they try to reach a resolution. Last but not least, a settlement conference involves both parties (with lawyers) stating their side to a judge or settlement officer. The judge or officer then helps the parties come to a solution.
Final Thoughts: Reflect on Action That Lead to the Lawsuit
Faisal Hoque in a Fast Company article makes an important point that successful growth-oriented businesses have flexible leaders. Meaning, higher-ups reflect and are self-aware, honest with areas that went wrong and where and how to improve. For businesses caught in a lawsuit, use this situation as a learning experience: what action (or inaction) led to the suit? What would you do differently? What proactive steps can you take to prevent this or a similar situation from happening, and encourage customers to keep coming back? Has your business been involved in a suit? What steps did you take to keep customers? Leave a comment.
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