Sales Issues – Reducing Business Risk


Understanding Key Business Risk issues

As a sales rep, you should be well versed in general business issues. Understanding risk issues from a business owner’s perspective enables you to talk at a much higher level about the impact of your product or solution on the business versus just talking features and benefits.

To understand risk issues, I asked several lawyers, Wade Richardson, a defense attorney, and Jon Rutledge, a general business attorney, to give me their input on issues that they address with business owners.

Jon counseled about Company Agreements and contracts.

New Business:

  1. Dealing with liability protection and tax issues (choice of entity and why) are the obvious issues that need to be discussed with a new business owner. Discussing foundational risk prevention such as general liability insurance/malpractice insurance/E/O coverage, is key to protecting a business.  Finding a CPA who will think like a business owner is important. CPAs can prevent you from not having unwanted dealings with the IRS but, more importantly, can help you make wise financial decisions in running your company.
  1. A well-drafted Company Agreement, especially when there is more than one member, is essential. It’s extremely important on the front end to memorialize the actual agreement of the members and to put in writing how the business will be governed moving forward. This prevents legal issues if partners have a disagreement or even a falling out.

Established Business:

  1. Are you using the services of any consultants/outside sales folks, etc that are not W-2 employees? If so, it is a must that those individuals are characterized as “independent contractors” and that there is a formal agreement between the two parties.  Following these basic procedures can save a lot of unnecessary and usually preventable headaches for the business owner.  These headaches typically include unnecessary tax issues as well as potential liability exposure to the business.
  1. Even with existing businesses, do the members have a Company Agreement that governs how the business will be managed/sold/dissloved etc? If not, it is very important that one is drafted so these matters do not become problems down the road.
  1. Any services between the business and a 3rd party need to be put in writing through a formal contract. This prevents liability issues and also is a framework from which to handle disputes. Doing business on a handshake may sound great and full of trust, but people often forget what they agreed to do.


Wade Richardson weighed in on litigation.

Business Litigation: What to do if you are sued:

1. Be ready – Most of the time lawsuits are not expected. You assume you can work it out. But, there are cases where disputes can’t be amicably resolved, then they can detrimentally affect the bottom line of your business. Having legal relationships established helps reduce the initial stress of being served.

2. Do not go it alone- you should never contact the other side (the complaining party or the attorney) without first obtaining advice and counsel from your own attorney. There are several risks associated with direct contact with the opposing side, and usually there is little that can be gained. By involving an attorney on your behalf as early as possible, you will gain advantage of time – to muster evidence, come up with a strategy, and to respond to the lawsuit appropriately.

3. Hire a lawyer – When you are notified of a lawsuit, immediately contact and retain an attorney. Lawyers are advocates. You need someone in your corner to review this new threat to your business and explore the best response to the lawsuit. Also, your lawyer will know how to handle the deadlines imposed upon you by the lawsuit.

4. Notify your insurance agent – All insurance policies require timely notice of any event that may impact coverage. The insurance company may actually pay to defend you or may cover a portion of your legal expenses.

5. Defend – Your attorney can help you be proactive in gathering information and evidence under your control that will help you defend the lawsuit. This information may include any documents reflecting communications with the claimant, and identifying any potential witnesses to your dealings with the claimant.

6. Keep your options open – Just because a lawsuit has been filed does not mean that there will be a full blown trial with a winner and loser. Most cases are resolved either through motion practice – asking the court to rule in your favor as a matter of law- or through settlement.  Be sure to select an attorney who can handle the case from beginning to trial, if necessary.

Obviously, there are many issues surrounding being served with a lawsuit that can only be addressed by an attorney, and that is why it is imperative that you retain a strong attorney advocate who you can trust to protect your interests.

In conclusion, just as a lawyer is a business advocate, sales reps should be business advocates. I recommend having a strong referral network of CPAs, attorneys and other consultants so that you can refer them when one of your clients has a specific business issue that needs addressing. Having a strong network also gives you credibility and increases their level of trust in you.


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