Fred Steingold on Wholesale/B2B

By Fred Steingold for Real Small Business

Q: My small business sells services to other small businesses. We do good work and rarely receive any complaints. Still, I'm concerned about getting tangled up in a lawsuit if a customer has a serious disagreement with us. Any suggestions?

A: Sooner or later, almost every business is likely to get into a dispute with a customer. But it doesn't have to turn into a lawsuit. Often you can resolve a dispute through negotiation, in which you and the customer compromise. In really sticky cases, you can bring in a mediator -- a skilled outsider who can help you find a middle ground.

If neither negotiation nor mediation works, there's another alternative: Stipulate in contracts that all disputes must be arbitrated. (If you don't have a clause in your contract, you and your customer can simply agree to arbitrate -- even if a lawsuit has been started.)

In arbitration, you get help from a neutral third party who can sort out the facts and make a legally binding decision. It offers many benefits. For one thing, it's usually much less expensive and time-consuming than traditional litigation. What's more, it's private: There are no public records for nosy outsiders to see and no trials in open court. And arbitration usually avoids the adversarial tone of a lawsuit. Result: You may be able to continue doing business with the customer.

What are the downsides? First, you waive the right to a jury trial. And, except in rare cases, you don't have the right to appeal. But, usually, the benefits of arbitration outweigh the potential negatives.