What’s your top recommendation for small business owners who are struggling to protect their business from potential risks or legal issues? We asked 17 experts, and they shared practical strategies to help safeguard businesses and avoid costly pitfalls.
- Implement Upfront Deposit Requirements
- Invest in Robust Contracts
- Prioritize Written Agreements
- Create an LLC
- Educate Employees on Risk Mitigation
- Implement a Comprehensive Risk Management Plan
- Create Clear Terms and Conditions
- Create a Risk Mitigation Checklist
- Focus on Cyber Security and Compliance
- Consult a Lawyer for Legal Requirements
- Comply with ISO 27001 Standards
- Ensure Airtight Documentation
- Prioritize Compliance and Legal Consultants
- Maintain Strong Documentation and Compliance
- Utilize Arbitration Agreements and Waivers
- Address Potential Risks Proactively
- Establish a Strong Legal Foundation
How to Protect Your Small Business
Implement Upfront Deposit Requirements
I’ve learned that proactive risk management through rigorous payment policies is crucial. Our most effective preventative measure has been implementing a mandatory 100% upfront deposit requirement for most clients, with a minimum 50% deposit for established businesses following thorough financial vetting.
Drawing from my mortgage lending background, I’ve applied similar due diligence principles to client assessment. Before approving any payment terms beyond our standard upfront policy, we conduct comprehensive financial reviews, similar to mortgage underwriting processes. This approach has proven invaluable in maintaining financial stability while scaling to serve major clients like Microsoft and Netflix.
Our risk management strategy extends beyond payment policies to include clear service agreements and comprehensive insurance coverage. We’re transparent about our role as a service provider rather than a financial institution, eliminating potential confusion about payment terms or service scope. This clarity has been instrumental in achieving consistent million-dollar revenue years while minimizing exposure to financial and legal risks.
Small business owners should prioritize establishing robust payment policies and clear service agreements before potential issues arise. Our experience proves that setting strict preventive measures early supports rather than hinders growth, creating a foundation for sustainable business expansion.
Daniel Meursing
Founder/CEO/CFO, Premier Staff
Invest in Robust Contracts
For small business owners, my top recommendation is to invest in robust contracts and policies upfront. We learned early on that unclear agreements with suppliers or partners could lead to costly disputes. We hired a legal advisor to outline clear terms for everything—from supplier contracts to customer returns policies—ensuring all parties understand their obligations.
One invaluable preventive measure is regularly updating our website’s terms of service and privacy policy to comply with evolving regulations like GDPR. We also perform quarterly risk assessments, reviewing data security and supply chain vulnerabilities.
A proactive approach, like ensuring adequate insurance and staying ahead of regulatory changes, has saved us from significant headaches. It’s about protecting against risks and fostering stakeholder trust by showing that you take your responsibilities seriously. A little investment in prevention goes a long way.
Peter Elliott
Promoter, MoreSports
Prioritize Written Agreements
Small business owners often underestimate the importance of setting up strong legal and operational safeguards until issues arise. My top recommendation is to prioritize written agreements for every business relationship, whether it’s with employees, clients, or vendors. Early in my career, I learned this the hard way when a handshake deal with a client led to scope creep and unpaid invoices. After that experience, I implemented detailed contracts that clearly defined responsibilities, timelines, and payment terms, which not only protected my business but also set clear expectations for clients.
Another crucial step is investing in cybersecurity measures. Small businesses are often targeted because they lack robust defenses. I once dealt with a phishing attempt targeting my business’s email accounts. Luckily, I had implemented multi-factor authentication and regular backups, so the damage was minimal. Since then, I’ve made cybersecurity training a part of onboarding for all team members to ensure vigilance across the board. These proactive measures—clear contracts and cybersecurity protocols—can save business owners from significant risks and legal headaches down the line.
Brandon Leibowitz
Owner, SEO Optimizers
Create an LLC
One of the first things I did to protect the company was to create an LLC to separate my personal assets from it. To make it more efficient, I used a company credit card, opened a separate business bank account, and made sure that every transaction was documented. I also created a comprehensive operating agreement that detailed my preferred practices. Even though I didn’t have any partners, it was helpful to clarify procedures, especially about how decisions and earnings would be managed. I felt calmer just by taking this step.
I also gave contracts priority. Before signing the contract, I had a lawyer review it to make sure all the details were clear, including payment terms, dates, and what would happen in the event of an issue. I had previously dealt with a subcontractor. All of my contracts are currently managed by me using a straightforward system that has tools to alert me when they are up for renewal. This prevents surprises later on and keeps things tidy. These actions may not seem like much, but they were essential to maintaining and safeguarding my company.
Jean Christophe Gabler
Publisher & Founder, YOGI TIMES
Educate Employees on Risk Mitigation
Invest in employee education, not just on workplace policies but also on recognizing and mitigating risks—they’re your frontline, and their knowledge is your shield. Teach them to spot red flags, like unsafe practices or improper documentation, which often snowball into legal troubles. A well-informed team often prevents issues before they arise, saving time, money, and stress.
I ensure my team is well-versed in redundancy—proofing client records and communications—backing everything up digitally, securely, and with clear access hierarchies to avoid loss or misuse of sensitive information. In my line of work, having a complete paper trail ensures transparency and accountability, which are priceless in disputes. This practice has saved us countless headaches when dealing with claims or navigating complex legal fields.
Jeffrey A. Preszler
Partner, Preszler Law Alberta
Implement a Comprehensive Risk Management Plan
I recommend implementing a comprehensive risk management plan that includes regular risk assessments, employee training, and proactive measures to mitigate potential risks. This can include creating clear policies and procedures for data protection, cybersecurity, and workplace safety. According to statistics, small businesses are often more susceptible to cyber-attacks and legal disputes due to limited resources and expertise.
Using a dedicated enterprise risk management platform can help streamline and centralize these efforts, offering better visibility into threats and improved decision-making.
My go-to trick is to regularly review and update our insurance policies to ensure we have adequate coverage for any potential risks that may arise. For instance, we have cyber liability insurance that protects us in case of a data breach. We also conduct regular employee training on best practices for handling sensitive information and maintaining a secure work environment.
At my company, we have also established a compliance team that regularly reviews and updates our policies to ensure they are in line with current regulations. We also conduct thorough background checks on all employees before hiring them to reduce the risk of potential legal issues. For instance, we have a strict anti-discrimination policy in place to protect against potential discrimination lawsuits.
Max Avery
Chief Business Development Officer, Syndicately
Create Clear Terms and Conditions
As I operate an online business, I’ve created clear and detailed terms and conditions for my website. While trying to keep the T&Cs simple, I’ve outlined what the customer can expect from us, what the limits of the customer options are, the order turnaround times, payment methods and what our refund and return policies include.
For example, as all orders are custom-made, it’s made explicit on the website that all sales are final, and payment is required prior to the product being dispatched. This helps to protect my business while also managing the customers’ expectations, which reduces the risk of conflict or disputes.
Additionally, I worked with a professional HR company to ensure my employee job descriptions and contacts comply with current employment law. The HR company provided prepared templates which can be amended to fit each scenario. Working with a professional HR company has negated the need to employ HR staff while also ensuring that I remain up to date with the legislation.
Bernie Dalzell
Owner, Roman Blinds Direct NZ
Create a Risk Mitigation Checklist
Create a risk mitigation checklist for every aspect of your operations, from workplace safety protocols to cybersecurity safeguards. Think of it as a living document that evolves with your business and reflects real-world scenarios that could jeopardize your livelihood. It’s not about preparing for every hypothetical—just the most probable and potentially damaging situations.
We’ve implemented a zero-tolerance policy for unsafe practices across all interactions—whether it’s handling sensitive legal documents or the way we design our office spaces to minimize physical hazards. This policy isn’t just about compliance; it’s about embedding safety and responsibility into every layer of our operations. Small steps like these have an outsized impact when it comes to avoiding preventable legal challenges.
Jason B. Javaheri
Co-Founder & Co-CEO, J&Y Law
Focus on Cyber Security and Compliance
Protecting small businesses from risks and legal issues require proactive steps that are practical, understandable and aligned with the business. Here’s my top recommendations for managing these challenges effectively:
1. Proactive Cyber Security
For small businesses, robust cyber security measures are essential to protect themselves from cyber threats and fraud. They don’t need to do a lot, by having some of the basics in place can go a long way to providing a decent level of protection. Implementing controls such as multi-factor authentication (MFA), antivirus software, a password manager, and setting up automated data backups can all really help. With just this handful of tasks, small businesses will be able to effectively manage their cyber risks without blowing the bank.
2. Streamlined Compliance
Legal protection for small businesses can be effectively managed by staying compliant with industry regulations. Specific compliance requirements for businesses vary by industry, but it may include adhering to data privacy laws such as UK Data Protection Act and the European GDPR, meeting health and safety standards, and ensuring tax and financial reporting is accurate. When handling client data, measures such as using cloud storage services with built-in encryption and access controls can be implemented to enhance compliance. Regularly reviewing practices that limit exposure to breaches can ensure that you remain aligned with evolving compliance requirements.
3. Clear Policies and Employee Training
Organizations that have clear policies in place and train their employees well can significantly reduce their overall legal and compliance risks. These policies can be as simple as a written employee handbook covering key areas such as workplace conduct, data handling, and emergency procedures can help establish expectations and accountability. For example, a marketing agency that I work with has introduced mandatory cybersecurity training for their team. In doing so, the staff were taught how to recognise phishing attempts and the correct ways to handle sensitive client data, reducing the likelihood of human errors leading to incidents.
By following these recommendations, small business owners can address potential risks before they escalate. These actions can not only protect businesses, but also create an environment of trust and increased credibility with clients and partners, creating a solid foundation for long-term success.
Elsie Day
Cyber Security Analyst, CyPro
Consult a Lawyer for Legal Requirements
As a business lawyer and entrepreneur, my top recommendation for small business owners struggling to protect their business from potential risks or legal issues is to first set up a consultation with a lawyer to understand their legal requirements and what legal documents they need to have in place.
Then work on implementing those preventative measures and recommendations such as setting up a business entity (LLC or corporation), obtaining necessary licenses and permits, ensuring website legal compliance, and using proper contracts with customers, clients, vendors, and employees. You can even grab legal templates from a lawyer to save time and money. Having proper insurance coverage is also crucial for protecting your business against potential risks.
All these measures help mitigate potential risks and protect your business from legal issues.
Remember legal is the glue that holds your business together so having a strong foundation will give you peace of mind and protect your business for long-term success. It’s also important to regularly review and update these preventative measures including your legal documents as your business grows and evolves.
Amira Irfan
Founder and CEO, A Self Guru
Comply with ISO 27001 Standards
As a business operating in the B2B shipment tracking SaaS niche, we handle sensitive customer data. This is necessary to deliver exceptional package tracking service. However, this crucial element of our business also exposes us to potential data breach risks and legal issues that may arise.
Our solution is to comply with and seek to be ISO 27001 certified. ISO 27001 is one of the most trusted data protection standards globally, designed to help cloud-based businesses like ours initiate and implement the safest data handling and processing protocols. Compliance with ISO 27001 standards gives us a rigorous benchmark to aim for and regularly test our cybersecurity protocols against.
Striving always to be compliant means implementing robust data protection in the company, which helps us mitigate cybersecurity risks and avoid legal battles with customers.
I recommend this solution for businesses operating in industries with such standards to help them avoid lawsuits and other legal battles.
Clooney Wang
CEO, TrackingMore
Ensure Airtight Documentation
Don’t wait for issues to arise before you act. Make sure your documentation is airtight from the get-go. From contracts to employee handbooks, clarity is your best defense. Make sure your contracts spell out every detail, from payment terms to project timelines. A good legal review upfront saves you headaches later.
I’d also say, invest in liability insurance tailored to your industry. For us, being in construction, it’s essential to have coverage for property damage and personal injury. Find an agent who understands your business and can customize your coverage.
Another big one is compliance. Stay on top of local laws and industry regulations. In our case, this means knowing zoning laws, safety codes, and even HOA requirements. We’ve built strong relationships with local permit offices to avoid surprises down the line.
Todd Bingham
Brand President, Top Rail Fence
Prioritize Compliance and Legal Consultants
As a CEO of a transportation company operating in the United Kingdom, my top recommendation for small business owners is to prioritize proactive compliance with local regulations and invest in working with reliable legal consultants and accountants early on. In our industry, having clear and robust contracts with customers and suppliers has been key to managing disputes and safeguarding our business interests.
We also conduct regular audits of our processes to identify gaps before they become critical issues. Additionally, we organize regular team training sessions to ensure employees understand and adhere to legal and safety requirements, reducing operational risks effectively.
Anam Barkan
CEO, HireGO Minibuses
Maintain Strong Documentation and Compliance
Strong documentation and proactive compliance are the greatest ways for small business owners to reduce risks and stay out of problems with the law. In our case, this meant making certain that all contracts, employee agreements, and company policies are precise, comprehensive, and current.
To remain in compliance with evolving legislation, examine your legal documents with a lawyer on a frequent basis. Spend money on insurance that is specific to your company’s requirements, such as professional liability or general liability insurance. This insurance might serve as a buffer against unforeseen claims.
I’d also recommend creating a risk management strategy and educating your employees on procedures to reduce any liabilities, including cybersecurity or workplace safety guidelines.
Lauren Leijten
CEO, Owner, RealSupps
Utilize Arbitration Agreements and Waivers
My number one recommendation for small business owners is to utilize arbitration agreements and class-action waivers for their employees. Wage and hour and other employment-related lawsuits are huge potential risks for small businesses. Staying up to date and complying with a myriad of federal and state employment statutes and regulations is difficult, even for medium and large businesses.
Oftentimes, an employee will be entitled to attorney’s fees for relatively minor violations. For example, in California, $10,000 in rest-and-meal break violations could easily generate an attorney fee award of $100,000+. And, even worse, may states allow employees to pursue these types of claims in class or collective actions. So that $10,000 mistake could snowball into a $1+ million liability.
An effective way to substantially minimize the impact of these types of claims is to use arbitration agreements with class-action waivers for all employees and contractors. Properly drafted, this will ensure that any alleged claims are resolved on a 1-to-1 basis in a private arbitration.
Drafting these types of agreements must be done with care. The law is constantly evolving and creative plaintiffs attorneys look for novel ways to get out of them.
Robert Theofanis
Attorney, Theofanis, Ltd.
Address Potential Risks Proactively
My top recommendation for small business owners is proactively addressing potential risks by focusing on three key areas. First, use well-drafted liability waivers and clear contracts to limit exposure to disputes and claims. Second, ensure you have appropriate insurance tailored to your business, such as general liability or professional liability coverage. Finally, protect your intellectual property with NDAs and IP agreements to secure confidential information and ownership of your creative work. These steps help safeguard your business and reduce avoidable legal risks.
Adam Yohanan
Small Business Lawyer, Yohanan Law
Establish a Strong Legal Foundation
The top recommendations will depend on each business, their unique situations, and risk profiles.
With that said, generally speaking the top recommendation is to have the right legal foundation in place. This includes establishing a legal entity to separate personal and business liabilities, trademarking your brand, and having clear contracts for services and products.
Additionally, securing insurance coverage for key areas to protect against general and professional liability can help mitigate risks.
By proactively addressing these legal issues, you’re protecting both your business and personal assets from potential threats.
Brian T. Edmondson Esq.
Internet Business Lawyer, InternetBusinessLaw.com
