Statistically speaking, most businesses today are small businesses. Small businesses are also the most vulnerable to market fluctuations or to any internal or external issues that can arise and threaten their operations. Competition at this level is fierce: corporations can afford to lower prices, while small businesses can’t. Moreover, the new global market makes it easy for foreign companies to compete with local, small businesses.
But small businesses are also very vulnerable in the event of a dispute. Disputes are costly – both in terms of time and financially. The traditional way of handling disputes involved a negotiation process with lawyers present. In case no amiable solution can be found, the case goes to court.
Proceedings can stretch over months or even years, and parties will need lawyers for the entire duration. As we all know, lawyers are pretty expensive, and the longer the proceedings drag, the more they will cost. Additionally, a dispute with one of your collaborators interrupts supply to your customers, or means you’re losing a big client. That means you need to put effort in finding new customers and new clients, which translates in wasted time and financial losses.
But going to court also has other disadvantages for small businesses. The parties don’t have the possibility of reaching an understanding any longer, and the decisions rests in the hands of a jury with little, if any, experience in the matter.
Most often, small businesses target narrow markets and work on tight budgets. The main problem here is that big companies can afford the costs easier, and they can outlast small businesses in a dispute.
This is why alternative dispute resolution methods are essential for small businesses in the event of a dispute. Today, an increasing number of companies include specific clauses which make mediation mandatory should a dispute arise. Mediation helps the two parties reach an agreement by discussing the issue. It’s not only focused on problem-solving, but also on building a stronger relationship between the parties and on maintaining mutual trust.