| Friend,
So, it's time to wrap up this series on protecting your dojo. What this series has been about is risk mitigation--taking steps to reduce the adverse affects of risk, so you don't spend time worrying about risks needlessly.
All business involves risk, so the best you can do is reduce your exposure and take steps to reduce the ill effects should some undesirable event occur.
Overview
First in this series, we spoke about various threats to your dojo, and where they can come from. This includes legal threats, financial threats, and threats to your business reputation.*
Legal threats can include, but are not limited to: - Personal injury lawsuits
- Sexual harassment claims (against you or an employee)
- Contract disputes (can happen with clients or contractors)
- Regulatory non-compliance (typically with regards to employment law)
- Fraud
Financial risks are generally caused by making poor business decisions or failing to take standard precautions in your business. Common situations that can lead to financial risk include: - Entering a partnership
- Not creating a corporate entity for your business
- Entering a lopsided contract (leases are the most common)
- Lack of or insufficient insurance coverage
Basic Legal Concepts
After that, we discussed some basic legal concepts and terms: - Criminal Law - Criminal law concerns offenses against the state... in other words, what you would traditionally think of as "law breaking."
- Civil Law - Civil law deals with disputes between individuals concerning their legal obligations to one another. Lawsuits are carried out in civil court.
- Administrative Law - Regulatory law, the "third branch" of the legal system that involves the administration and enforcement of regulations that stem from legislation.
Criminal Legal Issues
Concerning criminal issues, the most common steps a martial artist should take to protect themselves include the following: - Know the laws that govern self-defense in your area, so you can avoid being charged with excessive use of force (assault and or battery) in a self-defense situation.
- Get to know a criminal defense attorney and keep their card on you at all times. (Note: If you carry concealed, purchase a firearm owner's legal defense policy, and carry the contact card in your wallet.)
- Act professionally and document everything in your school (security cameras are the best way to do this). That way if you are ever falsely accused of sexual harassment or sexual assault, you'll have proof that can exonerate you, saving you from an extended legal battle.
Civil Legal Issues
Concerning civil legal issues, we covered the following: - Contractual disputes - If two people have a legal agreement between them (a contract), and one of them breaks the contract, the other party has the right to sue them to remedy the situation. Which leads us to...
- Torts - "...a civil wrong that unfairly causes someone else to suffer loss or harm resulting in legal liability for the person who commits the tortious act.” A tort is the reason for a lawsuit, and the person filing suit must prove it to be factual in court to receive compensation or some other legal remedy.
Remember, there are four components of a tort that must be present in order for a plaintiff to successfully sue for damages (meaning, monetary compensation): - Duty - The plaintiff must show that the defendant had some sort of legal duty or obligation to the plaintiff.
- Breach of duty - And, they must show that the defendant failed in that duty somehow.
- Causation - also, they must prove that the defendant caused them loss or injury.
- Injury - and finally, they must show actual damages stemming from the loss or injury.
There are three categories of torts: - Negligence is when a tortfeasor (the person committing the tortious act) does not take sufficient care in fulfilling a duty owed to another party. This is a very common reason for someone to sue a business owner. For example, if a student was injured in class while you were in the office answering the phone, that student could easily make a case that you were negligent in your duty to protect them from harm.
- Strict liability is a bit different than negligence, because it covers certain legal situations in which the plaintiff does not have to prove fault or negligence on the part of the defendant (or even intention to cause harm). The plaintiff only has to prove that the injury or loss occurred.
- Product liability is a sub-category of strict liability. When it comes to products defects that cause injuries, the law imposes strict liability on the manufacturer and seller. So, if you sell a defective martial arts training product to a student, and they are injured while using the product, you might be sued by that student under the legal principle of strict liability.
- Intentional torts include, but are not limited to: assault and battery, slander and libel, and infliction of emotional distress. Each of these acts are conceivably something that could happen in the course of running a martial art school.
After discussing civil legal issues, we covered the law of agency, which deals with persons who commit acts while acting as an agent of another. Under the law of agency you are liable when any person who is acting as an agent of your school commits a tort against another person.
Preventing, Preparing for, and Protecting Your From Lawsuits
After that, we discussed ways you can prevent lawsuits, including: - Professionalism
- Providing a safe environment for your students
- Monitoring what goes on in your school when you're not on the floor
Then we discussed ways you can prepare to face a lawsuit: - Set up a legal corporation for your business
- Keep personal and business monies separate
- And, run your business like a business, paying yourself a regular salary as an employee, and taking profits as bonuses at the end of the year
Protecting yourself against lawsuits involves implementing two simple strategies: - Using iron-clad liability waivers that are reviewed by a local attorney who is familiar with the laws in your area
- Getting adequate liability insurance coverage for your school
Financial Risks
In mitigating financial risks, there are a few simple steps you should take: - Limit financial access to yourself and your spouse
- Take out life insurance, key man insurance, and disability insurance policies, and have all legal documents in place (wills, etc.)
- Pay off your debt, and set up a rainy day fund, an emergency cash fund, and a retirement account as soon as possible
Partnerships, Employees, and Regulatory Pitfalls
Miscellaneous risks can come at you from unexpected directions. A trusted business partner can try to force you out of your business. A valued employee can quit and try to take all your students with them. Or, the labor department or workforce commission can fine you for being out of regulatory compliance.
Avoiding these pitfalls requires diligence and common sense: - Don't enter a business partnership, ever
- Make sure your employees go through background checks, and that they sign legal documents to prevent lawsuits, defections, and other potential issues
- Never become romantically entangled with employees, ever
- Know the laws and regulations you must follow as an employer, and observe them without fail
- Don't try to skirt regulations; treat employees as such and pay taxes and withholding on their wages
What If You Can't Teach?
The continuity of a martial art school in the event that the owner is ill or injured for an extended period is something for which most school owners don't prepare. Thus, they are often left without an income in the worst possible circumstances.
Yet, this can be avoided. Preparing for such an event involves two steps: - Setting up systems in your school and documenting them
- Hiring reliable employees and training them in those systems
Your goal should be to create systems and have staff in place that can perform every function in your school, regardless of whether or not you are present.
This will ensure that, if you are injured or ill for an extended period, that your school will continue to operate and provide income for you until you are well, or until you are able to otherwise resolve the situation.
Getting A Fair Lease
Finally, we covered leases and steps you can take to get a fair lease: - First, find the location you want at a rate you can live with, and check with the other tenants to see if they are satisfied with the property manager or landlord.
- Second, hire a professional to help you negotiate the terms of the lease, either a real estate attorney or a broker/agent.
- Third, know the terms of the lease. Get your rep to explain everything to you, so you know what you're signing.
- Fourth, get the lease reviewed on final time before you sign it. And, make sure what you sign is what you agreed on.
Final Thoughts
Again, all business involves risk. Your job as a business owner is to mitigate your risk--to reduce the adverse impact of an undesirable event on your business and life.
I know we covered a lot of ground in this series, and the steps I suggest can seem overwhelming. However, if you take things one step at a time, you'll find that it's relatively easy to knock this stuff out over a period of months.
And, doing the work now can prevent an undesirable event from occurring, or greatly lessen the negative impact on your business and life should such an event occur.
Until next time,
Mike Massie MartialArtsBusinessDaily.com
Quick-start Guide to My Books and Resources: - Looking for a list of books and resources I've written? Click here! - Need business coaching to grow your dojo? Click here…
P.S. - *I'll talk about protecting your business reputation in my next email series in a few weeks. When I looked at the scope of the topic, I decided it required it's own series to cover properly.
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