As many of you know, I often do public speaking for business groups. This is one of the most popular topics I present, so I thought I would share some of the ideas with you. This will be the first of a seven part series discussing each of seven mistakes I have witnessed and helped clients overcome over the years.
The first mistake I have often seen is not having a written agreement with a business partner. People treat the start of a business much like the start of a marriage, which, in some respects, it is. They see it as joining together on what they hope will be a lifelong successful venture that grows and builds harmony. They think that no “pre-nuptial” business agreement is needed because those in the management group are “best friends who would never fight” or are too busy starting the business to take the time drafting a guideline for its operation.
Much like marriage, unfortunately, all too often the business wedding ends up needing counseling or in “divorce”. Just like in marriage, that is the worst time to try to work things out.
I work with my clients when they are starting the business and getting along to set out an agreement for how they will operate. Who will have final say on day to day matters? If the managers disagree on a major issue, how will the disagreement be resolved? If a third party will help resolve the matter, whom will it be? What happens if one of the managers dies or wants to leave the business? Do the other owners want to be in business with the deceased owner’s spouse or significant other? Can an owner sell their portion of the business to anyone they choose?
These are just some of the issues which must be decided and the best time to do it is when the owners are just starting out and before they walk down the proverbial aisle to their business wedding. It is far less expensive to work out the agreement at that time than it is to fight over it when problems arise. Remember: Sooner or later, you’re going to need Tatar!