Interesting businesses are scythed at the knees because they neglect or choose not to put contracts in place. The conversations can be difficult, and you don’t know what you don’t know, and lawyers cost money, and “he’s a mate,” and the time isn’t right, and …
Ask someone you trust. They’ll have horror stories.
Two of the most common non-contracts are also two of the most important:
Shareholder agreements – Relationships do break down, one of you may want to sell, how will you deal with fundamental differences, or deadlock?
Intellectual property – Not a contract in its own right, but an element of so many. At the beginning, when there’s not much cash kicking about, you may have to call on some favours and rely on everyone’s best intentions. OK. But make it crystal clear who owns what and how everyone benefits in the short and longer term.
Big questions: who owns what, how long, how much, termination terms.
It might be a bit uncomfortable to push for contracts, and nobody wants to sign something today that makes them a fool tomorrow. It’s a risk, foolishness might make you give away more than you should. Without a contract, you risk everything.
Good people are always willing to make contracts. If you’re being passed around the houses, you might get hit with something big, and it’s probably just around the corner.
Skippy Strategy: Sit down with your opposite number (even if that description sounds weird), sort out the major terms. If you can’t agree, find an alternative partner or customer or supplier with whom you can.
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