Lone Star Park by Travis Isaacs (Creative Commons License)
When it comes to deciding who will be your business partner or a business investor, choose your associates with as much care as you would a romantic partner. When it comes to selecting these people, don’t you just look at their reputation, their track record, or their wallet. Look at who they are as a person. Look at how they work in relationships with others, their values, and their personality. If you are going to be intimately involved with this person from a business perspective, it should be someone you enjoy being around and who has values and goals that are compatible with yours.
When Gary Vaynerchuk evaluates startup owners and businesses for investment purposes, he says he bets on the jockey, not the horse. That makes perfect sense because there are times of great ideas out there but a much smaller group of people who can take one of these ideas and execute on it in effectively. As Gary would say, “Ideas are shit. Execution’s the game.”
Think of your business relationships as a “business marriage.” These are people with whom you will be legally connected and have fiduciary obligations to each other. And if things don’t work out, you will need to get a “business divorce” where one partner buys the other out or when the partners decide to shut down the business and divide whatever assets are left. I’ve worked on collaborative divorces where the owners realized that they could no longer work together on a business but they could agree on what terms they wanted for their separation. I’ve also worked on contentious business divorces where each side has legal representation and the contract negotiation is longer and the parties are much more antagonistic.
In many cases, many problems in a business relationship or the business divorce could have been avoided had the parties verified that they were on the same page from the beginning of the relationship regarding their goals, how they were to run the business, and how they will resolve problems. Unfortunately, too many people use poorly written contract templates they find on the Internet or proceed without one at all. They don’t understand that it is cheaper and easier to write an effective contract with a lawyer at the big getting of a business relationship then for each side to have to hire someone to negotiate their business break up when things don’t work out.
Choose your jockey (business partner) with care. If they treat other people poorly, they will treat you poorly. If you think you can manage or manipulate a person’s behavior, you are already asking for trouble. If your prospective partner balks at the idea of solidifying your relationship with an operating agreement or investor agreement, turn and run away. No one’s money is rich enough to make up for the headaches and heartbreak that result from not having a proper contract in place. In fact, the appropriate response to a request for a contract should be something along the lines of, “Duh.”
If you want to chat more about the importance of business contracts or how to write one to accommodate your needs, you can contact me directly or connect with me on Twitter, Facebook, YouTube, or LinkedIn.