By Marti Ashcraft on January 27, 2012
I can’t tell you how many times clients have come into my office and said “I am starting a new business with my best friend [brother, sister, mother, cousin, etc.]. We have a great idea. We share this vision. We have a great relationship. We are never going to have any problems about how to handle our business relationship. We don’t need a contract.”
Guess what happens six months later when the problems begin. One person hasn’t quit his full time job because he can’t afford to and the other person, who really couldn’t afford to quit his job but did, is shouldering a disproportionate amount of the responsibility for the new venture. The person who still is working his full time job is an “equal partner” but isn’t contributing equal time, effort and energy to the new venture but thinks he still is entitled to an equal voice in how the business is managed, and more importantly, when the new business starts making money, he believes that he is entitled to an equal share of the profits. The person who has been handling the workload for the new venture doesn’t see it the same way. After all, since he has been contributing the majority of time, effort and energy to make the business work, shouldn’t he be able to call the shots from a management point of view and be paid for his efforts doing so. But there is no written agreement defining their respective duties and responsibilities, rewards for the success in the business, or rights and obligations in the event of its failure.
Business is business, no matter with whom you are doing business. I understand that, at first, it may seem awkward to have to address business issues in a direct and more formal manner with someone you have a personal relationship. But trust me when I tell you that, after you overcome that initial discomfort, you will feel better knowing that the parameters of your relationship are clearly defined, and everyone knows what to expect. As counterintuitive as it may seem, in the end, it really does make everyone feel better.