“Perfect partners don’t exist. Perfect conditions exist for a limited time in which partnerships express themselves best.” – Wayne Rooney
I’m sure you have heard comparisons of starting business with someone to getting married. It’s really not that far off.
Businesses come from ideas – over beers or not over beers (there is no other way…) and there is a lot of vetting that needs to go into these endeavors beyond the “cheers – let’s do this” phase.
One of those critical phases that should be addressed very seriously early in the business is the Operations Agreement – basically everyone’s agreed upon commitments and criteria for the overall operation of the business. This should also include (MUST INCLUDE) a process or protocol for the, heaven forbid, bad times. This should cover buy-outs, deaths, transfers of ownership, expulsions, and the sort. I won’t go into details as there are a ton of resources online – even calling them prenups! Here is one for instance.
You never want to plan for this, but you should. Simply the act of going through the motions of creating these agreements will flush out tons of new pieces of information about your partners and will often create a stronger bond – trust me – it’s very worthwhile.
And why am I writing about this? Well – two reasons.
1) We’ve hit a bit of a rough patch with the founding partners of Snapden and we are seriously happy we did the work upfront as the buy-out currently happening could have easily gotten nasty without the documentation we put in place almost 2 years ago. Our agreement then is settling disagreements now. Our foresight is saving friendships.
2) This makes me recall another venture that I was ready to become involved with several months ago. The team seemed great, the idea was solid, a plan was set in place but when I suggested we all sit down and knock out an operation agreement, two members were in and two members fought it. One of those members was very against it, but with no good explanation. To me this was a red flag and I opted to part ways before too much time had been invested. It turned out that about 6 months later that member screwed the other original team mates out of the business and since there was no operations agreement in place there was nothing anyone could do but take a loss and walk. I dodged a bullet and to this day and into the future I will always ensure there are agreements in place upfront to cover all aspects of a future business. And in the end – I don’t want to work with individuals who wouldn’t take part in this practice. You shouldn’t either. We should all hold each other to a higher standard.
Not many people like having these difficult ad hypothetical conversations so early in a business, but trust me, you’ll be glad you did and you’ll be wiser for it.
“Commitment is an act, not a word.” – Jean-Paul Sartre
Have a creative and productive day,