Adrie's Blog

Handshake

In this day and age it gets harder to do deals just based on a handshake - exacerbated by the current economy where money becomes the most important factor. In particular in the Anglo Saxon countries, this culture of contracts and lawyers has existed for some time - it is now slowly also becoming the norm in other countries. Whether you like it or not, the trend will continue to rise. As much as it used to be the norm to not go to court to settle a dispute, it is the norm now to do so almost instantly when you cannot find a way out between the two parties concerned.

As a starting business, it is very important that you do make sure you cover everything in writing when you start out - I have experienced that in a later stage - when things are either going very well or very badly - those things that were not laid out well enough in advance come back to haunt you. Think for instance about partner contracts - I have been in a situation where I was in a partnership with one other person, shares split 50/50. When a third shareholder came in, we paid a lot of money to have a lawyer draw up a contract where we continued to have control and could at least run the operation without further say so from the new partner. What happened though is that my original partner then sold his shares to the new party, who therefore ended up with 66% of the shares. A very bad situation after a 12 year old partnership ofcourse. Luckily enough it worked out well in the end as both myself and the new partner kept our eye on the ball and worked together to maximise value but it would have been better to prevent this "piracy". In order to do so, you not only have to have a very good lawyer that's able to build a good catch-all contract, but also the mindset that you need to expect the worst of your fellow human beings.

Particularly when things are going well - it's relatively easy to sort get all parties to the table and have them sign agreements, everybody is still relaxed and happy to cooperate. When money comes into play - it unfortunately becomes a totally different story.

Then another example which I have never forgotten. When I needed a website for one of my companies I got an offer from a WPP daughter company to create one "for nothing" as part of their imagine in offering a supporting role to young companies. So far so good - ofcourse you grab such an offer with both hands, reknown company, nice people etc. etc. But even when you get something for free, you check the agreement you are signing. There was one small line in here that said that "out-of-pocket expenses" would be charged... to cut a long story short, those "out-of-pocket" expenses turned into a huge bill of US$70,000. If I had known that in advance, I would never have taken them up on the offer....so when something looks to be too good to be true, be extra diligent and check the small print in detail. It usually IS too good to be true.