Contracts vs Handshakes

Welcome
Apex Business Advisors would like to welcome Brandt Hill to our advisory team.

Brandt has many years of Investment Banking and Entrepreneurial experience, which will be a huge benefit to his clients. Check out his bio link above to learn more about Brandt.

Contracts vs. Hand-Shakes
Contracts can be a painful process when completing transactions of any type, and It can be tempting to forego a contract for a simple “gentlemen’s agreement”. After all, we are all good people, we are friends, we trust one-another, so let’s just agree to agree. Right?

Wrong! Contracts actually strengthen our bonds of friendship and trust. Our intentions need to be written down so there is no confusion, especially when our memories get a little foggy a year or two from now. I’m talking about good people with good intentions who get confused or have differing perceptions of what it was they agreed to during that hand shake.

“Partnerships” start with high expectations and general agreement on most details, but it never fails that a couple years down the road, the grumblings start. One shareholder thinks they are contributing more to the business than the other guy and should get a bigger piece of the pie.  One partner thinks they are contributing more to the business than the other guy and should get a bigger piece of the pie.

If this hasn’t happened to you, you probably know someone who has gone through it. Business divorces happen all the time because the detailed business plans, goals, partner roles, and expectations were not in writing. Obviously, a contract won’t cover every variable, but it can be as detailed as necessary to memorialize your plans, goals, roles, etc.

The same consideration needs to be made when selling a business or buying a business. Clear expectations of training, transition, financing, representations and warranties, list of assets to be transferred, etc., need to be written down in detail. If I agreed to train a buyer of my business, I want to them to know that I will put in so many hours a week for a number of weeks and not leave it open-ended. Open-ended agreements will lead to problems.

Apex Business Advisors will guide our clients to get proper legal advice when completing a transaction, so talk to one of our Advisors about how to find a qualified attorney.

Doug Hubler
President

“Professionals in Business Acquisitions and Sales”