How To Get A Pre-Nup For Your Business Relationship

I had a coffee today in the sunshine with an accountant I know. She was debriefing after a meeting with three directors of a start up company. Her intuition picked up that one of them was not comfortable with the arrangements being made ready to be given to the company's lawyer for drafting into a shareholders agreement. She asked him more than once if he agreed, to which he answered 'yes'. However his body language indicated otherwise.

Situations like this are  a breeding ground for future disagreements, which left unchecked can grow into a full blown dispute and be the death of what could have been a flourishing business. This is why it is important to take the time to build consensus at the start of a business relationship. Independent facilitators who are not acting for the company or for any one director or shareholder can help build that consensus. 

There is an optimistic quote from Richard Branson which cycles through my social media: If someone offers you an amazing opportunity and you are not sure you can do it, say yes. Then learn how to do it later”. 

While I applaud his sentiment, and concede that Sir Richard is a far better business person than me, I caution people against jumping into new business relationships too quickly. By business relationships, I mean partnerships, shareholdings in a company or taking on a new client or distributor.

Equally, a much older cliché rings true: “If it seems too good to be true, it probably is”. Some might say that is too pessimistic; I say it is the most realistic

Before you jump in, consider the following:

Everybody has his or her own agenda. That's not a bad thing, it's just the truth and something to be aware of. Is your collective agenda on the same page? Do you have the same goals for the business? You might think so, but do you know so?

Ideally, you want to do business with someone who is going to do what you cannot, or would rather not, do. Are they an expert in an area you are not? The value may be in your combination of skills or in the fact that they are willing to put the effort into areas you are not. The trick is get both of you to understand where the balance in your relationship is and to ensure that balance is valued accordingly and recorded accurately. 

A lack of clarity or agreements that can be interpreted in a number of ways are often at the heart of disputes — both personal and commercial.

Before jumping into business together, you should take the time to work out what you want personally, then jointly with your business partner and ensure your understandings are accurately recorded in a binding agreement. 

Your lawyer can draw up an agreement for you but to prevent future disputes it is advisable to sit down with an independent person who can facilitate discussions between you and your business partner to ensure your collective agenda is the same. 

The independent advisor can  act as a neutral pathway for each of you to discuss the more difficult questions and set up open communication channels for your future business discussions.  The appropriate cliche to use here is “prevention is the cure.” 

Spend time at the start of your business relationship so that you are set up for a long and happy life together!