So you have a great new idea, you have a bunch of friends, work mates or have found someone who looks like they fit in.
So what can go wrong?There are as many problems with people working together as there are people but they generally come down to:
- Difference of opinion. When it comes down to it whos direction will you take and are they other people going to be ok with that?
- Family / personal life. The person starting is on board but the better half often doesn't quite agree. More annoyingly the NEW better half suddenly doesn't agree sometime into the venture.
- Effort put in. One works 12 hours a day an the other treats it like a 9-5. Each person will have a different opinion about the value of effort ... Especially Marketing VS Technical VS Management.
- Money and ongoing contribution. At some point the venture needs to pay for itself, when is that point, who gets when and when?
- Money and ongoing contribution part 2. Sometimes you will have down periods, you need to put in cash, you need to work for free or cheap. What is the agreement around the payoff and the "return on investment" during these points? Who gets the bad jobs. There are always things you don't really want to do, and neither do the other people ... who is going to do them and what is their incentive going to be?
- On sunset. One person leaves, you get bought out OR you decide to throw in the towel ... what happens, who owns what? What is the magic "buyout price number" so if one gets the offer they can have a guideline to work with.
- Big Red Bus senario ... what happens if someone is killed or seriously injured ... what happens to their shares? Do you want to start taking orders from their spouse or extended family? Do you want your family looked after? what happens to their position?
There is probably a whole host more but these are the ones I have seen others come unstuck with.
My advice is, if you're looking for someone, friend or a new person, you need to cover off these points in a 1 to 2 page "in principal" and "heads of agreement" before taking it to a lawyer to become formalized. If you can't make it past agreeing to these points, you're not suitable for each other.
There is probably a few others to add to this list and I am happy to accept contributions.