Good Agreements And Expectations

“As much as possible, deal only with good and honorable people.  If you deal with good people, you won’t need a contract, and if you are dealing with bad people, no contract can protect you.” – Adam Aron, Chairman and CEO of Vail Resorts

Good agreements lead to good relationships. Bad agreements can lead to bad relationships. I have found that this is the basis of doing good business. I also agree with Aron’s statement. If someone is motivated by an entirely different agenda than what is honorable to a good partnership, what can you possibly do to thwart their tactics and strategies?

Assuming you have picked well and have chosen to make good agreements with good people, here are some things that can help keep the relationship in a healthy way:

• State the expectations. Your agreement should define what is a win for both parties, not just one side. Ensure that you both agree. Look out for each other’s interests and get concrete about what the expectations are for performance and results. If a specific number can be stated – 100 new sales, 90% customer satisfaction, 99% uptime – then ensure the agreement captures something measurable.
• Create a system for tracking. Create expectations for how the expectations and goals will be tracked. A simple Google Doc spreadsheet is a good way to track in lieu of more sophisticated software. Set dates that you will intentionally meet and review – weekly, monthly or quarterly.
• Rewards and consequences. If you meet goals together, what are the rewards? If they are tiered, then set specific amounts or rewards appropriate to the achievement. If you fall short or there is a threshold that can be set for non-performance, falling short, or poor market response, state this as a red flag in the agreement. Allow it to trigger a consequence – dissolution of the agreement, financial compensation, or some type of cost.
• Set exit plans. Agreements do not go on for perpetuity. Set the boundaries for dissolving the agreement. Non-performance is a glaring issue. Set the terms for exiting the agreement. Unlawful or deceitful conduct could be other reasons for dissolving an agreement. Be explicit.

These are all high-level and your attorney should be consulted for the details, whether it is for a new business venture, software sales or business partnerships.

There are a lot of times that you might want to test out a relationship. Get explicit around the worst case scenarios. This will clear the air of any concerns. Better to do this earlier than later when there is an unmet expectation.

When I look back at my business life, I can see that good agreements have made for good relationships. I hope this will help you to take full advantage of your entrepreneurial opportunities and build great relationships in the process.

Have you had situations where good agreements would have made for good relationships?