And a HUGE problem down the road……..

In many start up businesses a few people get together with an idea, hash it out over a number of weeks, agree to “do something”.

What usually happens is one of the people takes a big step, i.e. writes a check or puts something related to their new business on their personal credit card. That’s when everything changes. Now instead of 3 people with good ideas you have 3 people with good ideas, one of whom is now taking a risk.

That willingness to take the risk might be good for the business but if the partners haven’t agreed to how that risk will be shared then they are on the first step to what could be small issues that become big issues.

My advice, if there is more than 1 person talking about starting a business together, before anybody takes any risk, get in writing who is responsible for what risks and for those who will be taking on risks above the other partners, how will they be compensated for that risk or protected.

In the early stages of a business everyone wants to talk about how much money they’re going to make. For the sake of the partnership, the business and the friendships spend some time defining the risk side of the venture. If things go poorly you’ll be glad you did…if things go well you’ll be glad you did.