This is part 2 of the fourth article in an ongoing series covering the value legal agreements bring to your business beyond the surface. From boosting your bottom line and expanding your business to hiring the most talented team and improving every relationship you enter into, this series offers a comprehensive look at how effective legal agreements can enhance just about every aspect of your operation.
If you are like most business owners, you've likely been presented with legal documents that contained terms you didn't fully understand. You may have even signed documents that you didn't completely read because you were intimidated by the confusing legalese. And there have surely been times when a client or team member has signed a legal document you presented to them, even though they didn't fully read or understand what they were signing.
Unfortunately, such scenarios are far too common. But it doesn't have to be this way. In fact, rather than creating confusion and anxiety, the agreement process should do exactly the opposite.
Indeed, the agreement process is your opportunity for creating clarity—clarity in your relationships, clarity in your policies and procedures, and clarity in the delivery of your product or service. And if you avoid reviewing, rethinking, and revamping your agreement process, you are not only putting your assets and business at risk, you are short-changing yourself, your work, and your relationships.
In addition to creating clarity, when done right, the agreement process is ultimately about creating connection, coherence, setting boundaries, and establishing expectations. If your current agreement process isn't providing you with these outcomes, then this article is for you.
Last week in part one, we discussed how you can use the agreement process to gain clarity on exactly what you want out of your business relationships, avoid frequent causes of conflict, and achieve the ideal outcome for all parties. Here in part two, we'll explain how you can use the agreement process to more effectively deal with the inevitable changes that take place as your relationships evolve and your original agreements need to be renegotiated.
Plan for the Relationship's Evolution
Keep in mind that very few relationships remain the same forever. Instead, the relationship is far more likely to evolve and change over time. And if you can proactively predict and plan for what that evolution might look like and then adjust your expectations and responsibilities accordingly, rather than being caught off-guard or surprised when things change, the relationship can successfully adapt to the transition with ease.
One example of how this might unfold in your business is when bringing on a new partner. When entering into an agreement with a new business partner, one of the most important—but often overlooked—aspects of the relationship to plan for is how it will end. In light of this, each of you needs to come up with a clear exit strategy.
Think about and plan for all of the ways each of you might potentially exit from the business. What would happen in the event you decide to sell the business? What would happen if the business failed and you had to shut your doors? What will happen when one (or both) of you dies or if one of you becomes incapacitated? You need to get clear about all of these eventualities, and then document the plan. This is a key piece of relationship management that, unfortunately, often gets overlooked until it's too late to create a win/win outcome for everyone involved.
Keep Pace with Change: Renegotiation
Along these same lines, a key part of the agreement process is dealing with what happens when the assumptions you've made in the early days of the relationship change over time, or you acquire new information that necessitates a revision or upgrade to a prior-made agreement. When this happens, it's time to renegotiate. And this is where the vast majority of messy conflicts occur—and that's because most business owners haven't been taught how to properly renegotiate, and most agreements have not been created with the idea of renegotiation in mind.
Having a solid process for renegotiating an agreement is an essential but frequently neglected process all businesses should have in place. In fact, having such a process can be the difference between success and failure at some of your company's most critical junctures.
These are the moments when many businesses tend to fail and many business owners find themselves in crisis. However, by working with a Family Business Lawyer™, they can ensure this doesn't happen to you, and we do that by supporting you to establish a clear and consistent process for renegotiating agreements.
Again, start by assuming that every relationship you have in your business is going to change form, and anticipate that change. Even if you are planning to be in a relationship forever, the nature of the relationship must change over time because people's desires, preferences, and needs change over time. And if you want to be fully prepared and ready for whatever this evolution might bring, you have to make space for it in your business.
For example, one of the worst things that can happen to a business is when a high-level team member leaves without giving proper notice, taking all of his or her institutional knowledge with them, and leaving without supporting you to find and hire their replacement. However, you can avoid this by anticipating their eventual departure and creating a process around it that works for the benefit of all parties.
Begin by establishing space for change right from the beginning of the relationship. This might mean making it part of your onboarding process and telling every team member:
“We understand you are not going to be in this role forever, and we don't want you to be unless that's in your best interest. When you are ready to move into a different role or even leave the company, we ask that you let us know your plans—and let us know far enough in advance that we have time to explore other possibilities for you. And if you ultimately do decide to leave for good, we ask that you support us in finding and training your replacement.”
Take a similar approach with all of your business relationships. By being aware that every relationship will either end or transform in some way, you can prepare yourself for this inevitability on both an emotional and practical level. Then, use the agreement process to create some space within which that change can take place so that the impact is minimized, but there's still enough space for the relationship to naturally evolve.
Agreements Are the Heart of Your Business
Ultimately, your entire business is one vast series of agreements—agreements with investors and lenders, clients and vendors, employees and contractors, partners and customers—and the success of your business depends on your ability to make agreements and seal the deal in a win/win manner in each and every one of these relationships.
A Family Business Lawyer™ will use an innovative agreement process that gets all parties on the same page and leads to a triple-win outcome—a win for you, a win for the other party, and a win for the situation as a whole. If an agreement doesn't offer this level of success, then there's no deal.
Whether you need new agreements created or want us to review agreements you already have—even those drafted by another lawyer—meet with a Family Business Lawyer™. They will support you to not only create clear concise agreements but also implement an agreement process that will allow you to more effectively navigate the inevitable changes that take place in every relationship while dealing with conflict in a way that's both healthy and productive.
This article is a service of R&R Legal Advisors and Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.