Smellie on SMEs: Write stuff down or you'll regret it

By Pattrick Smellie

Nov. 6 (BusinessDesk) - For the last few years, I've had exposure to a situation where someone didn't write things down at the start of a business relationship. It's been like watching a slow motion train wreck.

These guys liked each other, served a common purpose, and began a promising new business at a time when the opportunities it exploited were recognised by very few.

More than a decade later, the two former friends will never speak again, except through lawyers. One will believe the other owes him huge sums of money, based on agreements he believes were struck in the start-up phase.

The other, still presiding over an enterprise which struggles but still has potential, spends perhaps 20 percent of his time - and a far greater proportion of his emotional energy - fighting off the attempts by his start-up partner-turned-nemesis to grab a pound of flesh that simply isn't there.
If this were a rarity, that would be one thing.

But enmities between people who began a business together with starry-eyed visions of the future, only to find their relationship foundered as the business hit trouble, are all too common.

When that happens, blame, recrimination, legal costs and a huge loss in productivity are all likely consequences. The business is put at risk.

Yet so much of this heartache could have been avoided if only the two start-up shareholders had documented their understanding of the future right at the beginning.

The original arrangements were agreed verbally and were generous by the admission of both parties.

The trouble is that five years down the track, vital details were more than just lacking. They were completely disagreed upon. Another five years on, and the arguments remain unresolved and toxic.

When they say "the devil's in the detail", this is the stuff they're talking about.

It's hard to say whether this business would have done better without this massive distraction. The success or failure of any new venture is a subtle and unique combination of luck, skill and timing.

But there's absolutely no doubt that a shareholders' agreement, drawn up at the cost of a few hours' difficult conversation and the involvement of a lawyer or trusted third party adviser, would have saved an enormous amount of wasted, negative effort, using up time that could have been devoted to the real problems of the business.

Online forum for SME's

Meanwhile, SME owners are being offered access to an online forum where they can access support and resources to help run their businesses more successfully.

It's a Bank of New Zealand initiative called BNZ Connect Community which promises to connect small businesses with one another and with experts in the field.

“Our small business clients have found Connect events hugely valuable in terms of finding support from those with similar issues and accessing tools specific to small businesses," says BNZ's national manager for small business, Harry Ferreira.

“We know that running a small business is an ever-changing, 24/7 venture so we wanted to extend that support and resource to a format that is working whenever small businesses are.”

You can find the forum at https://bnzconnectcommunity.bnz.co.nz/ .

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