It’s scary how many entrepreneurs play contract roulette. They sign a terrible agreement. Nothing bad happens. So they just keep signing until something blows up—like their business.
Some agreements go boom more often than others. Ever since Eve and the serpent signed that infamous catering agreement, the following five contracts have caused the most disasters:
Most execs spend more time picking their carpet and paint than they do reading their lease. Who can blame them? Most leases are 60-page tomes with no pictures. So they think/hope, “It’s all standard. Everybody signs these things.” Careful, now. There are a lot of gotcha-clauses in all of that fine print. The landlord may be able to veto the sale of your business. Or, you may have to pony up a small fortune in additional rent when the landlord finally decides to fix all of the code violations in the building. Worse, plenty of landlords want the ability to “renovate” your building. You and I would call it “demolish and rebuild.” They turn the property into a construction site—while you’re still in it. In one case, the landlord ripped off the exterior walls of a posh office building and tacked up plywood boards for a year or so. All day, trucks beeped, compressors clanked and workers jackhammered (interrupted only by everyone’s favorite heavy metal band during worker breaks). All the amenities of a door-less porta-potty, but the same high rent! The tenant’s signature on the lease pretty much wiped out any ability to complain.
Here’s the lesson of 1,000-plus lease negotiations squeezed into a simple winning formula: Read the entire, miserable, infuriating screed. Revise it so that it is acceptable to someone with a functioning brain. Get at least one backup location. Start early enough so you can credibly threaten to walk away from a bad deal and move on to a good one.
4. Loan Agreements
You think you’re just borrowing money. But, if you hold the loan agreement up to the light, the watermark says “Hostile Takeover.” Surprise! You sign and now the bank controls your business.