While
certainly not as concrete as a legal document, a handshake can be a legitimate
way to seal a business deal. Just keep in mind that if it isn't followed up
with an agreement on paper, each party must let the justice system decide
what's what in court.
Protection,
protection, protection
If
you prefer the old-fashioned way of doing business, follow these tips, which
could provide some protection, as listed by Legal Zoom.
--Bind
the deal by having others witness it take place
--Follow
up with an email, even if written as a thank you, with details of the agreement
--Keep
any correspondence or other documentation that could be used as
"evidence"
--Put
the deal in motion immediately. Even if the other parties do not act honorably,
their compliance can be used as indicating validity
A
deal junkie who made billions on handshakes
For
the CEO of Camping World, Marcus Lemonis, operating with a handshake is the
only way. The self-admitted "deal junkie" built his $3 billion
company making more than 100 such agreements, rolling smaller businesses into
the brand.
"I
don't know if there's an art to it," he said. "I'm a big believer
that a person's word and handshake are the best signature you can have."
For
the past 12 years, Lemonis has been investing in struggling businesses and
taking charge to help them survive. Now, as the star of CNBC Prime's "The
Profit," he'll put $2.6 million of his own money into turning around
businesses around the country that need help.
How
the deal goes down
Lemonis
wouldn't give away all his tactics in approaching a handshake deal, of course,
but did have some tips.
First,
always walk in with a game plan and enough information to be effective, never
asking a question to which you don't already know the answer.
Second,
keep it basic. The more complicated a handshake deal becomes, the easier it is
for the other person to say he did not understand the agreement.
"If
you keep it simple and clear ... the only reason you get screwed is because the
other person is lacking in character," Lemonis said.
Finally,
discuss the essential terms surrounding the economic foundation of a deal: What
the business structure will look like, who will pay what and who will get what.
"If
I give you a dollar, what do I get for it?" he said. "If you can't
agree on these basic terms, then there's nothing you can agree on."
Use
paper to solidify a deal, not hinder it
Besides
his personal preference for the handshake deal, Lemonis dislikes walking into
an initial meeting with a written document because it can weigh down the
negotiation. Fluidity is essential to adjusting on the fly, as circumstances
can change if a seller's request is reasonable.
"Maybe
you'll understand their tax situation better, or their family dynamic, or even
the emotions they tie into their business," he said. "If you walk in
with a written document it can get visceral real fast." He does get each
deal down on paper with an attorney, typically within a week.
Lemonis
will never stop doing business this way, he said, though he acknowledges having
been burned a few times.
"My
attorney hates that I do deals on handshakes because you can get screwed,"
Lemonis said. "But if someone is intent on screwing you, they're going to
do it whether you have it down on paper or not."
When
a deal goes bad
Lemonis
recalls a deal he made with a business that was set to close its doors last
Christmas Eve. He wrote a $125,000 check so the owner could make payroll and
settle with its vendors.
"Four
days later, they sent me an email and said, 'We don't know what you're talking
about. We don't know you. Don't come to our business anymore.' "
Such
an occurrence is rare, Lemonis said, and he refuses to let it ruin future
deals, saying some people are just bad.
"At
the end of the day you have recourse, but it's expensive and time consuming,
and it's just bad energy," he said."What am I going to do? Spend
$100,000 chasing $100,000?"
Don't
be misled: Lemonis takes such an event seriously and stresses that no one
should confuse his kindness with weakness. He just realizes that no one is
right 100 percent of the time. Rather than dwell on the deals that went wrong,
this deal junkie finds it best to move onto
the next one.
Courtesy:www.entrepreneur.com
