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What to do when a business contract goes bad?

Every business relationship should be spelled out in writing and every agreement must have a clear outline between the parties to clarify who does what, when, how and why.

But no matter how good the attorneys that are drafting these contracts are, they often cannot anticipate all the various scenarios and possible consequences. So in my opinion the true outcome of an endeavor depends more on the individuals coming together to sign the agreement and shake hands.

You see most of these agreements are written when a business is in the start up phase. When everything theoretically and on paper looks like a dream or maybe even a fantasy.
This is stage one of the business between two partners.

But once the business gets going and the challenges start coming from all directions they enter stage two and that is what I call the nightmare stage.

This is when there is a massive amount of problems and unanticipated changes that require time, energy and complete focus along with a high level of emotional maturity between the partners.

I do not mean they should be distant and cold when I refer to emotional maturity. I mean they must be able to listen to each other’s frustrations and exchange support for each other. It is natural and normal for the partners to blow up at each other, or place blame, argue and get into conflict. But if they have emotional maturity they will work through that stage and find the point of agreement that will lead them to the third stage and eventually out of this problem.

Many partners do not make it past the nightmare stage because they either become too cold, distant and inflexible or they get too angry, enraged and shut down.

So how could they find agreement when faced with so many problems? Well, agreement will come between them if they agree on the reality they are facing together.

This is the third stage that I call the reality stage.

Once they have agreement on the problems, it will strengthen their affinity towards each other and they could get started on following the steps to find resolution.

This third stage works well if the parties sit together and spell out the potential of their endeavor once more in a more realistic fashion. After all this is the reason they began the endeavor in the first place. This will keep them focused on the end goal.

Once they see the potential again, they must then write down all the obstacles they are encountering.
Then they should brainstorm all the possible solutions.

After that they must prioritize the actions they should take based on what will bring them the most money first. I learned that from studying many business startups and I found out that 80% of the early stage business obstacles are related to financial challenges.

If they can clarify and assign to each other the right duties and responsibilities and follow up with each other periodically they will pull through.

In my experience, most of the start-up projects start with a dream or fantasy, then they encounter a nightmare, if they can face that reality together, they will grow stronger and if not they will end up wasting more time, money and energy till they breakup. In the final stage they will reach a settlement that could be a great success or a compromise of some sort.

With these four stages in mind, I enter into strategic relationship with others knowing fully we will face obstacles soon because no matter the dream, business is always work in progress. I expect hurdles, changes and obstacles.

I prefer to encounter these early on and I may exaggerate my reactions to see how my so called: “partner” or associate or other party in the transaction will react.

If he/she is intelligent, energetic and ethical we will connect more and grow (even if we have to go through that conflict stage of nightmare) but if he/she is stubborn, inflexible and selfish, I quickly find an exit so we can minimize the damage and optimize our peace of mind.

An experienced person may avoid a lot of problems, but what he/she may never avoid them all.

It is inevitable that we will all face business obstacles. How we turn them into opportunities makes all the difference between success and failure.

I learned long ago, that my strategic partner or associate, or whoever is sharing the journey with me, must be someone willing, able and capable to add value. He/She cannot become harder or more distant when we face the nightmare.

If I ignore the fact that my partner is not open and respectful, and is not focused with me on coming up with possible solutions through brainstorming and flexibility, then I will get is a delayed magnified problem that will cause the inevitable demise of the enterprise.

There is a point in the relationship where you will conclude that it is better to take action now and severe the relationship than to keep searching, to no avail, for agreement on the reality you are both facing.

If you get to that point, rest assured it is better to cut your losses and more on to new opportunities, with better, more understanding and more flexible partners than it is to waste more time, money or energy.

Wishing you peace of mind in your business relationships.