Agreements in Writing

I have a very good friend, Sam, who I have also been doing business with. When we began working together, we verbally agreed that I would receive a predesignated percent of sales for any customers that I bring to him. He even acknowledged that this would be for the life of the client. Being the stickler that I am, I asked for an agreement in writing. He didn’t feel it was necessary but was willing to appease me by sending me an e-mail.

The sum total of the e-mail was: “[X]% for all sales referred.” Trying to be a trusting friend, I let it go.

Five months later, almost to the day, Sam and I went to lunch to discuss a new direction his business was potentially taking. I brought up the idea of writing this book on business integrity and he seemed all for it.

Around the same time, I set Sam up with an associate of mine in Australia. They chatted and Sam got back to me after their chat, quite excited, that my Australian associate was interested in being a distributor of Sam’s services for the entire Pacific Rim. Fantastic, I thought!

Then Sam sent me an e-mail stating that he felt our agreement might be too large for this deal, so he wanted to discuss restructuring this. What? He would have never met this guy had it not been through my efforts and connections. Wonder why I wanted to have a deal in writing?

Sam and I went up and back a bit. I discussed the situation with my primary mentor, a fantastic businessman, and my father, Peter. Big Pete tried to calm me down and reminded me that I did not want to lose a friendship over this, even though he did agree that I had a right to be frustrated.

I went back to Sam and he definitely caught on to the fact that he was rubbing me the wrong way. He said he would honor our agreement. If only it ended there.

The next stage was that while he acknowledged that our agreement was for the life of the client, he believed that could damage the possibility of his selling his business. Once again, I called Big Pete for help. I received a quick reply, “tell him that he can buy you out of your agreement with his profits if it is a sticking point in selling his business.” I relayed this thought as my own and Sam said he accepted it.

A week later, Sam was to have a meeting with potential investors and I advised him to fully disclose all commission agreements he had in place, including mine. I did ask that we formally put it in writing so that there was no question as to its legitimacy from the potential investors; while I wanted to trust Sam, I didn’t know the investors. I never received much of a reply from Sam and the day of his meeting came and went without my having a formal agreement in place with Sam.

The lesson I learned is that it is important to always put an agreement in writing. I believe even more so if it is a friend. No one wants to lose a friendship over miscommunication. Lay out the agreement in advance so there are no debates after the fact.