No matter how well a business deal is proceeding, negotiations and best-laid plans can always take a left turn, leaving the deal dead, or trapping you in a nightmarish contract. Coco Soodek, a business law attorney at international law firm Bryan Cave LLP and author of the ebook “Birth to Buyout: Law for the Life Cycle of Your Business,†says most scuttled business deals likely had some early warning signs. She says problems can be avoided if entrepreneurs and small business owners heed her five signs:
- The other guy talks and talks, and you understand every 37th sentence. Nobody should invest in a new venture if they can’t clearly understand how it works. When a potential business partner talks too much, or makes no sense, reconsider getting involved.
- Your potential partner starts acting like an adversary. If a potential partner refuses to be fair or reasonable before your relationship starts, imagine how much worse it’ll be when you’re locked into a contract. A red flag: non-compete clauses that restrict your ability to work elsewhere if the deal goes south. Don’t sign one of those.
- “Don’t you trust me?†If he has to ask that, then you shouldn’t. Also: “I only do business on a handshake.†That guy always turns out to be bad news.
- “These are the contracts. Sign here, here and here.†Contracts don’t always say what the signees think they do. People who write them make errors. Insist on a review with your lawyer, and insist that the other party does the same.
- You get close to contract; he starts to hedge. Sometimes the efforts involved in doing a deal sap a company of its energy. You’d be surprised how many Closing Dinners are followed by Requests to Renegotiate.
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