Contract. When?

How about now. Right now.

If you’re having this discussion in your head, stop. Pick up a phone and start having it with an attorney. In fact call an attorney before you finish reading this post. If you haven’t thought about it, or think this doesn’t apply to you. Stop. Think again. You’re in business? With other people? You need a contract. SERIOUSLY.

In the past month, I’ve had this exact discussion with at least five entrepreneurs who are getting involved with others (either bringing others into their business, going into a partnership with someone else, or being brought into someone else’s business) who are proceeding without a contract. They ask me, “Should I have a contract?” My answer is yes. BEFORE YOU GET INVOLVED.

That way everything is on paper and everyone knows the score. Upfront. I can’t emphasize this enough. One entrepreneur suggested that he was doing the work and would worry about contracts and business dealings after the product had reached the proof-of-concept stage (proof that the product actually works) – because if the product didn’t work, what difference did it make. The answer is: When the proof-of-concept phase is reached, it’s too late. Remember the story of Facebook and the two brothers, Tyler and Cameron Winklevoss? Well, there are a million other stories like that. They just didn’t make the news.

And as the company progresses, you never know what will happen. Decisions have to be made for situations you never dreamed would exist. And you and your partners may have very different opinions. That could mean the end of the company. And then where are you? More often than not, companies and partnerships break up. Especially between friends. Especially between family. Especially between colleagues you’ve worked with for years, even decades.

Hey, it happened to me. And I had an airtight contract. I’m suing now. If I didn’t have the contract? I wouldn’t have a chance in hell.

Okay. I’m off my soapbox.

Well, not quite yet. Lawyers tend to be expensive. Even the cheap ones. But think of it this way – it’s cheaper to spend the money now, upfront, than to have headaches or losses later that can be very, very expensive.

Sandra Holtzman teaches CEO 035: Licensing.