Doing business on a handshake sounds nice, but it’s not smart business.  No matter how well you think you know someone, or how much you feel you can trust them, when it comes to business,  ALWAYS, ALWAYS  get it in writing. Without a written document clearly defining responsibilities and expectations, it’s simply your word against theirs when something goes wrong. 

Many business owners pride themselves on doing business based on the honor system.  In an ideal world, I would support that 100 percent.  In fact, I’ve personally done business on a handshake in my own business.  But it takes getting burned only once before you realize that it’s a good business practice for all parties involved to memorialize your agreement in writing.

I served on a jury for a civil case in which a contractor sued a property owner for money owed on what the contractor referred to as a “contract.”  The property owner counter-sued the contractor for reimbursement of money he claimed he had to pay to have the work redone because it was not done according to specifications.  The problem was that neither party had bothered to get a signed a contract, and each had a different version of a document they claimed represented their agreement.  It was a very boring trial, but in the end the jury didn’t award anything to either party because neither could prove its claim.

While your small business may not be able to justify the expense of a lengthy legal document, you still need to create a document that outlines precisely what each party will do, when it will be done, how much it will cost, and any other specifics that are necessary for the satisfactory completion of the project. Whether the contract is made with a prospect, vendor, or a business partner, both parties need to sign and date the document.

When you’re working with an outside vendor providing services such as photography, website design, or graphic design, remember to make the agreement a work-for-hire contract.  In other words,  make sure you own the sole rights to whatever work the vendor does for you.  If you don’t establish expectations upfront, your rights to the product you’ve purchased could be limited.

So protect your small business and get everything in writing!

Have you had experiences with informal business agreements gone wrong? What other advice do you have for small business owners?


Susan Wilson Solovic is an award-winning entrepreneur and journalist, author of three best-selling books, multi-media personality and contributor to ABC News and other outlets, public speaker and attorney. AT&T has sponsored this blog post.