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Business with a handshake

By Peter Mirus (bio - articles - email) | Oct 21, 2009

I once had a prospective client in which I had invested some time, and for which my company was assembling the scope for a project.  Near the end of the scope discussions with the prospect, I said, "Great! We'll put together a Statement of Work for you. If you like what you see, just sign it and we'll start the project."

To which the gentleman replied, "Sorry. I never do business with anyone unless we can work together on a handshake basis."

Uh...what?

Respect for appropriate boundaries is a part of life and a part of business. The only way that you can have respect for the boundary is if you know where the boundary is. The only way you can know where the boundary is (and remember it) is if that boundary is written down and both parties agree to respect it--by applying their John Hancocks.

Trust is earned. It isn't automatic, and you can't buy it. Enough money can make you more comfortable working without trust and without a signed agreement, but for me that would have to be a whole lot of money. After all, a project or relationship with no scope defined is an open-ended project or relationship. Open-ended = expensive.

Once trust is achieved in a business relationship, the best thing is still to put everything down on paper (within reason). This makes sure that everyone stays on the same page.

This principle is even more true when you are working with a friend or family member.  If you are ever in business with a friend or family member who says, "No need to put things down on paper, we'll work it out", say with polite firmness, "Look, I value our relationship too much for that. We need to get this worked out and documented."

So the moral of the story is this: if you are inclined to do business on a handshake basis, particularly in a business relationship with no history (and no built-up trust), sit on your hands until you see a signature line, and then read carefully.

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  • Posted by: kman - Oct. 23, 2009 11:09 AM ET USA

    There is a difference between 1)getting a job planned well and documented and 2) engaging the other party in a contract that implies recourse to positive law. The idea of a handshake is to solely rely on natural law and the resultant imposition of moral duties. There are many situations where the latter can be used without being imprudent. However, not properly communicating job intentions is always imprudent.

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