Agreements are an essential, though often overlooked, part of business. They take time to create, but they can save business owners a lot of heartache and struggle in the long run. Simply put, agreements are meant to protect business owners from a whole slew of things: false accusations, faulty memories and forgetfulness, abrupt policy changes by suppliers and land owners, claims of disgruntled employees or partners, and so forth.

A wise person once said, “The dullest pencil is better than the sharpest memory.” The implied message of this saying is that none of us has a perfect memory and that recording important information—such as the details of our business agreements—is good protection against the negative consequences of our bad memories. At the onset of any exciting undertaking, such as at the start of a business, the people involved are usually so focused on the opportunity and the successes they hope to have that they think things will always be perfect. So they make a few informal plans and hand-shake agreements, and move forward with the work. But because the memories of partners, suppliers, landlords, and creditors are imperfect, business owners must plan for the inevitable—the forgetting of essential information upon which business operations are based. Start each new relationship with a written agreement (even if it’s written with the dullest pencil ever made) and make prompt written records of any changes that might affect the agreement.

Written agreements are great at solving problems that arise in the course of business. But they also give prospective business partners an excellent opportunity to brainstorm all of the important issues that have the potential to affect the business. Having an open and honest discussion about business-related issues (e.g., profit sharing, contract length, pricing, division of responsibilities, what to do if the business splits up) at the beginning of a new relationship enables all involved parties to understand other people’s perspectives and to either feel comfortable with the arrangements or get out before any serious damage is done.