The importance of contracts

I cannot stress how important contracts are. I learned the hard way with my last start up in a situation that cost me $1,600 of personal earnings that should have been paid to me, but wasn't. After working for a company similar to College Pro, I invested a couple thousand in my own painting business that produced around $50,000 during its first summer and had just over $60,000 in sales. (The difference arose from other losses that came from having to cancel jobs due to nonstop rain during the last couple of weeks of the summer. I lost another $5,000 grand in that situation as well.) The loss of the $1,600; however, was my fault. It was the only contract that I had lost over the course of the summer. I believe I left it at the customers' house, and they decided to take advantage of this. Beyond that, the contract was not explicitly clear on the details of the work that was to be completed. So, the customers refused to pay us the full amount. As you can imagine, I was pissed, I could not pressure them legally without any contract.Contracts are important for many reasons regarding the nature of the work involved and for the parties who are entering into the agreement. Many of these reasons are obvious, and I would just like to touch on a few. A contract should be as detailed and as explicitly clear as possible. This assures that both parties have a clear and thorough understanding of the expectations of the work to be completed and of the obligations that each member must meet. For our purposes, we are mostly concerned with all of the details and aspects of our application being included in the price that was given to us. Not only do we not want to be charged extra for something that was not included, but we also do not want a situation to arise where our vision of the project is not aligned with the developers' understanding of the requirements. Not only do costs associated with developing the application need to be included but also potential future costs and any other relevant costs such as hosting, server, and database fees. In our research we also found that some programmers had lower bids but higher maintenance costs. If you only examine present costs, you may end up paying much more later in unexpected fees.Today I spent three additional hours just going over our contract. We are making sure it is as close to perfect as possible before we more forward. We are now on our fifth revision and will be completing a sixth final one shortly. We have been making sure that we understand all of the language presented, that nothing has been left out that has been verbally agreed upon, that both parties agree on payment terms, when payments will be made, how payments will be made, what constitutes our satisfaction, what we require to see and have in our hands before we make the payment, along with many other considerations that I wouldn't want to bore you with. We have essentially been trying to cover as many angles as we could possibly think of.The great part about having a partner is that he will catch some of the details that you may not have caught. After my discussion with Rohit, our project manager, I sent all the documents and details of the conversation to Miles, who then reviewed it again and found other items that needed to be included. It is a tedious and annoying process, but one that is worthwhile and valuable to undertake.We continued discussions about partnerships and it is looking fairly certain that we will be working closely with two other start-ups that have the same target market. This is great because it gives us more exposure and a greater learning opportunity to see how they approach and tackle problems along with gaining further insight into the thinking and minds of fellow entrepreneurs. (This has been one of many ways that we leveraged ourselves.) We have been bouncing ideas off one another and generating plenty of new ones. All of the websites have the potential of being integrated into one another and acting as a portal for each other to attract more traffic.On a different note, we have decided to call our umbrella company Text Works and will likely be incorporating to an LLC within the next week. I will talk about LLCs in a future blog, as this will be my second one I obtain. We will also be coming up with a domain name and logo shortly as well.