Yes, Yes… Get Your Operating Agreement Early!
When you’re starting a business, especially as a young entrepreneur, the excitement is addictive. Sales are coming in, growth feels real, and opportunities seem endless. It’s easy to believe the momentum will last forever.
I learned the hard way that early success can cloud your judgment.
Years ago, I launched a mattress company with a partner. He was running a highly profitable operation in Europe — 60 employees, €450,000 in weekly revenue — and he wanted to expand into the US. My job was to build the American side.
At first, it felt like a dream. I started as a consultant and soon became a partner, with my share growing to 30%. I put in the sweat. He put in the money. The partnership felt fair and exciting.
But here’s the mistake: we never signed an operating agreement.
When money was flowing, it didn’t seem urgent. But when challenges came, the lack of structure nearly destroyed me.
My partner began making risky financial moves: withdrawing money for marketing that produced no results, signing loans with usurious terms, and draining cash we needed for payroll. Because we didn’t have a clear agreement defining authority and decision-making, I couldn’t stop him.
On paper, I was a partner. In practice, I was powerless.
The Lesson
An operating agreement (or shareholders’ agreement) is the document that defines how a company is run. It sets boundaries, clarifies authority, and gives everyone a roadmap for handling conflict.
I didn’t know better at the time. I didn’t protect myself. And when the business went sideways, I was overexposed to decisions I didn’t make and risks I didn’t approve.
The lesson I share with every entrepreneur today:
Draft your operating agreement before you make your first sale.
Don’t wait for conflict to define the rules.
Protect yourself and your company with structure from the start.
Technical skills, sales skills, marketing skills; they’re all critical. But without governance, you’re vulnerable.
I learned this the hard way. You don’t have to.