If you’re an entrepreneur or aspiring entrepreneur, chances are some of your friends are too. From time to time, you brainstorm or share business ideas. Perhaps you’ve hit upon a good business opportunity and are considering starting a business together.
The fact that you’ve discussed your business ideas is a good start. The concept of going into business with a friend excites people who get along. However, is it bad to start a business with friends? Keep reading to determine whether going into business with a friend can work for you.
Pros of doing business with friends
A business venture among friends comes with several benefits that make it worth trying.
You have a partner that you know really well
Depending on how close you and your friend are, you’ll have fewer surprises about your partner. You already know their personality beyond the surface level. Chances are you’ve witnessed their bad and ugly as well as their good.
It’ll be easier navigating the uncertain business world together. You’re fully aware of your partner’s strengths and weaknesses (and vice versa). You two can form a dynamic team that complements each other.
You already know how to communicate
One of the areas that help a business partnership thrive is clarity and decisiveness. For that to exist, the partners should easily communicate at length and depth on any issue.
With a partner that you’ve known for a few months, this might not be the case. However, years of knowing your friend permeate easy communication. You’ll get to the bottom of the issues fast and solve problems facing your business.
You’re able to spend more time together
There are many reasons why you guys became friends. Your friendship is what gave birth to the idea of starting a business together. You love hanging out and checking up on each other.
You’ll get the chance to spend a lot of time together, which you already love doing. Your friendship will no longer be limited to shared interests, hobbies, and activities. Whether it’s the weekly meetings, updates, or any other aspect of the business, you’ll spend that time with someone you get along with.
You have similar values and beliefs
As the old saying goes – “birds of a feather flock together.” Your friendship might have resulted from similar core values and beliefs. Being business partners means that you share the same drive for a similar vision and mission.
Whatever your business encounters along the way, you will likely support each other’s business decisions. When things get tough, you’ll be each other’s support system. You’ll help one another in a way that families or spouses may not be able to.
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Cons of doing business with friends
There’s always the other side of the coin, and sometimes it’s good for a business. The following are the disadvantages of starting a partnership with a friend.
Your relationship can become strictly business
As sad as it may sound, what was once a good friendship can gradually fade. Running a business requires hard work, and depending on how you take/give feedback and criticism can turn good buddies into “just” business partners. One partner might feel the other is too bossy or negligent. As a result, their actions can strain their relationship. Before they know it, people who hang out all the time start growing more and more distant.
Your business may be too casual
Your relationship might blind you from differentiating business and friendship. If you don’t draw the line, it’s your business that will suffer. Lack of defined roles can lead to some areas of the business being neglected while others are overdone.
Indiscipline might go unchecked since both of you are partners in crime. You might avoid making hard decisions and just chat as friends. If not dealt with, such things will lead to a lack of focus on running the business. In the long run, the failure of the venture is inevitable.
You have a limited network
Perhaps your partner has been your friend for years or grew up in the place. There’s a possibility that you have mutual friends and similar interests. When you collaborate in a business venture, your growth can be limited to your network circle.
In a scenario where partners aren’t friends, each of them might bring diverse experiences and networks.
You might lose your friend
You might have done and been through a lot of stuff together, but not in an investment setting. Maybe your friend doesn’t have what it takes to run a business. Worst case scenario, he/she makes a bad decision, and the enterprise fails.
Such an incident is a blow to your friendship and might lead to a fallout. Things will get awkward between you two. You’ll lose your friend and, maybe, some of the mutual friends you share.
Questions to ask before starting a business with a friend
Being good friends is totally different from grinding hours and hours of creating a profitable business. Here are some things to think through before starting a business with your friend.
Do you trust your friend?
Money has a weird way of giving people all sorts of ideas. A lot of people have lost money to people they considered friends. The question is, what is your friend’s reputation with money? Will there be total transparency?
Some partners might take from the cashbox. Still, they might run shady deals. Is there a possibility of landing in trouble? How well do you know your friend?
Do you share a similar mission?
You might have divergent opinions and personal preferences in other areas of life, but your mission drives your commitment to your partnership. Doing business together will come naturally when both of you are headed the same way.
Do you have the same goals and vision?
It’s essential to be on the same page right from the beginning. Whether it’s about achieving long-term or short-term goals, you and your partner should have the same vision. Having a mutual game plan will reduce conflicts in the future.
Do you have complementary skillsets?
You need to evaluate the skillset both of you bring to the table. What value does your coming together add? If you’re good and terrible at the same aspects of running an effective business, you’ll have many challenges. Do your qualities enhance and complete each other?
The bottom line is your partner should possess some qualities that you lack. Be realistic and strategic about what the business requires.
Could you start this same business on your own?
Sometimes, friends get wrapped in the idea of doing something together, but it’s not necessarily the best option. You probably don’t need a partner if you can get the business up and running all by yourself. You can hire people to work for you and remain the sole owner.
However, if you don’t have enough capital, a partnership is a good idea. A strategic partner will add value to your startup if you lack specific skills or connections.
Can you do a pilot test?
You’re about to invest your money and time. In some instances, it’s a good idea to test the waters before taking the plunge. This opportunity gives you a chance to see yourself and your partner in a business setting.
The trial run can answer several questions before committing your capital and energy. That way, you’ll realize areas that need more attention and figure out how to overcome the challenges observed.
Are you both willing to invest the same amount of time and money?
Time and capital will play a significant role in getting the venture up and running. Are you going to be 50-50 partners? If not, how will it work in favor of both of you? What are the exit strategies in case something comes up?
You’ll need to be clear on each partner’s share and how that will affect the future of the business. Think about what will happen if the business becomes wildly successful or fails.
How to start a business with a friend
Going into business with a friend allows you to share an entrepreneurial adventure with someone close to you. However, it would help to put a few things in place before embarking on that quest.
1. Establish your roles
Be crystal clear about each partner’s role before you establish the business. You’ll eliminate conflicts and confusion when in operation. Still, be open to change and easy to adapt where necessary.
2. Set communication guidelines
Make sure you set aside time to communicate regularly. Document necessary information and keep the records safely. Let there be total transparency in everything that directly or indirectly involves the business.
3. Write your plan together
You need to come up with a formal business plan and put that in writing together with or without legal counsel. It’ll help you stay on track as you execute your strategies. Try to work through the initial planning process together to ensure you are both on the same page. After writing your plan, you can continue to review and revise your plan together, or begin laying out how much each partner will engage with the plan.
4. Set milestones and mutual goals
Clearly define how to achieve your goals logically and practically. See what needs to be done first, by when, and the way forward once that’s achieved. This can help ensure that you and your partner are pursuing the same goals and have milestones in mind that measure progress.
So, should you start your business with a friend?
Don’t start a business with a friend just because you’ve had a good time together. Turning a potential idea into a profitable business requires you to follow your heart and bring your brains with you. Going into business with a friend is incredibly rewarding when done the right way.
If there are red flags, perhaps you shouldn’t do it. However, if it’s doable, embark on the entrepreneurial venture together. Check out our startup guide to ensure no matter what you decide, you’ll be prepared.