Starting a Business With Friends: What You Need to Know
There’s an old school of thought that says you shouldn’t do business with friends. But the truth is, there are some great advantages to doing business with the people whose company you enjoy most — whether it’s college classmates, best friends, or long-time partners. Can you imagine going to work every day and doing what you love in the presence of people you trust and admire? Sounds pretty great, doesn’t it?
Of course, just because “never do business with friends” may be a myth, that doesn’t mean that there aren’t rules and guidelines to keep in mind. While it’s great to start a business with some of your favorite people, it’s also important to keep a clear divide between business and pleasure.
Know Your Motivations
This is perhaps the most critical point to take into consideration before starting a business with friends: are you all highly motivated? More importantly, are you motivated toward the same goal? Life circumstances can change, and commitments can shift. Before you undertake something as large and responsibility-laden as starting a new business, make sure you’re all on the same page regarding your goals and visions. Otherwise, it’s all bound to fall apart sooner or later.
Clear, honest, and frequent communication is probably the most valuable tool you’ll ever have in your business arsenal. Whether it’s a daily meeting, weekly phone call, email chain, Slack conversation, or coordination via communications software, you need constant communication to keep misunderstandings at bay and small issues from becoming large ones. Don’t wait until that yearly retreat or crisis situation to talk to your business partners. Make it a daily responsibility and stick to it.
Have the Difficult Conversations
Here’s the other thing about communication: not all of it will be fun and easy. You can’t be afraid to argue, confront, and do the hard work when it comes to talking with your business partners. When it comes to money, job titles, responsibilities, and the future of your shared company, none of you can afford to tiptoe around the big issues. Make an agreement early on to step up and make a commitment to have the tough talks and come to an agreement — or just part ways before you get in over your head.
Clear Roles and Correct Tools
While communication is an important tool, it’s far from the only tool. You should also define clear roles for everyone in the company, and have the best available tools for each role. This is especially important for small young businesses who can’t afford to outsource the un-sexy work. Who’s going to handle the project management? Who’ll be in charge of budgeting? Who’s going to handle the social media accounts? Play to everyone’s strengths as best you can and divide responsibilities accordingly. The earlier you handle these questions, the happier everyone will be.
Stick to Your Structure
One common mistake friends often make when running a business together is trying to make everything a democracy. In most cases, it just can’t work that way. Remember what we said above about having clearly defined roles? Like it or not, once those roles are defined, things will work much more smoothly if everyone stays in their lane. People who work together have to trust one another to do their jobs. Trying to run everything by committee and unanimous agreement will not only cost precious time, but also increase acrimony and bureaucracy. Simply put, your business can’t afford it. If your roles aren’t working, by all means, take the time to re-evaluate, but don’t run your business like a commune.
Organize Your Ownership
Many business owners choose to divide ownership equally when starting a new business. This is a great plan… if everyone sticks with it and noting goes wrong. But sometimes life gets in the way. People take new jobs, or family emergencies force someone to abandon the dream. If they still own a major share of the company and are no longer contributing to it, it could spell resentment, hurt feelings, and disaster for the company. Consider vesting equity in your company instead, so if people do end up leaving the company early, they receive only partial equity, instead of a full share. Optimally, this should be built into your business plan from day one.
Keep Things Inclusive
Life changes, and business changes with it. With time, old team members will leave and new team members will join your business. It’s perfectly fine to keep your trusted partners closest to you, but don’t disregard the value of fresh perspectives and new blood. Take the time to include those new team members on your next corporate outing or trip to the local bar for drinks and brainstorming. You might be surprised at what they have to contribute.
Take Time to Yourselves
Working closely with your best friends can be great — but it can also be taxing to even the closest friendship. Take the weekends for family, or carve out time for a vacation away from your business partners. It may not seem necessary, but in the long run, it will help keep your energy high and tensions low. When you come back from that long weekend, you’ll find yourself energized and ready to tackle that problem that may have seemed insurmountable just a few days before.
Learn to Weather the Storm
Every business falls on hard times. Cash flow gets short. Supply problems cause stress. Even unexpected success can cause hardship you didn’t see coming. But the greatest stresses may not even come from without. Running a business is hard work, and even friends who love each other will disagree and fight. Learn how to argue your points practically and sort your problems out like the professionals you are. Don’t let business ruin your friendship — or vice-versa.
Starting a business with friends is not without its challenges — but with some work and realistic planning, it can be one of the most rewarding endeavors of your life.