There comes a time in the lives of many entrepreneurs when the question presents itself: should I go into business with a friend? While many people stick to a strict “no-friend” policy when it comes to new business endeavours, there are countless examples of successful ventures that were built by friends-turned-partners. Taking the time to correctly analyze your project and relationship, may make all the difference between a failed venture and a lucrative enterprise.
As you spend nights writing and rewriting pros and cons lists, we’d like to offer six things to consider before going into business with a friend.
1. Why Do You Want To Do It?
Before launching into business with a friend, you should take a step back and analyze your own reasoning – why is going into business with this particular person a good idea?
Ask yourself the hard questions. Martha Stewart offers some great questions to get yourself thinking in the right direction –
“What does she bring to the table that you do not?
What skills does she have that you need for the business model?
Does she share the vision in the same way you do?
Are you launching with her because you are scared to launch the idea on your own?”
If you are able to answer questions such as these with logic and ease, you may be on the right track to forging a successful business partnership with your friend.
2. Clear & Frequent Communication
In any relationship, personal or professional, clear and frequent communication is key to success.
Having an honest “What if…” conversation with your friend prior to working together, during which you discuss potential scenarios and pitfalls, is a great starting point for understanding the way that both of you may deal with future issues.
It is also wise to commit to a certain manner of communication to ensure that you both remain on the same page; “establishing rules regarding frequency and manner of communication between the partners is the lynchpin of working with friends,” suggests Inc.com.
3. Where Are They in Their Lives?
An important point to consider is the stage of life that your potential partner is at. Whether they have a significant amount of personal debt or are about to have a child are enormous indicators to what kind of commitment you may get from a person and how they handle stressful situations in their lives. “How a person handles their own finances may seem like a private matter—but in a startup, your own bottom line becomes more public, especially between owners,” advises Forbes.
4. Get Legal Advice
Although it may be tempting to jump into a partnership basing decisions on mutual trust and respect, make sure to consult with a legal professional prior to doing so.
Certain questions may not come up until you speak with a lawyer regarding potential issues. Martha Stewart recommends creating a written legal document that discusses “what happens if one of you wants to get out or if one of you wants the other to get out; how you will divide assets; what happens if one of you dies or becomes disabled; and certain parameters of ownership…”
5. Consider the Cons of Friendship
While there may be many pros to working with a friend, it is imperative that the cons are also taken into consideration before signing on.
When going into business with a friend, consider whether you have the same personal and/or professional networks — a strong and diverse network may be vital to the initial success of a startup.
Also, think about the issues that may come up because of your friendship; taking orders from a friend is usually difficult, a failed business venture may lead to serious problems within your friendship, and criticisms (constructive or otherwise) are more likely to lead to hurt feelings.
6. Test the Relationship
Prior to crossing the t’s and dotting the final i’s, consider testing your working relationship by embarking on a short-term project together.
It’s important to get a feel for the kind of partner that your friend would be. Do they prefer to be in control? Do they work best at morning or night? How do they share ideas? “A pilot or beta project would reveal just the answers you need to these kinds of questions, a necessity before committing your energy and capital to a startup” points out Selena Rezvani, contributing writer for Forbes.
It may seem like fun to go into business with someone who you have a great friendship with, but it is imperative that the ways in which a friendship could impact a business are considered. Thinking ahead and anticipating issues can make the difference between success and failure.