Things You Must Know Before Starting A Business With A Friend

Things You Must Know Before Starting A Business With A Friend

Fresh out of college or fresh out of a job, most people’s first inclination is always to start a business with a best friend, close friend, or former colleague. The decision to do this is mostly borne out of the zeal to start up with familiar faces, trusted individuals, and a helping hand to cover many other parts of the business.

When decisions like these are made, mistakes usually erupt from non-allocation of shares to improper identification of job roles, over familiarity, and a lackadaisical attitude towards real productivity, because of the lack of an opinion from a real neutral party.

While starting a business with a friend can be a great way to start up, several factors can ruin the business relationship. You need to have valid reasons to determine how far you can trust that friend, know if they have great skills to compliment your business, and several other crucial factors.

By being thorough in your decision of starting a business with a friend you can trust or not, you can be certain of a less bumpy ride through your business journey together.

− Resume / CV Writers −

Professional Resume & CV Writing Service

Our Professional Resume / CV Writing Service Will Land You An Interview!

Learn More >>

See Also: 5 Important Things To Know Before Starting A Business In Nigeria

 

Questions To First Ask Yourself:

 

1). How Much Do You Trust Your Partner?

Trust is crucial in all areas of life. Before you hold a boiling kettle of water, you do soft touches to ensure you can trust it not to burn your hands. Before you cook a meal, you first wash or rinse the cooking pot to be certain it’s free of germs. Before a bank gives you a loan, they verify to ensure you have a good credit history and a viable business before they entrust their money to you. Before you get a business contract, the awarder confirms you’ve done similar projects successfully, before they can award it to you. The same applies to investors and many other areas of life, including starting a business with a friend.

Before you start a business with anyone at all, ensure you can first trust them to a great extent. If you probably can, then you may have the right friend as a business partner.

 

2). Do They Have Skills Crucial To Your Business That You Don’t?

Starting a business with a friend who has complimentary skills must be a top priority in your checklist.

To ensure you’re not just giving away free shares to a person who would have little to no impact in your startup, largely because you feel inclined to for emotional reasons, first ensure that friend can compliment your own skills. Measure the value he/she would add to the startup, and weigh it in terms of how it can determine the company’s future.

If after a close examination you realise there would be little to no impact in the friend’s presence in your company, then you’re better off staying just friends and not business partners.

 

3). Are They Emotionally Intelligent?

How do they handle crisis? Do they have life problems that could hinder their effectiveness in your business? Do they experience constant states of depression? Do they complain about almost everything they encounter?

Starting a business with a friend or anyone who is emotionally weak can be a disastrous move. While it may seem all good at the beginning, the person’s emotions would skyrocket again at some point, which could over time damage both your business and personal relationship.

If your friend is emotionally unintelligent, you’re better off staying just friends than becoming business partners. Any attempt to start up a business together could eventually end your friendship and leave you both with a failed company in the process.

 

4). Can You Test-Run Your Partnership Before Fully Committing?

Rather than calling it running a business together, test-run your partnership. Start something without registering an entity, or agreeing to being real partners.

Doing this will help you both grow your partnership in parallels, and make it easier for any member to pull out before a real business takes off, to save your relationship.

In the course of a test-run, you’d start to notice sides of your partner you never used to, and start figuring out how to adjust to their gimmicks or not. More importantly, when you notice your partner is highly emotional, has awkward attitudes towards a sharing formula, or has problems identifying with designated business roles, you can know it’s best to end the business relationship before it escalates to a point where your personal relationships would fall apart.

See Also: The 5 Critical Stages You Will Go Through As An Entrepreneur

 

Why You Can Partner With Your Best Friend:

 

1). You Can Fully Trust Them:

Your best friend or close friends are people you know better than even their parents. You know most of their dirty secrets, how to behave in certain situations, their daily routines, and weigh more than their girlfriends or boyfriends may ever know.

By having a deep understanding of their everyday life and constant behaviours, based on what you’ve personally experienced through the years, starting a business with a friend, especially your best friend, can be a great idea sometimes.

 

2). You Already Have A Great Relationship:

Your time as friends has already built a strong connection. Since you party together, study together, hangout together, and do much more together, there’s a strong relationship existing between the both of you already.

Relationships are crucial to the success of partnerships, and since you have one with your close friends weigh better than one with someone you just met, your business can take-off with a smooth ride.

 

3). You Both Share The Same Beliefs And Convictions:

You stand by the same values. You mostly dislike the same things. You both are probably hardworking and dislike lazy people. You generally have similar views in politics, sports, relationships, and more.

Taking a long business ride with someone you share the same beliefs and convictions with isn’t just crucial to the success of a business, but also to the success of a marriage.

With the same belief system working together, starting a business with a friend can be a great idea.

See Also: The 1 Skill You Must Master Before Quitting Your Job

 

Here Are Strong Reasons You Shouldn’t:

 

1). No Clear Acceptance On Who’s Really The Boss:

Most times when you run a business with your friend, the titles given to each other doesn’t matter. Since everyone is a part of the business and have known each other for a very long time, taking orders or tasks from the other partner can seem belittling, and spark an argument in the process.

 

2). Too Much Familiarity Can Be Bad:

Too much familiarity lets so many things get taken for granted. Since you’ve known a friend for many years, stopping him/her in their tracks when they make a bad business decision or do something wrong can be a problem.

An extensive knowledge of a person based on a deep personal experience, can be a problem in running a business. You need to be able to call the faulting partner to order, let them know the consequences of their actions, and set them straight on the company’s course. But when a best or close friend is involved, it becomes more difficult to address.

 

3). A Break-Up In Your Business Relationship Can End Your Friendship:

This is one top reason starting a business with a friend you’ve known all your life or have had some of the best experiences with, is highly advised against.

A fight between the two parties based on whatever reasons, especially when the fight leads to the end of the business, can sometimes end a strong personal relationship built over many years.

See Also: 5 Warning Signs Your Business Is About To Fail

 

Important Things To Do If You Still Want To Go Ahead With The Partnership:

 

1). Setup A Clear Legal Structure:

To ensure your friendship doesn’t taint the business, have clearly signed agreements. Duly register the business, have a clear allocation of share capital, have a founders agreement, an employment agreement, a real board of directors inclusive of neutral parties, and much more.

By setting up a structure, starting a business with a friend or two becomes easier to run, and also avoids future fights on the sharing ratio of income made by the business.

 

2). Mix A Great Blend Of Professionalism With Friendship:

When you address your friend at the office in front of your other partners and other members of your employees, make it official. Don’t give others the opportunity to feel they too can start taking some acts of professional conduct in the office for granted.

By being professional with your friend at the office, they get a sense of seriousness when they’re at work, then switch back to their pure casual state when it’s off work periods.

 

3). Clearly State Each Person’s Role In The Business:

Each partner should have an employment contract clearly stating their role in the organisation, asides just being shareholders, and also stating that falling short on their deliverables can lead to them getting fired from that position.

While losing a position doesn’t mean the partner is no longer a part of the company, it only means someone else could take that position and redirect the organisation.

 

4). Fix Personal Resentments As Soon As Possible:

Starting a business with a friend can lead to certain resentments once in a while, or a lot of time. But every time there’s an argument, the more emotionally intelligent partner should try to resolve it as soon as possible, before it escalates.

Resolving an issue you’re clearly right on can seem annoying sometimes, but for the greater good, you may need to take the step to ensure a bright future for the business.

See Also: How To Start A Company Without Any Business Skills

 

Conclusion

While there are good and bad events that could occur when starting a business with a friend, the final decision on whether to start up together ultimately resides on you and your friend.

If you believe you can make a difference where others have failed, then maybe you two should take the step. Otherwise, you’re better off strengthening your friendship through other means, than risking it all by starting a business together.

See Also: 10 Things No One Will Tell You About Being An Entrepreneur

 

What are your thoughts about starting a business with a friend? Let me know by leaving a comment below.

 

Image Source: www.pp-solutions.com

– Business Proposal Writers –

Professional Business Proposal Writing Service

Our winning business proposals are highly effective!

Learn More >>