5 Tips For Starting a Business With Friends
So you’ve been part of the corporate jungle for 10 years and realize you’re not getting anywhere being an employee all your life. The next logical step, you think, is going out and starting your own life as an entrepreneur. However, if you’ve been so used to taking instructions, the thought of going into business could be terrifying. What do you do?
For most people, encouraging friends to do the same and join you in a new business life is a smart and comfortable way to start from scratch. After all, if you’re in the company of people you’ve known all your life and trust a hundred per cent, nothing could go wrong, right? Not really. While doing business with friends might be the most foolproof option there is, some business experts say it could be the very friendship that you have that will ruin your chances for success.
A person’s business personality is different from her casual personality, which is where most friendship-based enterprises fail. Who you thought was a fun-loving and fearless friend who could stay up all night listening to your gripes could be a very stern, calculating and time-constrained business partner whose vision for the company is very polar from yours.
A lot of businesses have grown and died this way. Friends fail to create that line between friendship and entrepreneurship and end up launching personal attacks when disagreements rise, especially issues that related to money. Over time, because friends are too concerned about hurting each others’ feelings, communications lines blur and gripes are piled up withing until everything blows up and more people get hurt.
“A friendship that is founded on business is good deal better than a business founded on friendship,” John D Rockefeller used to say. A friendship-based business is not all bad, however, and there are many instances when friends have actually formed stronger bonds while on the venture. It also helps that all parties respect the business hours as impersonal and purely professional and understand that when office time ends, you can all leave the issues at work and hang out as the best of buddies. Oprah shut down close friend Rosie O’Donnell’s show on her cable channel because of its poor ratings, but the two have managed to remain very good friends.
You can start a business with friends and end up growing it happily together. Here are some tips to make sure you don’t lose your heads and go at each other’s throats when the going gets tough.
1. Define your roles from the very beginning.
Who takes care of operations, financial matters, marketing, human resources, etc? You and your friend/s should be able to create a clear line of responsibilities so you don’t overlap and conflict with the each other.
Placing your job descriptions in writing as a handy guide will also help determine who will be accountable for what in the future.
Put it this way: while you’re all partners and have a say on how the business will be run, someone should be assigned to have the final say on certain matters. Or you could all agree on a method to make a fair decision when everyone is disagreeing with each other. You may have been the closest of friends for 30 years, but placing your job distinctions in writing from the get-go will help avoid serious conflict in the future.
2. Decide how conflicts and disagreements are handled.
Handle conflicts and disagreements in the most professional matter.
The tendency among friends is to take the disagreement to the personal level and that’s when the backstabbing and emotional monologues begin. While you may be used to talking your heart out to your friend at a coffee shop or over the phone, being in a business together means resolving conflict in a business-like manner. Bring it to the office, listen to what each other have to say, make presentations to support your claims when necessary and make fair decisions based on the points raised.
3. Business is business. Keep your friendship out of it.
Keep your relationship professional and centered on business only during office hours. When the clock strikes six, you throw your thinking hats out and start hanging out as friends. You should know the distinction between a professional criticism from a personal one, and you and your friend/s should be clear on this from the start.
4. What your strengths and weaknesses? How much time and effort are you willing to put into the venture?
Each individual has her strengths and special talents she can contribute to the betterment of the company. Utilize these and fill in your own strengths where the other is weak. This way, you create a symbiotic working environment for everybody. Your client will also be very happy that all aspects of his or her job order has been tackled thoroughly by a team that looks at all angles of his or her request toward execution.
At this point, it is important to note that while inviting friends to start a business with you is a potentially fun prospect, not all of your friends have something to contribute realistically to the company’s goals. In short, you don’t have to get all of your friends as partners just so the other won’t feel left out. Determine who among your buddies are the best contributors as full-time partners. Perhaps the others can chip in on a per-project basis or just function as non-managing investors.
5. Define your goals for the company, so you can arrive at a compromise if they don’t go in the same direction.
Before you start a company, talk to your partner friends about their vision and goals for the company.
This won’t be a problem if you all are envisioning the same end point. However, if the methods of one are not in line with the strategies of the other, you will need to meet halfway to make sure all recommendations are covered. Do this at the very beginning. This is also why it is important, as noted earlier, that you choose someone who will the last say over a particular subject so you don’t spend all of your time arguing your points. If need be, you can all agree to invite a third party to intervene when conflicts like these arise.
Being in a business with friends could help your venture grow much better and faster because the lines of communications are expected to be more open than, say, venturing with strangers. While some business experts do not recommend this, if you are able to define lines at the start and address potential areas of conflict, then you could be looking at one of the happiest places you’ve ever worked in your life.