5 Tips For Starting a Business With Friends

Is it a good idea to go into business with friends? Here are some do’s and don’ts.


You’ve been part of the corporate jungle for a decade longer than you ever imagined and starting to feel like you’re not getting anywhere being an employee. Or maybe you’re hitting the glass ceiling and your suggestions aren’t being taken seriously. The next logical step, you think, is becoming an entrepreneur. However, you’ve been so used to taking instructions that the thought of going into business seems a bit terrifying. What should you do?

5 Tips For Starting a Business With Friends

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 100% then nothing could go wrong–right? Not really.

A few years ago I spent months working on a business plan and coming up with ideas for a startup that I was going to partner on with a programmer friend. Because I trusted him, I didn’t have a contract in place. He took advantage of this and stole my ideas, launching the business without me. I moved on, but I certainly learned a few lessons.

While doing business with friends might seem to be the most foolproof option, some business experts say it could be your friendship that will ultimately ruin your chances for success.

A person’s business personality is different from their casual personality, which is where most friendship-based enterprises fail. The person you thought was a fun-loving and a fearless friend who could stay up all night listening to your gripes could be a very stern and calculating business partner whose vision for the company is very different from yours. Or worse — they could be a total slacker and you could be left doing both of your jobs just to keep the business afloat.

A lot of businesses have grown and died this way. “A friendship that is founded on business is a good deal better than a business founded on friendship,” John D Rockefeller used to say.

Friends who fail to create that line between friendship and entrepreneurship, and end up launching personal attacks when disagreements rise, are destined for failure. Or conversely, if you’re too concerned about hurting each others’ feelings, then unspoken gripes can pile up until everything blows up.

5 Tips For Starting a Business With Friends

But it’s not all doom and gloom! A friendship-based business is not all bad — there are many instances when friends have actually formed stronger bonds while working together on the venture.

It helps if all parties respect the business hours as impersonal, purely professional, and understand that when office time ends, you can leave the issues at work and hang out as buddies. For example, 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.

The good news is, you can start a business with friends and find success. 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 the last decade, but placing your job functions in writing from the get-go will help avoid major conflicts in the future.

5 Tips For Starting a Business With Friends

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.

Perhaps most importantly: sign contracts and define the company ownership. If your friend flakes, their ownership stake should decrease accordingly. Make the rules clear from the start. Essentially, structure everything as if you expect it things to go sideways at some point. That way everyone is protected.

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.

5 Tips For Starting a Business With Friends

4. What are 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.

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 endpoint. 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 have the last say over a particular subject so you don’t spend all of your time arguing. If need be, you can 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 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 the lines at the start and address potential areas of conflict, then you could build one of the happiest and successful companies you’ve ever imagined.

Avatar of Hilary Rowland

A writer, artist, and designer since she was young enough to put pencil to paper, Hilary taught herself code and created Urbanette when she was a teenager. Currently, she lives in Monte Carlo, but spent the past decade living in NYC, still considers herself a New Yorker, and visits regularly. She's always traveling, looking for hot new topics, destinations, and life hacks to bring to Urbanette readers.

Reader Discussion: 107 Comments

  1. Avatar of Harvey T

    It is true that you should keep friendship and business apart. I ruined 12 years of friendship because of business. :/

  2. Avatar of JURIK


    Great tips! But I think all these are easier said than done…

  3. Avatar of Jeni Morgan

    Jeni Morgan

    Doing business with friends is a good idea BUT you have to make sure that priorities and directions of interest are aligned with each other.

  4. Avatar of Kimberly Henderson

    Kimberly Henderson

    Having a business is not easy. It needs effort and time. If your friend is not serious, maybe it’s time to separate your ways so that you can still save your friendship.

  5. Avatar of Carol Clark

    Carol Clark

    Hm… an article about mixing business with friendship? Nice. Looking forward to that someday… if I ever have the courage to quit my shitty job.

  6. Avatar of Jennifer Martin

    Jennifer Martin

    Will send this to my friends because we are planning to open a small restaurant. This will help us a lot!

    • Avatar of Margaret Ross

      Margaret Ross

      Goodluck on your business! I hope that it will be a success!

  7. Avatar of Louise Wilson

    Louise Wilson

    Your friends are your friends, but you will never know their real behavior once you do business with them. Trust me in this. You never really know people, especially when you get money involved.

  8. Avatar of Ann Phillips

    Ann Phillips

    I agree with setting aside the issues in the office in your personal relationship with your friend/s/business partner/s. don’t destroy your friendship over money.

  9. Avatar of Heather Carter

    Heather Carter

    A professional article. I like it. thanks, Urbanette! I could use some career advice… sometimes I feel like I’m constantly causing problems at work 🙁

  10. Avatar of Andrea Wright

    Andrea Wright

    Do dope shit with my friends. That’s the business model.

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