Good friends, great business partners
Survey small business entrepreneurs and you’re sure to discover relationships that soured when long-time friends became business partners. Fortunately, the story doesn’t always end on a tragic note. Here’s why:
- Friends can talk openly. Because a foundation of trust has been established, friends have already learned to communicate candidly. When tough business decisions need to be made, they can discuss choices without wondering how criticisms will be construed.
- Friends capitalize on each others’ strengths. One partner may love recordkeeping but tend to avoid dealing with the public. The other, a crackerjack salesman, may struggle with accounting minutia. As friends, they can capitalize on one another’s strengths to advance the company vision while minimizing internal squabbles.
- Friends are committed. Friends care about each other, and will often go to lengths to work out differences because they’re committed to the friendship. They also typically have an understanding of each others’ top priorities, and are willing to help in reaching goals.
How to protect your friendship and your business
No significant business relationship should be undertaken lightly or blindly. With the help of skilled advisors, initial expectations about the company should be committed to writing. This includes laying out the details of operational roles, capital investments, working hours, exit strategies and other crucial aspects of the business. Even among friends, clearly written policies can prevent future misunderstandings.
Depending on your timeframe and industry, consider performing a beta test: a pilot project you can complete jointly before launching a business together. Along the way, ask these questions:
- How do you handle disagreements?
- Does one person always take the lead?
- Can you easily switch leader and follower roles as circumstances dictate?
Test your relationship in a real-world setting. Observe how well you work together and make adjustments before the firm starts operations.
One more question worth pondering: is your potential business-partner friend in a stable position in life? If he or she is working through the aftermath of a divorce or climbing out of financial debt, consider postponing the launch of your business. If possible, start operations without major distractions.
If you’d like more advice about creating a successful business partnership structure, give us a call.