From friendship to business partnership: what to consider when going into business with your friends
How many times have you wondered whether you should go into business with your friends or not? There are so many schools of thought on the topic. Some people swear it off altogether and others have been able to successfully navigate friendship-business partnerships. Maybe you have an amazing idea and vibe really well with your friend. Maybe you already bounce ideas off each other and want to take it to the next level. Maybe someone has approached you about helping them with their business and you want to make sure you are making the best decision possible. We get it! Speaking from experience as friends who have become business partners, there are quite a few conversations you may want to have with yourself and your potential business partner before taking the deep dive. Here are our thoughts on some things to consider!
First things first: Always put the friendship first. Before entering into a business arrangement with a friend, make a pact that you will always put the friendship first. This includes being transparent on all decisions, leaning into your strengths, communicating when things bother you, and not trying to undercut the other person/people. Working with friends can be tricky because of different personality types and the potential for you to cross personal boundaries because you know a lot about each other’s personal lives. When working with friends, it is important to set professional boundaries to not discuss your personal lives with other work colleagues and to not discuss work after work hours.
Consider your ability to communicate and your work ethic. How easy is it for you to be totally honest and transparent with that person? What drive do they have for the business? How much do they expect you to do versus what they are offering? How much time do you both have to dedicate to the business? How do you complement each other in terms of skillset? How efficient are you each at getting things done? What has their track record been with previous projects?
Do a self-assessment. Do you work better in collaboration? You should do an evaluation of how best you work — whether individually or with team members.
Here are a few other things to consider when entering into a partnership business. It is a significant decision that can impact your professional and personal life.
Compatibility and Trust: The most crucial factor is the level of trust and compatibility you have with your potential partner. You need to be confident that you can work together effectively over the long term and handle disagreements constructively.
Skills and Expertise: Evaluate the skills and expertise each partner brings to the table. Ideally, partners should complement each other's strengths and weaknesses. This diversity can lead to a more robust and dynamic business.
Vision and Goals: Ensure that you and your partner share similar visions and goals for the business. If your long-term objectives differ, it could lead to conflicts down the road.
Financial Stability and Contribution: Understand each partner's financial situation and the contributions they will make to the business. This includes capital, resources, and time. Clear agreements on financial matters can prevent misunderstandings later.
Roles and Responsibilities: Clearly define each partner's roles and responsibilities. This clarity helps in managing the business more efficiently and reduces the chances of conflict.
Legal Structure and Agreements: Decide on the legal structure of the partnership and have a formal partnership agreement in place. This agreement should cover all critical aspects like profit sharing, dispute resolution, decision-making processes, and exit strategies.
Risk Tolerance: Assess each partner's risk tolerance. Business ventures come with inherent risks, and it's essential that all partners are on the same page regarding how much risk they are willing to take.
Communication Style: Effective communication is vital in a partnership. Partners should be able to openly discuss and resolve business issues. Pay attention to how well you communicate with each other.
Work Ethic and Commitment: Make sure that all partners are equally committed to the success of the business. A partner who is not as invested or hardworking can become a liability.
Exit Strategy: Although it might seem premature, discussing an exit strategy is crucial. Understand and agree on what happens if one partner wants to leave the business.
Remember, a business partnership is like a marriage in many ways. It requires effort, commitment, and the ability to resolve conflicts in a healthy manner. Take your time to evaluate these factors thoroughly before making your decision.
