If you’re an entrepreneur or aspiring entrepreneur, some of your friends are likely to be as well. You brainstorm or share business ideas from time to time. Perhaps you’ve discovered a lucrative business opportunity and are considering forming a partnership.
It’s a good start that you’ve talked about your business ideas. People who get along enjoy the idea of starting a business with a friend. Is it, however, a bad idea to start a business with your friends? Continue reading to see if starting a business with a friend is a viable option for you.
Advantages of conducting business with friends
A business venture among friends has several advantages that make it worthwhile to try.
1. You have a partner that you are very familiar with
You’ll have fewer surprises about your partner depending on how close you and your friend are. Beyond the surface, you already have a sense of their personality. You’ve probably seen their bad and ugly as well as their good.
Together, navigating the uncertain business world will be easier. You’re well-versed in your partner’s assets and liabilities (and vice versa). You two can form a dynamic duo that works well together.
2. You’ve already mastered the art of communication
Clarity and decisiveness are two qualities that can help a business partnership succeed. In order for that to happen, the partners must be able to easily communicate in-depth about any issue.
This may not be the case with a partner you’ve known for a few months. Years of knowing your friend, on the other hand, pervade easy communication. You’ll get to the root of the problem quickly and solve the issues that are plaguing your company.
3. You’ll have more time to spend with each other
There are a variety of reasons why you and your friends became friends. Your friendship is what sparked the idea for you to start a business together. You enjoy spending time together and keeping tabs on each other.
You’ll have plenty of opportunities to spend quality time together, which you already enjoy. Your friendship will no longer be restricted to shared hobbies, interests, or activities. You’ll spend that time with someone you get along with, whether it’s for weekly meetings, updates, or any other aspect of the business.
4. You share many of the same values and beliefs
“Birds of a feather flock together,” as the saying goes. Your friendship may have developed as a result of shared core values and beliefs. Being business partners entails having the same passion for the same vision and mission.
Whatever challenges your company faces, you will most likely support each other’s business decisions. When things get tough, you’ll be there for each other. You’ll be able to assist one another in ways that families or spouses might not be able to.
The disadvantages of doing business with friends
There’s always the other side of the coin, and it can be beneficial to a company. The following are some of the drawbacks of forming a business partnership with a friend.
1. It’s possible that your relationship will become solely business-related
What was once a good friendship can fade over time, as sad as that may sound. Running a business is difficult, and how you receive and respond to feedback and criticism can turn good friends into “just” business partners. One partner may believe the other is overbearing or careless. As a result, their actions may put their relationship under strain. People who hang out all the time start to grow distant from each other before they realize it.
2. It’s possible that your company is too casual
Your relationship may make it difficult for you to distinguish between business and friendship. It will be your business that suffers if you do not draw the line. Due to a lack of clearly defined roles, some aspects of the business may be neglected while others are overworked.
Because you’re both partners in crime, indiscipline may go unchecked. You could avoid making difficult decisions by simply chatting with your friends. If not addressed, such issues will lead to a lack of focus on the operation of the company. The venture’s failure is unavoidable in the long run.
3. You only have a small network
Maybe your partner has known you for a long time or grew up in the area. There’s a chance you have mutual friends and share similar interests. When you collaborate in a business venture, your network circle can limit your growth.
If the partners aren’t friends, each of them may bring a unique set of experiences and networks to the table.
4. You might lose contact with your pal
You’ve probably done and gone through a lot of things together, but not in the context of investing. Maybe your friend isn’t cut out for running a business. In the worst-case scenario, he or she makes a poor decision, and the company fails.
Such an occurrence is a setback for your friendship and may result in a rift. It’s going to be awkward between you two. You’ll lose your friend, as well as possibly some of your mutual friends.
Before starting a business with a friend, here are some questions to consider
Being good friends is not the same as slaving away for hours on end to build a successful business. Before you start a business with a friend, consider the following points.
Do you have faith in your pal?
Money has a strange way of inspiring people with all kinds of ideas. Many people have lost money to people they thought were their friends. The question is, what is your friend’s track record when it comes to money? Is there going to be complete transparency?
Some of your partners may take money from the cashbox. Still, they could be involved in shady dealings. Is there a chance you’ll get into trouble? What is your level of familiarity with your friend?
Do you have a similar goal in mind?
In other areas of life, you may have differing viewpoints and personal preferences, but your commitment to your partnership is driven by your mission. When you’re both headed in the same direction, doing business together will come naturally.
Do you share the same vision and goals?
It’s critical that everyone is on the same page from the start. You and your partner should share the same vision, whether it’s for long-term or short-term goals. Having a shared game plan will help you avoid future conflicts.
Do you have skills that complement each other?
You must assess the skillsets that each of you brings to the table. What is the added value of your coming together? You’ll face a lot of difficulties if you’re good and bad at the same aspects of running a successful business. Do your qualities complement and balance each other?
In the end, your partner should have some qualities that you don’t. Consider what the company requires in a realistic and strategic manner.
Would you be able to start this business on your own?
Friendships can become entangled in the idea of doing something together, but this isn’t always the best option. If you can get the business up and running on your own, you probably don’t need a partner. You can employ others while remaining the sole proprietor.
A partnership, on the other hand, is a good idea if you don’t have enough capital. If you lack specific skills or connections, a strategic partner will add value to your startup.
Is it possible to conduct a pilot test?
You’re about to put your money and time into something. In some cases, it’s a good idea to test the waters first before jumping in. This experience allows you to see yourself and your partner in a professional setting.
Before investing your money and time, a trial run can answer several questions. That way, you’ll be able to spot areas that require more attention and devise solutions to the problems you’ve identified.
Are you both ready to put in the same amount of effort and money?
In order to get the venture off the ground, time and money will be crucial. Are you going to split the bill 50/50? If that’s the case, how will it benefit you both? What are the contingency plans in case something unexpected occurs?
You’ll need to understand each partner’s share and how it will affect the company’s future. Consider what will happen if the company succeeds or fails spectacularly.
What is the best way to start a business with a friend?
When you start a business with a friend, you get to share an entrepreneurial adventure with someone you care about. However, before embarking on that quest, it would be beneficial to put a few things in place.
1. Define your roles
Before you start a business, make sure you understand each partner’s role. When you’re in operation, you’ll be able to avoid conflicts and confusion. Maintain an openness to change, and the ability to adapt when necessary.
2. Establish communication policies
Make it a point to communicate on a regular basis. Keep all necessary information on paper and in a secure location. Allow complete transparency in all aspects of the business, whether they are directly or indirectly related.
3. Come up with a plan together
You must create a formal business plan and put it in writing, either with or without the assistance of legal counsel. It will assist you in staying on track as you carry out your plans. To ensure that you are both on the same page, try to work through the initial planning process together. After you’ve finished writing your plan, you can either continue to review and revise it together, or you can start laying out how much each partner will be involved with it.
4. Establish milestones and mutual objectives
Clearly define how you will achieve your objectives in a logical and practical manner. Look at what needs to be done first, when it needs to be done, and how to proceed once that’s done. This can help ensure that you and your partner are working toward the same objectives and that you have a plan in place to track your progress.
So, is it a good idea to start a business with a friend?
Don’t start a company with a friend just because you had fun together. To turn a potential business idea into a profitable venture, you must follow your heart while also using your head. When done correctly, starting a business with a friend can be extremely rewarding.
If there are any red flags, you should probably avoid them. If it’s possible, go ahead and start your own business together. Check out our startup guide to make sure you’re ready for whatever you decide.
Learn more from Business and read 7 Steps to Starting a Business Without Any Money.
