From BFF to Business Partners: 3 Must Have Conversations
Can friends be business partners?
At some point, we’ve probably all idled away a few hours with our friends talking about starting the perfect business. In a way it makes sense – you can trust each other and likely have a similar outlook on life. What could possibly go wrong?
Some estimates suggest that 40 percent of founding teams include people who were friends before starting their business. But studies by the Harvard Business School found that out of 10,000 businesses, the ones started by friends were 28.6 percent more likely to have founder turnover.
But is it always a bad idea? After all, some of the most successful businesses around were founded by friends; Hewlett-Packard, Ben & Jerry’s and eBay to name just a few. How hard can it be? You get together to think of an idea, and have loads of fun setting it up! Sounds easy, but it’s not without its disadvantages.
The Pros of Going from BFF to Business Partner
Trust is Already There
You know this person very well and can trust them. One of the hardest parts of finding a business partner is getting to know them. In fact, a podcast called StartUp describes the process as being similar to dating; you never know if it’s going to be a long-term relationship. At least with a friend, you can skip that part.
Setting Up a Business is Brutal
It’s good to know that you have a friend who is going through the same all-consuming experience you are.
You are both (hopefully) starting out with the same vision and ethos for the business. For example, Ben Cohen and Jerry Greenfield, founders of Ben & Jerry’s, both had a strong desire to give back to the community with the profits of their business. Shared values are essential for setting the tone of the company.
Fair Assessment of Strengths and Weaknesses
You already know each other’s traits and how your strengths and weaknesses can complement each other – an excellent foundation for a business.
Cons of Going from BFF to Business Partner
Social Network Overlap
One of the advantages of a new business partnership is that usually you both bring different connections to the table – a pool of people to help grow the business. If you’re already friends, there’s a reasonable chance you know the same people and your pool will be smaller.
Awkward Decisions Need to be Made About Equity
Being friends can mean awkward conversations about cold, hard figures. How do you divide up the company to the satisfaction of both parties? It could result in a damaging power struggle.
You Might Be a Little Too Close
People who know each other too well could be more likely to argue than people in a pure business relationship. Personal relationship drama can easily bleed over into your business relationship.
Business Challenges are Different from Friendship Challenges
Although you get on well socially, it might be a different story when you get into the office. The challenges and pressures of starting a business may put a strain on your relationship.
You Need to Have These Key Conversations Before Entering into a Business Relationship with a Friend:
They say talk is cheap but in this case talk can actually save you both time and money. Time spent talking over what you both expect establishes clarity around your business goals, values and disaster management. It should always be part of the business start-up planning process, but if your co-founder happens to be your friend it may also help to preserve the friendship when times aren’t all that easy.
#1 The Goals and Timelines Conversation
What is most important to you? Are you planning to take the slow and steady approach to growing a business that will generate long term income for the owners, or do you want to be out of the blocks fast, build value in the business with a view to listing or selling the business? Put some thought into this and have this discussion before you make the leap.
#2 The Equitable Effort Conversation
Unbalanced levels of commitment are the primary cause of partnership breakdowns. While each of the business partners will, from time to time, be putting in more hours than the other, the main thing is that there should be an equitable sharing of the workload overall. Maybe one of you is an early bird who does his or her best work early in the morning and wants to be home to read the kids bedtime stories. The other might start a little later but puts in extra hours in the evening or the weekend.
While there is no need to keep timesheets, having the conversation reduces the potential for friction down the line. Discuss what each of you consider an acceptable “work-life balance” and acknowledge that, depending on skill sets, there may be times when you both will have to put in extra hours.
#3 The “Lifeboats” Conversation
Lack of cash flow, PR disasters, angry clients are just a few of the difficulties that most businesses face at one time or another. You may not yet have the answer on how to deal with every possible problem that may or may not come your way. There will be a certain amount of learning as you go along. However, to prepare you for the inevitable times when things are not sailing smoothly, it is worth considering some “what if” scenarios and planning a course of action that you both agree on.
Hopefully you won’t ever need to activate these tough actions in response to a crisis, but at least you know that you’re both on the same page if it does happen.
Having these conversations in advance is time well spent and enhances your chances of long-term partnership success and protecting your friendship as well.
Going into business with a friend because it might be fun is not a sound basis for a successful business. A better foundation is a shared vision and confidence that your differing skill-sets complement each other. And during the tough times, where your mental strength as an entrepreneur might be wavering, a friend can be the right person to pick you back up and push you both towards the goal.
Over to You!
Have you started a business with a friend or are you planning to do so? Share your experience. Did you rush in without considering the longer-term implications of your friendship, or did you take your time and discuss how to balance your friendship with the shared business responsibility? Share your comments and experiences below.