If you have entrepreneurial spirit, chances are your close friends do too. Have an idea that you think will take off? Starting a business together can be an adventure, to say the least. Make sure you keep these questions in mind as you weigh the pros and cons of launching a joint venture.
How to start a business with a friend: What to do
When starting a small business with a friend, you should always do the following:
- Communicate clearly and regularly. Just because you and your friend know each other well as friends doesn’t mean you’re aware of each other’s business wants, needs, strengths, and weaknesses. As you launch your business, you should set aside time for several transparent, no-holds-barred conversations about both your expectations, goals, and work styles. This way, you’re not in for surprises down the line that could hurt both your friendship and your business.
- Define your roles from the jump. Sharing all your expectations from the get-go means knowing who will handle which tasks from day one. Establishing this division of labor now is key to preventing conflicts later, as nobody likes seeing their supposed equal do substantially less work. Similarly, nobody likes seeing someone neglect tasks for which they’re responsible. Set your roles now to minimize the chances of either scenario.
- Write, not just verbalize, your business plan. You and your friend might have similar goals and ideas, but as your business grows and changes, your relationships to it – and each other – could change. That’s where a formal business plan comes into play. Writing a business plan keeps you and your friend on track as inevitable personal and professional changes occur. Make sure to get your plan in writing to solidify it.
Starting a business with a friend: What NOT to do
A successful business launch with a friend avoids the following pitfalls:
- Forming a business partnership with a friend just because you like them. Your favorite person in the world isn’t necessarily a match for your business idea. Think twice – or three times, or more – about whether your close friend has interests and skills similar to yours. If not, then just spend more time with that person when you’re not working. Your friendship will be better without bringing work into the fold.
- Making any assumptions at all. As explained above, a transparent conversation at the outset of your business launch is key to starting and running a business with a friend. Any and all assumptions in the early stages of your company could thus prove problematic. Instead of assuming that your friend is as committed to the work as you are, have the aforementioned conversation about how invested you’ll both be in the company as early as possible.
- Mixing personal and professional life. Sure, it’s inevitable that your business will come up when you and your friend are out with a bunch of other people. Beyond this scenario, though, make a rule to only talk about business at predetermined times. All other time should be devoted to your friendship. This structure achieves a tenable work-life balance and helps keep your friendship stable even when business is tough.
- Prioritizing the business over your friendship. Always remember that you’re working with a friend, not just someone with whom you have a good business relationship. This distinction requires that you make time for your personal relationship even when your business is incredibly hectic. It can also mean implementing an exit strategy that allows you to leave the business without ending your friendship.
11 key considerations when starting a business with a friend
As you and your friend launch your business together, you should ask the following questions:
1. How well do you communicate?
It’s no surprise that open communication is one of the central elements that holds any relationship, business or otherwise, together. But when you consider the major step of launching a venture with a friend, it might be easier than you think to take that rule for granted.
Knowing each other well doesn’t mean that you should communicate any less, especially about the difficult subjects. You’ll clear away confusion faster, make sure you’re aligned, and work through tough decisions as a cohesive team.
2. Do you have trust?
Friendship usually means trust. And when it comes to building a business, that should be especially important for both of you. Think about the times where your potential business partner delivered on promises, went the extra mile, and helped you achieve your goals. If you have any hesitations, don’t take them lightly – you’ll be working together on critical decisions.
3. What tough conversations should you have now?
It bears repeating that the toughest conversations – business roles, commitment to the company – are best had early. To make sure everything is out in the open before you formally launch, ask yourself: What do I want to know about my friend, the business, and their overlap? Then, schedule a formal business meeting to get it all out on the table.
4. How can you make sure to include everyone?
Even if you and your friend clearly establish your business roles, there will inevitably be times when you feel like one of you is doing more work than the other. To prepare for these scenarios well ahead of time, you should figure out early on how you can re-level the playing field. Will weekly meetings work? Or is raising your concerns as they arise more proactive and effective? Only you can decide.
Similarly, you should take steps to ensure that your friendship doesn’t box other people out of the business. Chances are that you’ll want employees eventually, but employee retention can be tough if your company is a front-row seat to a relationship involving only you and your friend. And since hiring can quickly become a necessity if you grow fast enough, determining how you’ll include your whole team early on can lead to success sooner than later.
5. Do you share a vision?
You might have brainstormed together, but have you discussed your visions for where the company’s going and how you’ll get there as a team? This is a key question to consider, and one that can be deceivingly simple to answer. Take time to talk your ideas through, from the abstract to the specific, so you can stay on the same page from the very start.
Once your visions align, start breaking them down into concrete goals. Define clear roles and set responsibilities. Do you have a plan for the business in five years, a year, or even six months? Without these milestones defined, you might find your business heading in different directions.
6. Do you have a business plan in place?
A business plan is a strategic document that maps where your business is heading over a certain time period. Once you’ve agreed on a few solid targets, go beyond the verbal “OK” and put your plan of action in writing.
Taking this step seriously can be one of the keys to success. Treat important business matters just like you would for any business partner and hold each other accountable to following the business plan.
7. What does success mean to you both?
After learning that a business plan is important to small business success, you might wonder: What is success? It’s up to you and your friend to determine the answer. The thing is, you and your friend are unlikely to have the exact same definition of success, so focus on solely the overlap.
For example, if reaching a certain number of loyal customers means success to you both, focus on that. If your friend instead values quality over quantity, find a minimum retained customer revenue that satisfies you both. Doing so is just one of many ways in which your teamwork will truly make the dream work.
8. Can you separate personal and business matters?
Just like creating a business bank account is a pivotal step for the financial growth of your company, setting a clear boundary between your personal and your professional relationship can help you stay afloat.
You might even find that you strengthen your friendship by distinguishing between the types of conversations you’re having, specifically when and where. If you have an office space, leave personal chats at the door. Create a company email address to be used exclusively for business. Schedule meetings with specific agendas so that you don’t get sidetracked.
Don’t forget to take time out of your busy days to catch up. You’ll probably find that the new responsibility changes your relationship, but it shouldn’t suddenly take priority over your personal connection. At the end of the day, your friendship should continue growing through thick and thin.
9. How can you exit gracefully if need be?
Even the soundest of friendships can suffer if doing business together raises previously hidden red flags. Maybe your best friend has horrible spending habits you didn’t realize until you shared a business account, or maybe your micromanaging style is driving your friend crazy. These conflicts could end a friendship if drawn out long enough, but an exit strategy can help save the friendship.
With an exit strategy, you create a legal framework for either of you to tactfully exit the business without substantially damaging your operations. This framework lessens the chances of a dramatic exit that sinks not just your company but your friendship.
10. What are your unique skills?
While having a strong friendship is a valuable asset for any business partnership, it shouldn’t be the only driving force. Getting along well and enjoying each other’s company isn’t always indicative of a strong business partnership. Consider your partner’s skillset, qualifications, and experience objectively before taking the plunge.
Your individual strengths should complement each other so you can collaborate effectively as leaders. Rather than creating competition, take time to understand where each of you shines.
11. Will your roles overlap?
Once you’ve identified the areas where each of you specializes, consider how your individual skills will translate into your roles within the organization. Take steps to ensure that there’s as little overlap as possible—you’ll avoid conflicts and miscommunications when you each have a clear view of your designated responsibilities.
Good friends Mary and Lisa work together as Painting with a Twist studio owners to give back to their community in a fun, relaxing environment. Read their success story and learn more about how SmartBiz helped them achieve their dreams with an SBA loan
