12/14/2017

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Is Mixing Business And Friendship A Good Idea?
by John M. Roberts

Make sure your friendship is strong enough to take the ups and downs that come with working a business.

It’s great to have a trusted friend around when you start a business, but there may come a time when you will have to decide how to balance your friendship and your business with what you want to accomplish. Going into business with a friend may be a great way to get a business moving quickly, and you and your friend may make a great team, but there may be points of contention.

Before you decide to go into business with a friend, ask yourself how important the friendship is to you. Many friendships are lost due to business dealings. This doesn't mean that bad things happen every time friends join forces to start a business, but it happens more often than you might think.

Conventional wisdom suggests that the best people to partner with when starting a business are those you know and trust. This is true to a certain degree, but there are pitfalls. What happens if things don’t go well?  Are you prepared for the loss of a friend due to rigors of running a business? 

If money is lost or the business goes bankrupt, will all parties come to terms with it or is this where anger and the blame game come into play?  Believe it or not, you may be the one who can’t get around the fact that your expectations weren't met.  On the other hand, it may be you who gets blamed for the failure. In either case, blaming one another may turn your friendship sour, or even worse, you may end up in court.

You may think you know your friend, but when it comes to business and money, you may not know them as well as you think you do.  Money can become a game changer very quickly in any relationship, business or otherwise, and it can drive a wedge between the best of friends.

No matter who you decide to go into business with, there are questions that need to be addressed by you and your business partner(s) before getting started.  The most important questions should be about money and finance, but there are also other issues that need to be put on the table and worked out up front.

  • Who is going to be the face of the business? This is very important. It may seem trivial in the beginning, but at some point, especially if the business grows, someone is going to have to take the leadership position.
  • Who is going to finance the business? In some business arrangements, one partner may put up the money while the other partner does the work.
  • What will each partner bring to the table? Each partner has to pull his weight but there may be different assignments and duties. Different people have different talents so who is going to do what should be established right away. Remember, it is unwise to think that your partner is going to have the same opinion about how things should be done and can't always do things exactly the way you do them.
  • Are your goals the same and how will you reach them together? This includes determining what each of you want to accomplish on personal and professional levels.
  • What is the purpose of the business and how do you want the company to grow? Determine what the business is expected to grow into and how each partner feels about making it happen. You may want your business to grow slowly while your partner may want strong growth and rapid expansion.
  • How will decisions be made? There has to be an agreement about who is going to be the decision maker. In the early days of the business, decisions may not be weighty issues but as the company grows, they may cause distractions, especially if they involve spending money.
  • What will be the roles of others who may be brought in to help with the business, especially wives, children, parents, or girlfriends or boyfriends of either of the partners? It is a good idea to keep personal and professional lives apart but sometimes it can't be helped. This is very important because if there are issues, family members usually side with their own relatives and this may cause tension between partners.
  • What happens if you decide you want to leave the partnership or if your partner wants out? This can become a tricky situation, especially if there is equity in the company and either of you wants to leave with what is rightfully yours. How will this be handled?

These are just a few of the questions that you may want to consider before starting a partnership with a friend. You may think it's a little soon to start talking about what might happen down the road, but the sooner these issues are discussed, the sooner you will know where you stand and the better it will be for all involved.

A contract should be drawn up spelling out what is expected of both partners. I may be a good idea to have an attorney or a neutral third party draw up an agreement incorporating the rules and regulations that both you and your friend have discussed and agreed to follow. A failure to plan, even between the best of friends, may cause considerable damage to the friendship. In many cases, the friendship is lost forever.

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