Friendship and Business, Is It Good?
Starting a business is always exciting! Who else would you want to start a business with other than your friends? It is always comforting to know someone is on this risky train with you, especially if you know them personally. The problem is, friends may not make the best business partners. They may like the same football team, or drink the same beer; however, are they going to be an asset to building your next empire? Friendship and business can be a recipe for disaster!
Forming a Business With Friends
Ok so you and your friend decide to start a business together. You have a great idea that you think you can market into something incredibly profitable. Perhaps, you have been friends for years and feel there is no way this could go wrong. Let me tell you from experience, it is much more likely to go wrong than not. I have gone into business with friends four times now. Have I learned from the past? Actually, yes. My previous businesses were not successes. I consider them tuition. Some I lost money, some I lost time. But they have led to me forming a company with a friend that is actually successful with minimal issues (knock on wood).
Before going into business with a friend, or multiple friends, consider a few things.
#1 What Do You All Bring To The Table?
This is a huge one! I have always had the mindset that I want to share in riches with my best friends. I want my success to bleed into their successes so if I win, we all win. The problem with this mentality is after the initial awe of forming the company has worn off, you start to think “what is it you say you do here?” A recent company I was trying to form started with five of us. It was a real estate investment firm and all of us wanted to use the BRRRR method (as illustrated by David Greene) and start building wealth. We all had similar goals and thought we can help each other succeed. But, after we started ironing out the details of who’s doing what, there became conflict. At least one in the group didn’t have a skill or background that would help the company move forward. So why were they part of the company? Personality can only get you so far.
#2 Motivation Check! Hoorah!
This is a lesson that I learned from my first business. Is everyone as motivated as you are to start a business? Since you are reading this, I’m assuming you are ready to hit the ground running! You probably have a file structure already built on your computer, excel spreadsheet templates for your orders and invoices, even started building a website to get the ball rolling. Is everyone else on the same page? I frequently get told in my business ventures to slow down and “dont put the carriage in front of the horse.” I am a motivated individual. Unfortunately, your friends may not be on the same wavelength. My first company with two friends had one who had it as his 3rd or 4th priority overall. He was the programmer for the company, and we relied heavily on his skills. He ended up walking away from the company because it was negatively affecting our friendship. It was definitely the best choice, and he and I are still great friends today because of it.
#3 Work Ethic
This lesson I learned from my first side company that I started with a friend who I met through work in the military. He was a logistics officer and, though we never worked directly together, he did not have a poor reputation. He and I were good friends and shared a desire for passive income. We would watch videos about Fulfillment by Amazon and how to combine it with Alibaba to make money with those products. He was motivated, had a good social media presence, and he was the one bringing me this opportunity. At this point, I had worked for Corporate America, and had experience in logistics and marketing. I knew what needed to be done to market a product appropriately. I found later on that he didn’t have motivation to put in the work, he just wanted the income. The marketing research he was supposed to perform ended up being a quick questions to friends at the bar he was at one night. Our products failed market entry and we closed down shop within a year.
#4 Company Vision
This issue came to light with the real estate company I talked about. In the beginning, we had a vision of how we wanted the company to go. We had a rough target market and strategy. As the company evolved with education and more detailed planning, the vision began to evolve as well. Unfortunately, not everyone agreed with this evolution. I, for one, was more concerned on the deals making sense in the numbers, and optimizing return. I understood how we wanted to target a specific market, but felt that we were pigeonholing ourselves into too small of a niche to begin our journey. Unfortunately, this created a large rift that could not be recovered. I left this group because I felt it was negatively affecting the friendships I had with the other member. I learned from the past how bad it could be, so I believe I left at the right time. We’re still friends and still talk real estate and investing all the time, but not in the same company.
Friendship and Business = Personality Battles
I previously said, personality can only get you so far. But, it does go both ways. Some times, personality clashes will stop you short as well. When looking at a business partner, make sure they meet the four criteria above, and your personalities mesh. I do well with motivated people who have a ZFG mentality for most things, but are motivated to get things done. These people will give uncensored feedback, but only when warranted. Personally, I do not work well with people who have to have an opinion on everything. I hate the “my only concern” response to everything I say. I know I am more of a control freak for much of the business and will push people to be on my time schedule. So, if my business partners and I don’t mess in these things, I can tell you right now, it’s not going to work. Know your personality quirks and your friends’ before you decide to sign on for years of headaches.
Prevent Problems With Your Friends and Business
There are plenty of ways to prevent issues, or at least get the big hurdles out the way. The biggest thing you can do is write a business plan. I know this takes a lot of time and you want to hit the ground running. But, it will save you a lot of heartache in the future if you have it all written down. It forces you to talk to your business partners about who does what, what happens in conflict, what happens when someone leaves? It makes you take a deeper look at the business to see your strengths and weaknesses as a company, and how you will overcome these obstacles. Most of the issues I had with my previous business ventures could have been solved with a couple weeks worth of planning.
Disclaimer
Once again, I am not a financial advisor. These tips are some things I have validated with my own personal experiences. If you feel you need more personal advice, please consult a professional financial advisor.
