Tips For Going Into Business With Friends
DECEMBER 19, 2016
Passive Income MD
Yes, there is some truth to it all, but believe it or not, good partnerships are actually possible. Sometimes it can even result in a good deal of synergy.
Why might you want a friend as a business partner in the first place?
1. Capital: You might need additional capital for an investment and a good friend is an easy place to start.
2. Time: Perhaps you simply don’t have the time to take on the entire project by yourself. This isn’t exclusive to physicians, either. If you already have a full-time job or a family (or both), sometimes you need a partner to help shoulder the responsibilities.
3. Fear: Maybe when it comes down to it, you’re a little bit hesitant to start a new venture alone. Going into business with a good friend is appealing because you’re in it together. The added benefit there is that you learn from them, they learn from you, and you both learn more about how to run that business.
These are all good reasons, but really, the best reason to have a friend as a business partner is the most important aspect of a partnership, trust. When you partner with a friend, if it’s a true friend, that trust has already been established.
I’ve been fortunate enough to have some great business partnerships with close friends. I’ve invested in an apartment building, a fix-and-flip, and even angel-invested with them. Now, admittedly, these ventures are not without occasional issues. But we’ve been able to navigate past those and the business relationship has been strengthened because of it.
So, if you’re considering going into business with a friend, here are some tips I’ve picked up through my own experiences:
1. Establish the business relationship in writing. This can be in the form of an LLC or legal entity. It is extremely important to talk through all the logistics of your partnership - dissolution, addition, what if someone wants out, etc. If a problem arises, everything will already have been outlined and agreed upon on paper, so conflicts and misunderstandings are much more easily resolved.
2. Establish regular meetings. We’ve heard of the importance of communication. In business, just like it is with spouses, if there isn’t constant communication, misunderstandings arise and resentment can begins to seep in. Make sure to specify times and places to discuss things. Make sure you’re still on the same page, and if you’re not, find out why.
3. Establish that your friendship is the first priority, and be willing to talk about dissolving the business if necessary. Remember, your friendship is the your first priority. Communicate early and often that if things start to sour, an honest conversation about whether the business can continue to thrive needs to happen. Be willing to chalk it up as a learning experience and leave it at that. The important thing that is that you’re able walk away with your friendship intact.
Ultimately, the decision to go into business with a friend isn’t something to be taken lightly. It can be a fun and beneficial experience for everyone, but it must be undertaken with honesty, communication, and planning. If it has all of that, odds are you’ll become better friends and your business will thrive.
Have any of you gone into business with friends? What have you learned?
Passive Income MD can be found on his self-titled blog Passive Income M.D. or on Instagram.