Should You Start a Business with Your Friends? Explained Dos and Don’ts
If you’re an entrepreneur or prospective entrepreneur, several of your friends are also likely to be. You brainstorm or share business ideas from time to time. Perhaps you’ve discovered a lucrative business opportunity and are considering forming a partnership.
It’s a good start that you’ve talked about your company ideas. People who get along enjoy starting a business with a friend. Is it, nonetheless, a bad idea to start a business with your friends? Continue reading to see if starting a company with a friend is a viable option for you.
Advantages of conducting business with friends
A business endeavor among friends has various advantages that make it worthwhile to try.
You have a partner that you are familiar with
You’ll have fewer shocks about your relationship depending on how close you and your pal are. Beyond the surface, you already have a sense of their personality. You’ve probably seen their awful and ugly as well as their excellent.
Together, navigating the uncertain corporate environment will be easier. You’re well-versed in your partner’s assets and liabilities (and vice versa). You two can form a dynamic duo that works well together.
You’ve already mastered the art of communication
Clarity and decisiveness are two qualities that might make a business collaboration succeed. For that to happen, the partners must be able to communicate in-depth about any topic easily.
It may not be the case with a spouse you’ve known for a few months. Years of knowing your acquaintance, on the other hand, pervade smooth conversation. You’ll get to the root of the problem quickly and tackle the challenges plaguing your company.
You’ll have more time to spend with each other
There are a variety of reasons why you and your pals become friends. Your friendship sparked the idea for you to create a business together. You enjoy spending time together and keeping tabs on each other.
You’ll have plenty of opportunities to spend quality time together, something you already enjoy. Your friendship will no longer be restricted to mutual hobbies, interests, or activities. You’ll spend that time with someone you get along with, whether for weekly meetings, updates, or any other business area.
You share many of the same values and views
“Birds of a feather flock together,” as the adage goes. Your friendship may have developed due to shared fundamental values and beliefs. Being business partners entails having the same passion for the same goal and mission.
Whatever challenges your company faces, you will most likely support each other’s business decisions. When things are bad, you’ll be there for each other. You’ll be able to assist one another in ways that families or spouses might not be able to.
The disadvantages of conducting business with friends
There’s always the flip side of the coin, and it might be beneficial to a company. The following are some of the drawbacks of forming a business partnership with a buddy.
Your connection may become solely business-related
As terrible as that may sound, what was once a good friendship might erode with time. Running a business is complex, and how you receive and respond to comments and criticism can turn terrific friends into “just” business partners. One partner may believe the other is overbearing or careless. As a result, their activities may put their relationship under strain. People who hang out together all the time start to become away from each other before realizing it.
Your company may be too informal
Your relationship may make it difficult to distinguish between work and friendship. Due to a lack of clearly defined duties, some aspects of the company may be neglected while others are overworked.
Because you’re both partners in crime, indiscipline may go unnoticed. You could avoid making complex judgments by just chatting with your buddies. If not addressed, such issues will lead to a lack of concentration on the company’s operation. The venture’s collapse is unavoidable in the long run.
You only have a small network
Maybe your companion has known you or grew up in the area for a long time. There’s a chance you have mutual friends and share similar interests. When you engage in a commercial venture, your network circle can limit your progress.
If the partners aren’t pals, they may bring a unique set of experiences and networks.
You can lose contact with your pal
You’ve probably done and gone through many things together, but not in the context of investing. Maybe your acquaintance isn’t cut out for running a business. In the worst-case situation, he or she makes a poor judgment, and the company fails.
Such an occurrence is a setback for your friendship and may result in a rift. It’s going to be difficult between you two. You’ll lose your friend and possibly some of your mutual pals.
Before launching a business with a friend, consider some questions
Being excellent friends is not the same as slaving away for hours to build a successful business. Before you start a company with a friend, consider the following points.
Do you have faith in your pal?
Money has a strange way of inspiring people with all kinds of ideas. Many people have lost money to persons they thought were their friends. The question is, what is your friend’s track record when it comes to money? Is there going to be complete transparency?
Some of your partners may remove money from the cashbox. Still, they could be involved in unethical dealings. Is there a chance you’ll get into trouble? What is your level of familiarity with your friend?
Do you have a similar goal in mind?
You may have differing viewpoints and personal preferences in other aspects of life, but your objective drives your dedication to your relationship. When you’re headed in the same direction, doing business together will come effortlessly.
Do you have the same vision and goals?
Everyone must be on the same page from the start. You and your partner should have the same vision, whether it’s for long-term or short-term goals. Having a shared game plan will help you avoid future confrontations.
Do you have skills that complement each other?
You must assess the skillsets that each of you brings to the table. What is the added benefit of your joining together? You’ll face many difficulties if you’re good and bad at the same components of running a successful business. Do your qualities complement and balance each other?
In the end, your partner should have specific attributes that you don’t. Consider what the company demands realistically and strategically.
Would you be able to start this business on your own?
Friendships might become entangled in doing something together, although this isn’t always the most excellent option. If you can get the business up and go on your own, you generally don’t need a partner. You can employ others while being the only proprietor.
On the other hand, a partnership is good if you don’t have enough funds. If you lack specialized expertise or contacts, a strategic partner will provide value to your startup.
Is it possible to conduct a pilot test?
You’re about to put your money and time into something. In some cases, it’s a good idea to test the waters first before jumping in. This experience allows you to observe yourself and your partner in a professional atmosphere.
Before investing your money and time, a trial run might answer various questions. That way, you’ll be able to spot places that require greater attention and devise solutions to the problems you’ve identified.
Are you both ready to put in the same effort and money?
Time and money will be crucial to getting the venture off the ground. Are you going to split the bill 50/50? If that’s the case, how would it benefit you both? What are the contingency plans in case anything unexpected occurs?
You’ll need to understand each partner’s share and how it will affect the company’s future. Consider what will happen if the company succeeds or fails spectacularly.
What is the best way to start a business with a friend?
When you start a business with a friend, you experience an entrepreneurial adventure with someone you care about. However, it would be beneficial to set a few things in place before beginning that quest.
1. Define your roles
Before starting a business, be sure you understand each partner’s position. When you’re in operation, you’ll be able to avoid disagreements and confusion. Maintain an openness to change, and adapt when necessary.
2. Establish communication policies
Make it a point to communicate regularly. Keep all relevant information on paper and in a secure location. Allow complete openness in all aspects of the business, whether they are directly or indirectly related.
3. Come up with a plan together
It would help if you created a formal business strategy and put it on paper, either with or without the assistance of legal advice. It will assist you in staying on track while you carry out your plans. To ensure that you are on the same page, try to work through the early planning phase together. After you’ve finished developing your project, you can either continue to review and edit it together or start laying out how much each partner will be involved with it.
4. Establish milestones and common objectives
Clearly outline how you will attain your objectives logically and practically. Look at what needs to be done first, when it needs to be done, and how to proceed once that’s done. It can assist ensure that you and your partner are working toward the same objectives and have a plan in place to track your success.
Is it a good idea to establish a business with a friend?
Don’t start a company with a friend just because you had fun together. To turn a viable business idea into a profitable venture, you must follow your heart while also using your head. Starting a business with a friend may be quite lucrative when done correctly.
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