Business Ventures With Friends. The Good, Bad & the Ugly

Hands in

Hands In! Maybe?

If you are an entrepreneurs, it’s very likely some of your friends are entrepreneurs.  Which is fantastic right?  That means you can come together for ideas, advice and other forms of insightful collaboration.  Of course, there will be many opportunities for you to pursue ventures with your friends.  Pretty exciting stuff, I know.

However, one must consider the possible pitfalls of partnering with friends on ventures (impressive alliteration eh).  Many times friendships get tested and business decisions get clouded.

With a talented group of friends and more and more partnership opportunities coming my way, I have to consider the good, the bad and the ugly before I jump into a new venture.  And you should consider it as well.

The Good

The single most important thing is that expectations are set.  There must be one vision and one team moving in unison.  If they fall off track a bit, they have the wherewithal to hop back on and get moving in the right direction.  Since birds of a feather flock together, your friends most likely have some of the same skills, talents and interested.  That shouldn’t mean that roles and positions aren’t set.  Egos may be tampered with when one friend is named the CEO over another but a group must define roles in order to have expectations met and the organization operate effectively.  Setting expectations and defining roles based on each individual’s strengths and desires is the only way a business friendship combo can work.

When all is accounted for and everyone is on the same page, you can only imagine the benefits.  You are working side by side with people you care about on a project you care about.  There is nothing better in this world then spending quality time with good friends.  If you are able to start up a successful business with your friends, you live the virtues of spending quality time with them while changing the world and making money.  Doesn’t get much better then that.

The Bad

Business decisions sometimes takes emotionless fortitude to move the right direction.  On the other hand, for friendship’s to flourish, one must have the capacity to empathize with their friends on a deep emotional level.  If you cannot find a balance between the two temperaments, be prepared for a short and bumpy ride.  To find this balance the team must be committed to being as open as possible.  Disclose all, from you finances to your feelings.  If you stumble across a partner that is not willing to be open, pick up your bags and roll out.

Say you do get to the point where each team member can strike a balance between business and friendship and prove to be open with each other.  You’ve made it passed step one.  However, in step two, money is something that will need to be accounted for.  Many entrepreneurs have the idealist notion is that you create something great and the money will fall into place (I still work under the notion…yes I am a romantic).  But at some point some type of reality sets in, either your costs are piling up or money is flowing in (hopefully the later).  If your friends and business partners does not have a clear picture of their capital contribution things are liable to get bad.  Never, never let friendships break up over money.  Be smart and bring in a trusted third party part time CFO if you need to, the money is worth the money.  If you are in this position, go talk to my friend and financial expert Trishan. He is a honest and knowledgeable guy that will set up your company’s finances for you.

The Ugly

My first venture Blacktop Hoops is the quintessential example of friendships and ventures turned ugly.  I ended up collaborating with a friend I only knew for a short period of time.  We had our differences but since we believed we needed each other we stuck through it.  He later brought his friend on to be our developer.  Communication was terrible and there was far too much tippy toeing around people’s feelings.  End result, is that the partnership is now dissolved.  Learn the whole ugly story here.

Conclusion

Make sure you know what you are getting your self into before you jump into it.  Set expectations, roles and most importantly make sure your group compliments each other.  No good friendship is worth ruining over business and no good business worth ruining because of a friend. 

Have you worked with friends before?  What have you learned from the experience?

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2 Responses

12.14.09

Good article! To add on.. someone once told me, when in a partnership, never go into business 50-50. The vision of the business could change down the road… Then what?

Gary Erickson (CEO of Clif Bar) wrote a book, “Raising the Bar” and tells a great story of a friendship and partnership in a successful business and the dilemma of selling the company. He was in a 50-50 partnership with his friend. She wanted to sell and he didn’t. So he had to buy her out. In the end, the business relationship with his partner ended amicably. Actually much of what he talks about relates to meaning and smart business. It’s a good read.

12.14.09

You always seems to give great insight Nikki! Thanks so much. My first startup I had majority shares so their wasn’t an issue with that…however there were some other issues. Thanks so much for the great story. I hope to hear more from you soon.

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