It’s natural to team up with a friend when you launch your venture — but should you?
You decide to start a business. You’re excited. You’re motivated. You’re dreaming big dreams. And you’re also really nervous — so you decide uncertainty loves company and ask a friend to be your partner.
Good idea?
In business things often get complicated. Difficult, impersonal decisions constantly need to be made in the name of creating the best future for the company. Many entrepreneurs that start a business with a friend wind up with broken finances and ruined friendships.
In fact, if you hedge your business decisions on the wisdom of statistics alone, stoically ignoring your friend’s frantic excitement about “this cool business idea” seems to be the safest route.
Heartless, yes, but a Harvard Business School study showed that among technology founders the group that is made up of friends proved to be the most unstable, with a founder turnover rate of nearly 30%.
Surprisingly, the group composed of total strangers fared better. Add to that the even gloomier 9-out-of-10 failure rate of startups in general, and you could begin to wonder why you would even consider starting a business with a friend.
In fact, it’d be entirely safer to stay in the comfort of your day job and preserve your friendships, right?
Wrong. What if you dream up a great business idea and your gut says you need your talented friend to help turn it into a stellar success?
My advice: Ignore the statistics. With my best friend I grew my last business, Case Escape, to over $160,000 in revenue in our first year alone. And it’s continued to grow.
You can do it too, but first you need a strong foundation for how to manage your newly complicated relationship. Even more importantly, you need to establish ground rules and get a few things in writing before you start.
Before starting a business with your friend, ask yourself these crucial eight questions.
1. Do you share the same business goals?
It’s a major red flag if you want to build a lifestyle business that could last decades and your friend wants to create a high-growth business that could be acquired within a year or two. These fundamental differences in growth strategies would without doubt lead to conflict.
2. Do you share the same values?
Just like dating, if your friend (and potential business partner) has a drastically different set of value and beliefs, think twice about mixing your finances and futures together.
3. Do your skill sets complement each other?
Make sure you’re starting a business with your friend because it would truly benefit you both, not just because you spend a lot of time together and you think it will be fun.
4. Do your work habits align?
Be sure that you have mutual times you can work together on your business, especially while it’s getting started and during a time period when you’re both likelyholding onto your day jobs.
5. What is your default strategy for resolving conflicts?
If you argue a lot as friends… chances are, that tendency will carry over into your business.
6. Which specific roles and responsibilities should each business partner assume?
Clearly define your complementary roles and make sure they engage both of your interests.
7. How stable are your personal lives?
You don’t want to start a business with a friend who plans on selling their belongings and traveling the world for the foreseeable future.
8. Are you both willing to follow each other’s direction when the subject matter expert speaks?
Be sure you can both handle constructive criticism, and know when to trust your partner’s judgement.
Good friends starting and running a business together often don’t often result in a happy ending. Failed partnerships do happen, and lead to damaged friendships… or even end up with former partners not being friends at all.
After some serious consideration, brainstorming, and weighing the pros and cons, if both your business idea and idea of involving your friend as a partner come out as a positive, then you may need to risk failure and your friendship in order to get your business off the ground.
