Starting a business with another person can be a risky yet fulfilling endeavor. This is especially true when running a business with a close friend.
While it might be challenging to balance your personal relationship with your professional partnership, there are countless benefits to pursuing entrepreneurship with a friend. Follow these six tips if you’re considering starting a business with your friend.
Get everything in writing
Before starting a business with your friend, draw up paperwork to put your partnership in place. Consider meeting with a lawyer with experience in partnerships to draft a business plan and ensure you’re covering all your bases. There are many contingencies you might miss from the get-go, and having it all in writing will protect you and your business partner/friend from potential issues down the line. For instance, if one of you wants to leave the business, you will have a contract in place that outlines how you will value the business.
You should also put into writing any and all business promises, like compensation rates, profit shares, investment contributions, and business accounts.
[Read more: How to Write a Startup Business Plan]
Establish a shared vision
Before diving into a business with your friend, talk to each other about the business idea and how it might pan out, including any obstacles that might arise. How will you address these potential issues, and do you agree with the proposed solutions?
Ensuring you share a similar vision for your business and its future is crucial to your success. It isn’t enough to agree on a business idea or industry; you must anticipate the entire future of the business, including any sacrifices and pivots you each may have to make.
Clearly define each of your roles
Don’t jump into entrepreneurship aiming to be jacks-of-all-trades. Instead, evaluate each of your strengths and weaknesses to determine the appropriate roles. Make sure you both understand your unique responsibilities and how they differ from each other so you can properly delegate work and operate in a collaborative manner.
Miscommunications are plentiful in business, but they can have a lasting negative impact — especially when they occur between co-owners.
Create a realistic budget together
Creating a budget for your business can be a challenging task, as it involves multiple factors. When determining the right budget with your friend, ask yourselves the following questions: How will you pay yourselves? How much will you invest directly into your business? How much will you need to set aside for things like taxes, employees, supplies, and other expenses? This will help ensure both parties are on the same page and comfortable with the budget.
Every budget should include:
- Estimated revenue.
- Fixed costs.
- Variable costs.
- One-off costs.
- Cash flow.
- Profits.
[Read more: How to Create a Budget for Your Business]
Communicate openly and often
Miscommunications are plentiful in business, but they can have a lasting negative impact — especially when they occur between co-owners. Communicate with your business partner/friend often to ensure you’re both staying on top of your respective tasks. If either of you runs into issues or has questions, you should feel comfortable communicating with each other and asking for help.
When working with a friend, you might hesitate to admit you’re struggling or raise a concern. However, keeping to yourself can harm the business’s bottom line. For instance, if one of you feels the other isn’t including them in important business decisions but fears speaking up, this can breed resentment and turn into a larger problem down the line. Host monthly check-ins where you both share what you feel is and isn’t working, and how you can better work together.
[Read more: How to Create a Successful Internal Communications Strategy]
Separate work from play
As friends, you and your business partner are likely to continue spending time with each other outside of work. Whether you’re grabbing dinner on a Friday night or attending a cycling class at your local gym after work, don’t cloud your personal time by talking about your business.
The same goes for work. During the business day, don’t waste time venting about a problem at home or allowing personal arguments to get in the way of your business partnership. Keeping the two separate is crucial to protecting both your personal and professional relationships — as well as the business itself.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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