You’re sitting on your sofa with your best friend from kindergarten. Suddenly, like a lightning bolt, both of you have an idea for a business. Both of you have a moment of eureka a la Honore Balzac! You immediately turn on your computer, while your friend orders a couple of pizzas so you guys can work around the clock. After a couple of hours, a thought comes across your mind: "Can I co-own a cost-effective business with this guy?"
It would be a dream come true to start a business with your friend who knows every characteristic, foible and quirk you have. Your friend feels the same. The problem, however, is the fact that you both have different work ethic, cultural values and business sense. Sure, combining your capital can make things easier at first, but problems can compound over time.
Although there are some success stories of best friends launching a business, it’s something that should be ignored for the most part. After several difficulties, disputes and arguments, do you really want to risk tossing your friendship aside because you couldn’t run a business together? The obvious answer is no, so don’t!
Here are nine reasons as to why you shouldn’t start a business with a friend:
1. Entrepreneurial Compatibility is an Issue
Your friendship may be strong and durable and can survive anything, but that won’t necessarily equate to business or entrepreneurial compatibility. In a lot of cases, friends enter a business with various approaches to productivity and corporate values. If both of you have different vantage points and takes in this realm then it will likely generate domestic strife, stir up trouble and risk ending the friendship. Much like a relationship, compatibility is key to success.
2. Business Goals Differ Between Friends
Everyone has different objectives, goals and aims, whether it’s in their personal life or in the business world. Business can change friendships very easily. For instance, one person’s motivation for business is the desire to be their own boss, while another person wants to earn a large chunk of change for themselves. Simply put: business goals are not on par between either of you. Remember, commercial partnerships are established from common goals and business aspirations not friendships.
3. Financial Setups Don't Bode Well for Friendships
The average, practical person will concur that the worst thing to ever do in a friendship or in a family is to lend each other money. If the debt is late in payment or unpaid completely then it will spur conflict. The same idea can be translated to the business world. Financial conflicts, negligence and splurges can impact the friendship and the venture. Just like business goals, your views on money can be very different from your friend’s.
4. A Paucity of Expertise in an Area
Indeed, friendships are very valuable in our lives. We crave our friends’ attention, we yearn for their humor and we desire their sympathy. In the business world, however, expertise is of the utmost importance. A solo business owner can bring in someone else to prove their expertise or do it on their own. A business partner relying on a friend to perform a task without the knowledge can be dangerous upon entry into the marketplace. Without the required tools, you can suffer tremendously when competing against your rivals.
5. Friendships Can Suffer When Business Thrives
No one will argue the fact that a friendship can be affected when business is down. But what happens when business is on the up and up? Well, it can take a hit, too. Success and plenty of green can metastasize a person almost immediately, which will then create resentment between partners, even if profits are at all-time highs. When a business is flourishing, it’ll change your friend’s goals and their priorities. What was once an aim to get rid of the tie has transformed into a plight to gamble with success.
6. You Will Have Same Social Circle
You love your significant other, but you wouldn’t want to work with that person or spend 24 hours a day seven days a week with them, would you? Well, the same can be applied to your friend. Since you’ll be spending a lot of time together, you’ll soon get annoyed by their behavior and overall presence. Think about it: during the holidays, you want to spend time with your friend, but since you’re already spending a great deal of time together, they’re the last person you’d want to spend time with.
It’s also quite possible that you’ll have the same social circle. This means when you go out with your friends, your business partner will likely be there as well. Again, spending so much time with them can be too much for you to handle.
7. Honesty is Thrown Out to Spare Feelings
Is your friend not carrying his own weight? Is your friend making constant mistakes in accounting? Is your friend wasting too much money? Unfortunately, you won’t bring this up to them because you don’t want to hurt their feelings. If this was another person then you’d have zero reservations or qualms to be honest about their poor performance. But since it’s your friend you hold back and just hope that they’ll get better.
8. Taking Advantage of the Friendship
It’s easy to take advantage of your friendship when both of you co-own the business. It’s wrong to do it, but it’s common to find this behavior. Since your co-founder is your friend, he will feel embarrassed to ask you to work harder. Meanwhile, you slack off because you feel comfortable around your friend and your friend won’t encourage you to work harder because it could diminish the friendship. This is a terrible way of thinking, especially when you own a business and you have poured your life into the private ordeal.
This is just disrespectful to the friendship itself.
9. What Could be the Worst Case Scenario?
At the end of it all, nobody likes to talk about worst case scenarios. Whether it’s in an intimate relationship or a business partnership with your friend, worst case scenarios are often ignored. This isn’t good. Prior to launching a business, friends should talk about what would happen if the venture is a failure, if you two have a falling out or if you have found the love of your life and they want you to end this endeavor.
Friendships are very valuable to us, and we wouldn’t want to sacrifice them for all of the gold in Fort Knox (if the Federal Reserve still even has the gold anymore). Therefore, you want to ensure that you’ll always remain friends. One way to achieve this is to avoid setting up a business together. This will lead to trouble and deteriorate the quality of your friendship. There’s no shame in admitting this. It’s like starting a business with a spouse, a brother or your dad.
Whenever something goes wrong, there will be resentment. Whenever something goes right, there will be a slight change in the person. It’s just a fact of life. Be safe: don’t start a business with a friend.
As per the Globe and Mail, ask your friend these questions:
- Do we have complementary skills?
- Do we have different networks?
- Do I trust and respect his work ethic?
- Do I trust and respect his decision-making abilities?
- Does he have previous startup experience?
Have you ever started a venture with a friend? Let us know in the comments section below.