If you are thinking of going into business with a friend, chances are at least one person has told you to avoid mixing friendships with business at all costs. Although having a personal relationship with your business partner can complicate things, there are also advantages to knowing your business partner so well. The following mistakes are some of the most common pitfalls that lead to the demise of friendships and business partnerships.
1. Not Discussing Finances
You are going into business with the objective of making money. Business partnerships between friends are more likely to be doomed before they start if they avoid openly and transparently discussing finances. If there are personal finance issues like challenged personal credit or cash flow issues that may affect the business, each partner should put those issues on the table from the beginning.
2. Not Coordinating Your Work Ethics
Before going into business with a friend, you’ll want to be sure that both partners have compatible work ethics. A business partnership can overcome some differences in work style than others. If you or your partner is less willing to take on a mutually agreed upon equitable share of the work that needs to be done, the business will struggle and both parties may harbor resentment.
3. Not Assigning Responsibilities
Business partners should always identify tasks and assign responsibilities to each party. Assigning roles in the beginning will make it easier to divide the workload and help prevent conflict and missed deadlines in the future.
4. Not Identifying Strengths and Weaknesses
In assigning responsibilities, your business will be much more likely to thrive if both partners can identify their strengths and weaknesses and assign tasks accordingly. For example, if you are better at meeting deadlines, you and your partner may agree that you should take the lead on time-sensitive tasks.
5. Not Discussing Business and Personal Goals
A partnership in which each party has different personal reasons for starting a business can create problems down the road. For example, one party may be amenable to selling the business once it reaches a certain size while another may want to pass the business down to his or her children. Hashing out your road map to success early on will keep you on the same page.
6. Not Planning According to Your Lifestyles
If you and your business partner have different lifestyles, your schedules and work capacities may differ. Plan out how you will accomplish tasks while balancing outside jobs, spouses, children, elderly family members, hobbies, and other responsibilities.
7. Not Seeking Out Professionals
You will likely need to speak with an attorney and other professionals throughout the course of owning a business with your friend. Professional consultation can steer you in the right direction when structuring the business, filing taxes, creating contracts, and designing a contingency plan.
8. Not Communicating Frequently and Openly
Lack of communication may cause the breakdown of a business or personal relationship. When going into business with friends, you will have both on the line. Although problems may arise, you will feel better and work through them more easily by communicating.
Starting a business with a friend is not always a bad idea. With proper planning and enlisting the help of qualified professionals, your business and your friendship may flourish.
