You and your friend decided that you should start a business together, how cool!! Maybe you and our spouse concluded, after the last couple of bad jobs and long commutes, “how much fun would it be to work together, start a business and spend more quality time together?” Hmmm-a match made in heaven or hell?
You may have just signed up for a ride on a slippery slope. By the way, you are not alone. Many businesses get started and succeed this way but many also end this way. Consider this a spoiler alert to those of you considering this option, if you just fell into a partnership by default or took the leap of faith without a lawyer.
In the beginning it sounds like an amazing idea – actually it sounds like the perfect plan. Spend more time together, be productive and make money! What could be better than that? Or, worse yet, what could possibly go wrong?
Actually a lot. If you haven’t done your homework and stopped long enough to put a plan in place, you could be headed for trouble. Did you communicate your values, mission or vision for the business? If you haven’t stopped long enough to get really clear on the big picture, the big decision you may encounter very soon after getting started is: “are you willing to put your friendship or even your marriage at risk”? Are you willing to choose the business over the friendship or spouse? Or vice versa?
According to Ryan Robison, https://www.ryrob.com/should-you-start-business-with-friend/ you have to consider the pros, the cons and look at the statistics. Many successful businesses have been started with partnerships but even more have destroyed friendships, families and suffered huge financial losses.
If you just can’t help yourself and your friend’s enthusiasm is way too exciting to ignore, here are a few tips to consider before you jump into the water head first without checking the temperature:
- Have that hard conversation about what your BIG goals are as well as the nitty gritty. How much time/money you’re both going to spend working on the business daily, weekly, monthly, yearly?
If you can’t bring yourself to have this conversation, then STOP here.
Are both of you going to focus solely on this business? If you’ve been dabbling in another hobby/biz, are you willing to give it up? Caution here if you’re not hearing this is my “only biz”. Do not pass “GO”. Consider hiring your friend as an employee or independent contractor.
Put it in writing!! Please don’t ignore this step – consider it a “danger warning sign” with red flashing lights. Even if you’re starting small, at least write a letter of agreement and include how much money you’re each contributing, a marketing plan, how are you going to handle the expenses/income.
- What type of business will you be: a DBA, LLC, non-profit, etc.? Who owns what % of the business? The worst mistake, in my opinion, is to make it an equal partnership. If it’s a 50/50, who’s opinion counts more when the tough decisions come up? Consider 55/45 depending upon who’s idea it was.
For success consider these… “7 Partnership Killers to Avoid” https://www.entrepreneur.com/article/196912
Better yet, at least have a consult with an expert 3rd party whose experience and advice can help you to consider if this is the best option for you and your friend or spouse. This advice is priceless regardless of the cost upfront.
Hopefully, it will save your friendship or marriage, a lot of wasted hours and prevent the pitfalls of seeing your BIG dream and partnership go down the drain.
If you and your partner or spouse are struggling in your business because you can’t agree most things or even a few major things that are holding you back from profitability and success, Kathy can help you get clarity and end the struggle, please click HERE to schedule a FREE consultation!
click here to take the FREE Core Values Assessment!