Starting a business with your friends as co-founders can be an exciting, rewarding experience. Unfortunately, it can also lead to a lot of headaches and resentment if you’re not careful. Here are the pros and cons that need to be considered before jumping into entrepreneurship with your best friends.
This blog post will discuss both the advantages and disadvantages of starting a business with friends so that you can make an informed decision about whether it’s right for you! Plus, I included this helpful quiz to help you decide if starting a business with a friend is a good idea (or a bad one!)
8 Pros of Starting a Business with Your Best Friend
1- Built-in Support System
Starting a business can be exhausting and overwhelming, especially when you’re on your own. However, when you have a friend with whom to share this experience, it’s much easier!
A business among friends can also provide emotional support when things get tough, making it easier for one another in a way that spouses or families may not be able to. In addition, friends probably share similar values with you, so you will likely support each other’s business decisions.
2- Understand Each Other
It’s nice to work with people who know what you need before you do. That’s what good friends do. You don’t waste time explaining because they already get it without asking for clarification – IF you and your friends share the same vision.
You have someone to talk to about the business and share ideas. Having a trusted person, who knows your small business well and has a vested interest in its success, is invaluable to an entrepreneur. Get advice and support when you need it
4- Combined Knowledge
You’re able to learn from each other’s strengths, weaknesses, and knowledge. More diverse skillsets on the team mean more knowledge and skills. Combine forces to create a small business that’s greater than the sum of your parts.
5- Risk Reduction
Reduce the risk of going into business alone. Less risk of failure because you’re not alone in the endeavor. Create equity in common ownership
6 – Lower Startup Costs
Reduce the costs of starting a small business by pooling your money with close friends. Your combined financial assets will allow you to start a larger corporation as a team than you could alone. You can also check out LegalZoom reviews online to see if there is a good deal to be had.
7- Enjoy Your Work Colleagues
It’s more fun than working alone! You can work collectively to solve problems and share the workload. It helps you spend more time with your friends since entrepreneurs spend most of their time working. Stay close with friends who are also your colleagues
8 – Better for Your Health
Improve work-life balance by dividing the workload evenly, so you don’t overwork – a very real danger for entrepreneurs. Grow as individuals and together.
8 Cons of Starting a Business with Your Friends
1 – Friends Don’t Always Work Well Together
If you don’t work well together, it can be hard or impossible for your friendship to survive the pressure of growing a small business together. On the other hand, being friends and having a good time doing leisure activities is very different than working together to build a new business.
2- Business Failure Could End Relationship
If things go wrong at your firm, it may cause strain in your friendship or lead to it ending altogether. One friend blames the other for the business closure creating ill will towards each other.
3-Jealousy Amongst Friends
There is always the potential for one person to feel like they have less control over the business they started with their high school friend. This could be because they are outnumbered, felt pressured into doing something, or have just not spoken up about what needs to change to their friend partner.
4-Unfair Division of Work and Profits
Both parties will likely need to make some sacrifices if starting a business together. So, there might be times when someone feels like they’re giving more than they are receiving back in credit and pay. This often creates feelings of hostile resentment, which could sour the friendship and cause the business to fail also.
5-Conflict over Job Responsibility
It can be easy to lose track of whose task responsibility is, leading to resentment and arguments. There may not be enough work for both people, and you each might want to control different parts of the business–leading to conflict over work roles.
6-Personal Issues Affect Company
If something goes wrong in one person’s life, like an illness or divorce, then there are two people living under that stress.
7- Disagreements Over Decision Making
You might have too many disagreements, which leads to changes mid-way through the process. In these cases, your time and money have been wasted on this venture because it didn’t last long enough.
-Sometimes, friendships are put at risk due to disagreements over how goals are established for the company. Do you and your friend have the same goals for your venture? Do they want to make money and cash out while you envision additional locations and franchising? It is important that you share the same business goals when going into business together.
Starting a new business is hard but could it be worth it for you? Check out my article about the hardest parts of launching and how to make it a bit easier and more successful for your new venture.
Disadvantages of Starting a Business with A Friend
-If you’re not careful, your friend could end up being just another boss! This is when things can get toxic–you might one day feel like they don’t care about how much work you put in or that what needs doing gets done well enough.
If this happens, it’s important to set boundaries early on so your relationship doesn’t suffer for business reasons. It may be difficult if both people know each other very deeply as friends before becoming business partners, but most importantly, communication is key.
You should talk openly and often about expectations, workloads, roles/responsibilities, etc and communicate your desires honestly. It’s also good practice to check in how the other person is doing every now and then.
It’s also important to create a specific agreement between the two of you about what would happen if one party wanted out of the partnership as well as how to divide any profits.
Finally, your work will be much more rewarding when it feels like there are shared goals in place with someone who understands where you’re coming from!
Advantages of Entrepreneurship with Friends
– You don’t have to do everything alone, so load sharing can make things easier for everyone involved.
– Being able to bounce ideas off each other means that no idea goes untouched or unshared, which leads to better quality output–your company grows together after all!
-You’ll be able to work on projects together in person instead of just chatting via email and Skype.
-Hearing what your friend has to say about a project or idea is valuable–you can bounce ideas off each other when one isn’t sure how to move forward!
-No more relying on people who don’t have your best interests at heart, which can happen even if they’re friends too! Every day there are new stories about companies that turn out scams. That’s not something you need to worry about with people who will always look after your best interest first.
-Working with a close friend is arguably safer than working with someone you just met at a networking event. You’ve probably also seen the good, the bad and the ugly. So you know what you’re getting into. With business being so uncertain, it’s best to go at it without any surprises. You have an awareness of the personality beyond just the surface level and know what motivates them.
-You’ll have someone to brainstorm with and bounce ideas off.
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QUIZ: How to Decide if Starting a Business with Your Friend is a Good Idea
Ask yourself these critical questions before you launch your startup, and ask your friend to join your team. If you answer Yes to 8 out of these ten questions, it is probably a good idea to start your business with your friend as co-founders. If not, stay friends and either launch on your own or find a business partner (check out my best tips on how to find a good business partner here)
- Do they have the same values as you – in work and life?
- Are they excited about what we can do together?
- Is there great chemistry between us – a natural synergy between us?
- Would they be a good fit with our office culture?
- Do we have complementary skills to each other to make a stronger team together?
- Do we understand each other’s strengths and weaknesses – and can we work within these limitations?
- Do I trust him, and is he ethical?
- Does he work hard and go the extra mile?
- Do I esteem and value his business decision-making abilities?
- Does he have previous business startup experience?
Steps to Follow When Starting a Business with Friends
If you have read about the pros and cons and taken the quiz above and are ready start a business with your friend, follow these steps for business and friendship success.
Assure Compatability as Business Partners
When forming a business, one of the most important factors is compatibility. Here’s what to consider in order to ensure success:
-Do you share similar values? -Can you work together for extended periods of time without losing patience for each other? -Are you good at different things so that one person can do their duty effectively?
-Are you able to think outside of the box and plan for any possible problems that may come up while in business together?
Decide on an Agreement Structure
If both parties want a 50/50 profit share, then this is what should be written into the contract. However, if one person wants more or less time, this also should be decided before launch day.
Establish Goals and Expectations
Setting realistic expectations will help you to avoid disappointment and frustration. If one person expects the business to be in the black after a few months, but their partner is content with just breaking even, for now, they won’t have as much success.
Clarify Everything in Writing
A written founders agreement is the best way for you and your partner to safeguard against disagreements in the future. You should put together an agreement that covers all of the possible scenarios before you get into any kind of business partnering.
Treat Money Responsibility
It is important to remember that your personal and business funds should be kept entirely separate from one another. Instead, open a separate business account for both parties to have access to.
Before starting your business, make sure to set up complete transparency of finances. The agreement should also include clauses about each member’s responsibilities. Guidelines outlining what constitutes improper use of business funds, the ability to remove money from the company, and other details may be beneficial.
Hiring an accountant or having someone handle your finances also reduces the reliance on one person for financial decisions and can help keep you on track.
Keep Play Time Separate from Work Time
During the workday, it’s important to maintain a good work-life balance when you get home, whether day or night, take time for yourself and your family before jumping back into business mode with your partner.
Create Job Roles Tailored to Each Persons’ Skillset
For example, if one partner has a knack for social media and the other excels at graphic design, create job descriptions that best suit each person’s individual strengths. You can also use your skills as an opportunity to work together on projects you enjoy in addition to sharing managerial duties.
Communication is Key to Good Business Partnerships
Establish a good foundation for communication by having honest conversations about your expectations, goals, and challenges.
Acknowledge that Things Go Wrong in Business Relationships
It’s important to acknowledge the inevitable setbacks you will both experience as partners. That way, when problems arise, there is no finger-pointing or blame game because everything has already been discussed and agreement has already been reached.
To Build a Strong Partnership, Share Your Vision for the Company
Discussing your expectations is important to maintain realistic hopes and ambitions. You should know what you want from this arrangement so that when one of you doesn’t live up to their end of the bargain, both parties can find an agreeable
Learn How to Manage Conflict as Business Owners
It’s inevitable that there will be different opinions and perspectives when two people work together. The key to keeping a strong partnership is learning how to manage conflict in an amicable way.
Disagreements happen at all stages of business relationships, but how you handle them can make a difference. It is important to be flexible and allow for trial and error when starting a new business. Think about how important it is to you that you get your way on this issue.
Not every business decision is universally agreed upon. Your founders’ agreement should include any steps necessary to manage disagreements and changes that are unlikely but very possible.
Feed Your Friendship
Starting a business together may be risky, but if you guard against the descent of your friendship, things can go really well. You may think you’re spending a lot of time together, but that doesn’t mean it’s making your friendship stronger. Set aside time to spend with your friend just for fun!
Tips for Successfully Running a Company with Friends
-Discuss and agree on common goals ahead of time, even if you’re unsure how to divide up the work yet.
-Agree to keep an open mind about who does what so that there is no fighting over email or social media accounts. The more tasks you can share equally, the better!
-Plan for times when one person will need help with deadlines because they’ll have another day job as well! Try out a monthly schedule where everyone takes turns helping each other out with their workload to make it easier on all involved.
– Put everything on paper (a contract) so that both people are clear on what they agree to do
– Make sure you know how much time will be spent on this project before starting it; if one person is going into it thinking they’ll only spend an hour per week, but the other person wants five hours, then there may need to be more negotiations made before taking this step
– Find out what type of relationship both people want out of this business–do they just want a working relationship where everyone has an equal say or do they also want something more personal like friends who help each other through tough times as well because that can affect how things go down in general when building up their company together!
*If you decide at any point that this arrangement isn’t working out, then speak up right away–don’t let friendships turn toxic before making a decision!
How to Prevent Conflict in the Workplace When Working with Friends
Starting a business with friends can be an exciting endeavor but also fraught with challenges and potential pitfalls that might not come up if you were working on your own or in partnership with someone who isn’t so close to you.
Business relationships aren’t always easy–even when it’s just two friends starting out as co-founders. So how do you keep things running smoothly?
Here are five tips for making sure the work doesn’t get personal:
– Find out what type of relationship both people want out of this partnership before getting too far into building the company; do they just want a working relationship where everyone has an equal say, or do they also want something more personal like friends who help each other grow?
– Keep the lines of communication open and be honest with each other. If there are disagreements, try to come up with a solution that benefits both people; sometimes, it may seem like one person wins out more than the other, but at least you can have an agreement from which everyone is better off in some way.
– Don’t let work discussions turn into arguments about personal lives or feelings; if they do, then take them offline somehow so as not to disrupt productivity in the office environment.
– Be mindful of how much time outside of work you want to spend–the closer your friendship, the less appropriate it becomes for one person to demand more closeness while another feels too close already.
-Having more autonomy over company decisions because not every decision needs approval by two people (i.e., if one person can make a final call). This keeps things running smooth when partners don’t agree on what steps they should be taking next or how much money is needed for advertising opportunities etcetera…
What if Your Friend Co-Founder Has Opposing Ideas for Your Business Direction
When you and your partner have different ideas on where the company should go, it can be a difficult situation, but it’s not impossible!
The first step is figuring out why this difference exists, and that just comes down to communication. Ask yourself: “What are my thoughts?”, “What are their thoughts?”. List each person’s view on the decision and discuss further.
Is one person more passionate than the other? What was each of our inspirations for starting or running this business in the first place? Once you know who wants what, then you’ll need to figure out how to move forward with these varying goals.
If both parties find a middle ground (i.e., compromise), there may come a conflict at some point when decisions must be made; here’s how to successfully make a good decision with your friend and business partner:
-Discuss objectives and preferences
-Brainstorm a list of options; don’t rule anything out (i.e., creating a non-controversial solution)
-Pick the best option, then let it be known to your partner/friend how they can contribute their opinion in future decisions if there are any other problems that come up as time passes.
-Share power. The last thing you want is for one person or entity to always have power over the other friend! And this isn’t just limited to business partners; this goes into all areas of life.
Once people know what the balance should look like, it’s easy to see when someone has been taking advantage. It doesn’t take much effort or energy on either side but only by setting than someone you don’t know.
-Knowing that if there is ever an issue with management or any other problems as time goes by, both partners have an equal say in how things are handled – they’ll feel more invested!
– If you disagree about your company’s direction, try to think of it as a puzzle with many solutions. Maybe there are different pieces that can fit well in more than one way–you’ll find the correct answer when all the pieces come together.
– There may be scenarios where one person wants to keep things similar, and another wants them to change; if this is true for you, then consider who has been working on what so far, how long they’ve spent doing it, etc.; look at each other’s ideas objectively without negotiating or discussing but instead looking for similarities between both side’s plans.
In this blog post, we’ve given you some important questions to ask yourself before deciding if launching a company with your friend is the right decision for you. If after reading through our points and taking the quiz here, it seems like starting a business and share the same vision may not be worth the risk at all, then it’s best to pursue entrepreneurial ventures on your own.
But if these points match your experiences so far – and launching a company with a friend sounds exciting as an idea- then keep going! We want you to succeed in whatever endeavor you pursue moving forward. Good luck out there Entrepreneurs!
Should I start a business with my family? Learn the answer to this question in my blog post about the pros and cons of starting a business with your family. It discusses how to balance work & relationships and the best ideas for your family business startups.
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