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Business With Friends
Thinking about going into business with a friend or family member? The general advice is to avoid it at all costs, but there are also many examples of these types of partnerships that have been…successful.
- Warner Bros.
- Hewlett Packard*
- Ben & Jerry’s
- Harley Davidson
- The Disney Brothers Studio (a.k.a. The Walt Disney Company)*
So what did they do right? What do they have in common? Discounting the mystical recipe for success that is inexplicably associated with starting a business from inside a garage in California*, there are some lessons to be learned from successful partnerships.
It’s Not Business as Usual
When you go into business with someone, you are entering into a long-term relationship with them. As with any successful relationship, it should be based on mutual trust and respect. Ask yourself: Do you trust this person’s ability to make good decisions? Are they in a stable place in their personal life? Will they represent the company well? Partner with someone who you feel will improve the chances that the company will be successful.
Take some time to really look at your friend’s strengths and weaknesses. Make an effort to understand and accept them. Realize that these are things that will likely be consistent over time. Now, take an honest look at your own. Are you the “numbers guy” and your friend the “people person”? Take this into consideration when distributing the workload. And make sure that it’s an even distribution to avoid any feelings of resentment later. The foundation for an ideal partnership is one in which the global strengths of the partners overcome their weaknesses.
Now, let’s be honest…you will probably be spending a lot more time together. It’s not enough that you are comfortable in each other’s company. Make sure that you and your friend are on the same page when it comes to your definitions of success. For some, success means being able to pay their bills on time and have enough left over to take the family on vacation; for others, it means being able to retire at 40. Some are looking to establish a family business that can be passed down to their children; others, looking to puff it up, sell it off, and quickly move on to the next thing. If there is a big difference in the stars that you’re reaching for, it could be a fatal flaw. Make sure you’re ‘in it’ for similar reasons. Each partner’s individual vision for the company cannot be mutually exclusive. Where do each of you stand with regard to risk tolerance? How effectively are you able to resolve disagreements with this person? Is he or she open to considering your thoughts, or compromising if necessary? Are you?
A Little Planning…To Avoid Misunderstanding
If you think you may have a good match, it’s time to get down to the nitty gritty. How well you handle the daily grind can make a big difference to your ultimate success. Consider whether or not you have similar work ethics. If one partner is first-in, last-out Monday through Friday, and the other only makes it in a few times per week, tempers can flair. If one always makes a point to return phone calls within one working day, and the other rarely checks voice mail…well, you see where we’re going with this…
The ability to communicate effectively and discern your friend’s strengths, weaknesses, and vision for the company should be at the top of your list of things to consider before diving into a business relationship. And any agreements that you enter into, including an exit strategy – which should be in place at the beginning of this union – should be well thought out. Wait. What? Who wants to think of leaving the company before it’s even off the ground? The fact is, life is unpredictable and it’s good to think about things like this now, when everyone is excited for the new venture and willing to cooperate. All of your bases will be covered with smiles and handshakes, and you’ll be ready to succeed with your new business partner at your side!
Put Things Down in Writing
Whatever you and your partners decide, you want to make sure that it is put down in writing and signed by all the parties involved in the partnership. This will allow each partner to review and confirm or correct the terms of the oral agreement and work out some details that sometimes are left unresolved at the beginning of the relationship and can become a strain on the business later on. You will probably want to retain the assistance of an experienced business attorney to prepare these documents.
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