Starting a Business with a Friend: The Important Dos and Don’ts

starting a business with a friend |  Small Business Tips |Starting a business with a friend could be a great decision! Be aware, though, that there’s a right way to do it—and a not-so-right way, too.

If you and your friend are both entrepreneurs (or aspiring entrepreneurs), brainstorming new business ideas are probably standard issue. And when you hit upon a really good business idea, you’ll want to take that entrepreneurial spirit off your friend’s living room couch and into the boardroom. That could be a great decision! Be aware, though, that there’s a right way to go about starting a business with a friend—and a not-so-right way, too.

To be fair, starting a business isn’t ever an easy endeavor. And we get the thought that partnering up with your favorite person would mitigate some of that stress, or at least make it more fun. That can certainly be the case.

But starting a business with a friend means that your relationship changes. During working hours, you’ll need to interact with each other a little more formally than you would if you were just hanging at home, especially if you’re co-helming a team of employees.

You’ll also need to make sure that your close personal connection doesn’t result in sloppy business practices. Emotions can run high when you’re going into a business with a friend—or anyone for that matter—but you also need to keep those emotions in check to run your business professionally. Obviously, that’s harder to do if your best friend is sitting in the next office, or if it’s your best friend who’s triggering those emotions.

That said, starting a business with a friend can absolutely be done—you just need to keep a few best practices in mind. We asked a few entrepreneurs who’ve successfully mixed business and friendship to share their advice on what to do, and what not to do, when you’re starting a business with a friend.

How to Start a Business with a Friend: What to Do

First, we’ll cover the right stuff. If you’re thinking of starting a business with a friend, keep these tips in your back pocket:

Do communicate often.

You probably know from your personal relationships that open communication is crucial. The same principle applies to business partnerships.

But if you go into business with a friend, it can be easy to take that principle for granted: You know each other inside and out. It’s fine to go about your business under the assumption that you’re on the same page. Right?

The truth is, silence breeds confusion. And in a business setting, that confusion can result in devastating losses.

Josh Rubin, owner and CEO of Post Modern Marketing, understands the importance of maintaining clear channels of communication between you and your friends-turned-business partners. He says:

In a previous version of my company, I employed two of my best friends. I trusted my friends, so I took their word for it when they said that they were staying on top of their roles. But, pretty soon, an IRS audit uncovered that my friend was paying themselves more money than we’d agreed upon, for hours they weren’t working. As a result, the relationship, and the business, were damaged beyond repair. So, my one big tip for anyone starting a business with friends is: Don’t start a business on promises alone.

Even though you innately trust your friends, you still need to communicate clearly about everything. Especially the difficult subjects.

Do establish clear roles from the beginning.

This tip follows naturally from the first: Clearly define your job titles and responsibilities at the outset of your venture. It’ll ensure that your organization runs smoothly, and it minimizes the risk of confusion, and even power struggles, as your business scales.

Bill Widmer, cofounder of The Wandering RV, learned the importance of job titles quickly after starting his business. While traveling in an RV for six months together, Widmer and his fiancée, Kayla, launched a website to keep their friends and family updated on their travels. Soon, the venture became popular, and their business was born.

Widmer says:

Once we hit the first page for one of our articles, that’s when we realized we might have a real business opportunity on our hands. We continued to create search-friendly content and build links to it, and now the site sees over 100,000 unique visitors per month.

But at the beginning, Kayla and I didn’t have any kind of defined roles. We were just ‘co-owners.’ She did a bunch of stuff and so did I. It worked for a while, but it caused a lot of stress between us. Now, she writes most of the content, and I’m the editor and marketer. She handles social media, I handle email. If something goes wrong, we know who’s ‘fault’ it was, so that person can take responsibility and fix it.

Do get your business plan in writing.

Of all the varied advice our expert entrepreneurs gave us, writing a business plan was the common denominator.

Laying out a strategic map for the next 1 to 5 years of your business’s life is crucial for any kind of venture. But when you start a business with your best friend—and you’ve had the necessary, preliminary conversations ensuring that you’re on the same page about this thing—you might think the strength of your word and a formal business plan are mutually exclusive.

According to our experts—they’re not! In fact, it might be a good idea to hire a business lawyer to help you draw up your plan.

One of those experts, Adam Cole, successfully co-directs Grant Park Academy of the Arts alongside his good friend. One of the keys to that success, Cole says, was getting everything down in writing. “We hired a lawyer and drafted an operating agreement,” Cole says. “It took some time, and the discussions could get a little uncomfortable as we contemplated what could go wrong between us or to our business. But now we have a plan to fall back on in case our relationship or our business changes.”

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About Maida
She is Zipsite's all around Zipsiter. Only clocks out when she can barely stand. She sings, bakes, and tries so hard to be fit. But don't judge, she can literally strong arm you no problem. She's currently involved with eCorp, Contrib and VNOC, besides being a Brazilian Jiu Jit Su practitioner.

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