You may start a business with a friend and end up not remaining friends after all, because money and prosperity are powerful forces that may pull friendships apart.
You mustn’t take starting a business with a friend lightly, and you mustn’t allow the bond of friendship to blind you to certain things you ought to take care of from the outset.
You ought to know some things and put certain structures on ground before attempting to start a start-up with a friend or friends. Some of them are –
1. Draw up a formal agreement
Although you may find it uncomfortable suggesting to have a formal agreement drawn up between business friends, it is always best because it serves to safeguard you against future conflicts.
Conflicts are always bound to happen, but when it happens between friends, they can always resort to their formal agreement to get it resolved without hurting each other’s feelings.
2. Know what each partner is contributing
Each friend must know what he is bringing into the business and why the business cannot survive without him.
A friend might donate his space for an office while the other donates equipment; one might give funds while the other gives his time; one might bring in licensed expertise while the other manages the marketing and sales.
The lines of every partner must be well-defined so that no one crosses into the lines of the other – and the contributions of each partner must be quantifiable as crucial to the business.
3. Identify individual weaknesses and strengths
You must know the strengths and weaknesses of each partner. A friend might have strength in securing adverts, making sales, and closing deals, while another has tardiness, procrastination, and forgetfulness as his own weakness.
Identifying the strengths and weaknesses of each partner and perfecting ways to cover up for them will go a long way in helping to build your business and further cement your friendship.
4. Who gives the final order?
You must both be mindful of where the final authority resides, and you must respect this. The final authority of one partner may be in finance and of the other recruitment, that of another might be sales and marketing, and yet another gives the final word on organization and management.
Not getting this straight or respecting it will result in a clash of authority and will result in disrespect from employees.
5. Sharing profits and dissolution
Payments shouldn’t really constitute a problem if it has been worked out between all partners in fairness to individual contributions and abilities.
You must be sure to settle the issues of profits, and even dissolution if it really comes to it before setting up a new start-up with friends and family as partners.
6. Do you share the same definitions of success
You must determine that you both have the same visions for success before starting out together so that you don’t lose steam midway.
The definition of success to one partner might be the ability to sell to a whole community or town, and it might be the potential to sell to a national base of hungry consumers to another, while another partner might believe success means being able to market your products globally with international distributors, affiliates, and franchises everywhere.
So be sure to have the same vision and value for success so that the vision or limitation of one does not hamper the other.
7. Working out a succession plan
Be optimistic and work out a succession plan in case anything happens to one partner, or the business even has the growth potential to outlive every one of you.
Work out a succession plan for people to carry on after you without any possibility of conflicts or clash of interests after you are gone.