3 Things You Need To Do Before Starting a Business with Friends or Family
It’s no surprise that so many of us are rethinking the way we work, with ‘The Great Resignation’ making news, millions of people are reexamining the role work plays in their lives, whether they want a traditional 9 to 5, if their career aligns with their core values and how they integrate work and play.
In fact, many workers started their own entities during the pandemic, a phenomenon the New York Times named ‘The Start-Up boom’. Last year Americans filed a record number of applications to start new businesses, according to an analysis of Census data, with many pandemic entrepreneurs inspired to start their own side hustle, turning a hobby into a business alongside a friend or family member.
Co-founding your business with a friend can be a recipe for success with famous friendship partnerships such as Ben & Jerry’s providing ample inspiration. It’s appealing to start your new venture with a partner, having someone to help you navigate new waters can sometimes give us the push we need to launch, allows you to pool finances, and maximize any networks or contacts you both have. These benefits make it tempting to partner with someone you already know and trust but working with a friend does come with its own set of risks. Venture Capitalist Courtney Lawless says the first thing to note is “starting a business with friends or family will change your relationship with them”, so think hard about whether you want to change the dynamic of your current relationship and whether you have a strong enough foundation to add another layer of complexity to things. While it makes sense to partner with someone you know well sometimes that can place tension and strain on the relationship. On the other hand usually, you are friends because you have common interests, share great synergies, and get along well, and Lawless says that these are “all things that make partnerships work really well and it generally helps to like the people you are working with”.
1 - Make a contract – Make sure you have a solid contract in place that clearly defines expectations, roles, and responsibilities, and what happens in the event there is a dispute or disagreement or one of you passes away. A really solid contract done by an actual attorney, i.e. don’t use the LegalZoom boilerplate documents, a little money spent here will save a lot of money and heartache in the long run.
2 - Establish your goals and vision from the beginning – One vital step Lawless advises all Co-Founders do is to create a written business plan and contract which outlines a clear sense of your roles, your goals and expectations in whatever venture you choose. talk regularly, openly, and honestly about expectations and goals. If you want to grow your business to a multinational corporation and your friend is happy with a mom-and-pop shop, you are very misaligned. Talking out these details is very important, not only before you start, but regularly check in on those topics as things change!
3 - Communicate clearly and often and in writing as much as possible – that way you both have reference notes to work from (and receipts if things go wrong).
