Setting up a business with friends

Everything that's good to bear in mind when taking your first steps

Behind every business there is usually a team, whose members are often linked by a friendly (or even family) relationship. This team has just one mission: to lead the business to its destination. Both when this is achieved successfully and, more critically, when the business fails to develop as expected, there may arise disagreements and problems that intensify, particularly because of the pre-existing friendly relationship of the business partners. 

There are, however, some general rules that may help partners maintain a harmonious balance. 

Yes to the professional relationship, but keep things clear and documented

The fact that your friend is indeed someone you know and trust doesn't mean that any agreement, plan or investment should just remain verbal. Although it may sound contradictory, setting up a business with a friend should be no different, in terms of formalities, from starting any other partnership; the friendship will be strengthened by keeping it based on solid foundations. Accordingly, it's important to have official documents that accurately reflect the terms and conditions of this business relationship, its objectives and obligations. 

Setting up a business with friends

Yes to distinct roles, no to diverging decisions

Not everyone is good at everything, that's beyond doubt. It's therefore imperative that friends/partners undertake different roles and responsibilities. When it comes to making decisions that may affect the company as a whole, especially in its infancy, then these should be jointly taken in order to be able to jointly deal with any unforeseen outcome.

Decide from the outset what the long-term goals of the business will be

It may seem a long way off, but every business must clarify early on what its long-term goals are. This planning is even more important in the case of a partnership of friends, since, as experience shows, the most common disagreements are related to where partners envisage their business moving in the years ahead. Different aspirations also give rise to different desires, different decisions and, by extension, a different orientation. It is therefore important to have a shared understanding as regards not only the immediate but also the more distant future of the business.

Take particular care when hiring staff

It is not uncommon for those running businesses, especially SMEs, to come under pressure to hire acquaintances and friends, which can often lead to misunderstanding. The problem, unsurprisingly, is amplified in cases where the owners are also connected by a friendly relationship. To avoid such complications it is advisable to apply purely professional criteria, depending on the needs of the company and the position in question. 

Many believe that friendship-based partnerships can only grow to a certain extent. It is, however, up to you to debunk this "myth", proving that through hard work, a proper "reading" of the market, and good planning you can keep your friendship alive and still see your business thrive. The fact that obstacles and mistakes will arise along the way doesn't mean that you can't depend on the pre-existing friendly relationship, leveraging it as an advantage that helps you to adapt more effectively to ever-changing circumstances, thanks to good understanding of one another, rather than as a source of additional problems.