Almost every aspiring entrepreneur gets their chance to weigh up whether it is a good idea to have a close friend or family member as a business partner. The answer is not always simple and almost always varies from scenario to scenario, and person to person. There is certainly a reason why the adage, “never do business with family and friends,” is an expression rather than a concrete rule.
As a starting point, when faced with this kind of decision, ask yourselves the following salient questions:
- Are we in it for the same reasons?
The most successful and efficient business partners share a vision and are clear about their goals from the onset. Is the collective ambition to employ a growth strategy that will boost the business’s bottom line? Is it a 10-year plan to build a business worth selling? Or is the strategy to build a legacy? All parties need to be aligned upfront to ensure a fruitful partnership. Singleness of purpose is essential to making joint decisions that will have everyone involved walking away feeling confident.
- What will happen when partners don’t agree?
As a business partner of a close friend or family member, you may have conflicting interests, which can lead to complications. The challenge centres around when to “wear the hat of a professional business partner,” and when to “wear the hat of someone who is emotionally invested in the other party.” It is a delicate balance to maintain and disagreements are an inevitability. However, to avoid conflict becoming crisis, you need to agree on a way to resolve matters before you even enter into the partnership.
3. Do the business partners share the same risk profile?
Some of the most pivotal business decisions rest on whether the deciding party is risk-taking or risk averse. It is not always necessary for both parties to share the same risk profile per se, but it is necessary to be able to meet somewhere in the middle. Compromising and calling on each party’s instinctive attitude towards risk is vital when it comes to making decisions like launching new products, taking on a strategic partner or restructuring the business.
4. What will each partner’s role be?
In a partnership that transcends the lines between professionals, it may be difficult to define clear-cut roles and responsibilities. However, professional boundaries are the key to healthy working relationships, and that begins with defining each other’s strengths, capacities, and work ethic. Being able to have an open conversation about what each role or position entails, can be the beginning of building trust and mutual respect.
5. How will we keep personal and professional lives separate?
In a relationship that entails both a personal and a professional component, the lines between the two can become blurry. However, with transparency and an openness to debate and discuss, healthy “ground rules” can be set. Maintaining a work-life balance is a challenge for business owners across the spectrum. For those in business with family and friends, the challenge takes on its own nuances. On the one hand, the shared, personal relationship may make communication easier. On the other hand, the opposite could be true.
There is simply no blanket answer to whether going into business with friends or family members is a good idea. Different people respond in different ways to the complexities of relationships. However, pausing to ask the tough questions from the beginning, may help avoid future pitfalls.