Going into business with loved ones: good idea or big mistake? BL finds out whether it’s possible to work together and keep your relationship intact.
You should never go into business with family or friends.’ This is common wisdom we’ve all heard a thousand times before, but is it really a non-negotiable rule? Close friends Steve Jobs and Steve Wozniak probably wouldn’t think so.
As with anything, there are pros and cons, but if you have weighed these up and are sensible about it, starting a business with a friend or family member could be the most rewarding work experience of your life.
1 Questions to consider
Before you decide to embark on a business venture with someone you’re close to, you need to think through some tough questions and talk to your potential partner about any concerns:
• Are they as committed as you are?
• Do you have a similar work ethic?
• What’s their motivation for getting involved, and are you okay with their reason?
• Do you share the same values and aspirations for the business?
It’s not always easy to know the answers to these questions if you haven’t worked together on anything before. Melinda F Emerson, author of Become Your Own Boss in 12 Months, told Forbes magazine that she recommends friends do a test project first. ‘It’s best to test the relationship so you can see how your potential partner works with you on a project. You need to know if he or she is a person of action, or if they need instruction. Are they an ‘in-charge’ kind of person who always needs to be the leader, or can they follow your lead sometimes?’ A test project will reveal this kind of information before you commit.
2 When things go bad
‘I have worked with various family members over the years, and although it definitely has its benefits, there are drawbacks to be aware of too,’ says Wilna Hugo of Joburg. ‘When I asked the family members I worked with what their advice to others would be, they each suggested to avoid working with family and friends, if you can help it. Over time, it just gets more and more difficult not to take work problems personally, and your relationship suffers.’
To help keep all matters professional, always have written agreements in place, says Gautenger Alet Green, who invested in a property with her brother. ‘Because we’re family and know each other so well, we assumed we’d always be on the same page. We didn’t talk about how we would handle things if we didn’t agree, and we never put anything down on paper. Looking back, this was really naive. We could have saved ourselves and our family a lot of stress if we had taken the time to go over all the possible scenarios, instead of rushing in head first.’
3 Time out!
It’s important to keep investing in your personal relationship, otherwise your business roles will take over. Get together outside of work to do the things you used to enjoy before you became business partners. This will help you stay friends, and keeping your friendship strong will help you get through tough times at work too.
4 The sweet spot
Harvard Business School professor Noam Wasserman studied nearly 10 000 founders of start-up companies and discovered that the least stable teams were friends. Even teams comprising virtual strangers were a safer bet. The most stable were past co-workers. If you’ve worked with someone successfully in the past, you’re more likely to make it work in the future.
So perhaps the best advice is to look to your previous work pals for potential business partners?
Make it work ‘As with any partnership, it’s vital to establish ground rules,’ says Gerrie van Biljon, executive director of Business Partners. He offers guidelines for friends or family going into business.
1 Establish trust
Do you trust this person fully? If not, don’t even consider going into business together. Trust is one the most important factors in a business partnership.
2 Identify your complementary skills
It helps to go into business with someone whose skills complement yours. Review which types of skills are most needed for the business, then take time to review your own skills, and then allocate your roles accordingly.
3 Plan for the worst- and best-case scenarios
As partners, you should plan ahead on how to deal with disagreements that may occur in the future. Define your roles within the business and agree on who the leader is. Even with 50/50 partnership, only one person can have the final say when a decision has to be made. Appointing an external board can assist with this process.
4 Document everything
If the business is extremely successful, how will profits be shared? If the business fails and doesn’t survive, how will debts be paid off? These are some of the tough questions that need to be addressed before you start out. Once all aspects of the partnership have been evaluated and the terms agreed on, protect each other by signing relevant agreements and include an exit clause.
Text: Andrea Kirk
