Are you planning to start a business with a friend or family member? If so, you are in good company. About half of all startups today are organized among friends, family members or spouses. It makes sense too because in today’s highly competitive business climate, startup entrepreneurs want to pursue their most ambitious goals with people they trust.
So why is it that the longest, most emotionally wrought letters I get from business owners seem to involve partnership battles with “former” best friends?
Underlying every solid friendship are expectations of a higher level of loyalty and understanding than is common among work colleagues in corporate jobs. Friends count on their business partners to be supportive when family obligations interfere with business deadlines. Friends also expect their business partners to defend their actions to co-workers, customers, investors and vendors even if all reason says otherwise. When our friends let us down, resentments can simmer in a profound and debilitating way.
Can this happen to you and your best friend? Sure.
Here are some of the most common areas of conflict and some suggestions for how to keep the peace before toxic conflicts decimate great friendships and business opportunities.
Work style conflicts
Business partnerships are like marriages. Since you will spend a lot of time together with your best friend business partner, you should explore work style compatibility. What’s fun at a sports bar may not be welcome at the office. How do you each feel about vacations, overtime or just taking time off on a whim? Are you a morning person who likes to work in a neat and quiet environment? Does your friend work the same way? Talk it through now.
Business strategy disagreements
When I meet with new startup partners they tend to be well aligned to the grander goals of an organization, but rarely have worked through the nitty-gritty details of how to achieve these goals. The process of developing an operating plan with sales projections is a good test of partnership collaboration. If you can’t agree on how a company will function, who will solicit customers and how the company will be funded, then the decision is easy…Don’t partner!
Most startups don’t have a lot of cash on hand so agreement on spending priorities is crucial to partnership success. One partner’s definition of a necessity may seem like an excessive luxury to another. To navigate these issues and prevent unwelcome surprises, set specific policies regarding the authority of any partner to write checks, offer customer discounts, incur debt, buy equipment or charge expenses to a company credit card.
The typical startup business will take a lot more time and money to become profitable than anyone ever expects. This isn’t necessarily a sign of poor planning, but a reflection of the routine adjustments entrepreneurs have to make as they learn more about their customers and competition.
Nagging problems, however, arise when one partner can commit more time or cash than the other partner. It is these commitment imbalances, especially in 50/50 partnerships, that tend to create the most emotionally draining conflicts.
A better way is to acknowledge at the time of startup that no partnership is ever a perfect balance. Pressuring partners to commit more money than they can afford will create undue stress on the friendship and the business. Also, discuss how long each partner can go without a salary before having to look for outside employment or investors. If one partner can commit more time and money than the other, simply agree that the lead partner should own more of the company.
No way out
Today you want to work in a startup; tomorrow you may not. The reasons for a sudden career plan change are more likely to be influenced by family issues—an illness, a new baby, a divorce, a spouse’s lay-off or sudden family relocation—than by concerns about the business.
What happens when one partner wants to sell out, quit or reduce involvement in the business? The best time to negotiate answers to complex breakup issues is before any money goes into the business checking account. Hire a lawyer to help you craft a partnership agreement and a stock purchase and sale agreement. Don’t startup without them!
The trick to any successful business collaboration is candid disclosure of issues that might stall business progress as well as damage the friendship. No two partners will ever agree on every business issue, but you both have to agree how you will work through problems when they do arise. You can do it, together!