Should you or shouldn’t you go into business with a friend?
I’m sure this is a thought that most of the people reading this article would have had at some point in their lives, or even taken it to the next level and discussed it verbally with those involved.
Can it Work?
So you’re downing a few beers one Friday afternoon and the regular chit chat about tonight’s footy game with your drinking buddy digresses and turns into talks about going into business together.
Whether it is a roof tiling, candle making or a mortgage lending firm, you don’t need to research to hard to find successful joint ventures between friends.
Under the right circumstances, a partnership business model can work. And it makes sense right? Straight away all financial aspects are halved between the two of you (or multiple partners, making the financial investment even less). This is a massive incentive.
Finding a Business to Buy
The fundamental aspects of buying a business in a partnership (with a friend, family member, wife, husband, etc) are basically the same as acquiring a business as a sole proprietor. The parties involved will already have some idea of what niche they will start their search in.
It is usually a niche they they have previous experience or knowledge in. So, they start searching reputable business for sale websites for the perfect opportunity, at which point they will do their due diligence before making the financial commitment.
Is Your Partner a Good Fit?
Don’t be fooled into thinking that buying an already established business with your buddy will a road to riches. Even of the business is booming. Most importantly, you need to make sure you have a compatible business partner!
Here are a few boxes you need to tick before going forward:
- What skill sets does each person bring to the table;
- Do you have similar personalities (so they don’t clash);
- Establish the roles of each partner from the beginning;
- Make it clear who owns the major share (if its not 50/50).
Addressing these points will certainly make life easier and while avoiding some critical issues along the way.
Legally Binding Agreement
Before making the big move, it is highly recommended that there is some kind of legally binding agreement which would cover the main aspects and possible outcomes of the agreement.
This can be done yourself, but hiring a solicitor to complete the task will avoid making any costly mistakes. And when you go into business with a friend, you definitely need to make sure the contract is water tight!
You need to outline exactly what each others roles are including financial position, day to day operations, decision making and partner exit conditions (just in case someone wants out!)
Relationship Evolution
Just like most relationships, yours will evolve and change over time. Usually in one of two directions. It will grow and become a more respectful, professional outfit, or it will become untrustworthy, strained and most likely destroyed.
It is always good to go in with a positive attitude, but be prepared to lose your friendship with your buddy. More often than not, this is unfortunately how it will end if things to do not work out.
Putting Your Friendship at Risk
A life long friendship can be destroyed in less than 1 year of going into business together (or weeks). You need to decide if you are prepared to risk it all. The personality traits and common interests that bind you as friends, most likely will not flow across into the business environment.
There are not many people who would risk a friendship over money, so make sure everything is in writing and on a legally binding document.
This way both your new business venture and your friendship has a very good chance of surviving and thriving!