Tips for Those Entering or Already in Business with Family or Friends
Mixing family and business – there’s a lot of experts that advice against it, yet there are numerous success stories that emphasize the benefits. Maybe you’ve decided to start a business with your brother and a best bud from college. You’ve heard all the horror stories of mixing business with pleasure, but are determined to be an exception to the rule. Or perhaps you’re already partners with a friend or family member but you skipped having ”the talk” when you first got into the business. Whatever the situation, here are some tips for those entering into business – or already in business – with family or friends.
Schedule a meeting to talk about it –
Get together and sit down for a long discussion about the business. Now’s the time to put aside family talk and plans for the upcoming weekend and really focus on the business. Discuss and set clear roles and responsibilities, goals and expectations, as well as boundaries.
Here are the things you need to discuss and the “What ifs” to consider:
- Who owns what and who does what? Which will depend on a number of factors, such as the level of responsibility each person is willing to take on, the amount one is willing to invest, a person’s contacts, the skills each person has, etc.
- How you are going to operate and manage the business? What systems/ethics/business practices will you run your business on?
- What will happen if one of you needs time off work or wants to take a vacation?
- What happens if someone decides they want to leave the business?
- What if one of you is slacking and not holding up their end of the deal?
- What if the business fails?
- What if one of you gets married or divorced? Either can affect the business if limits are not placed on ownership.
None of these “What If” scenarios are comforting to think about, but they are necessary things to think about and discuss to save your relationship, as well as your business. After you agree on who owns what and who does what and you consider the “What If” scenarios and come up with solutions, you need to document your agreement, which leads us to our next point…
Agree on the details and document it –
Create and document a written agreement that clearly lays out in detail all the areas discussed in the meeting, such as who owns what, who does what, how much of the business each person owns, and a succession plan in writing that defines to the point how the business will be split up if someone decides to leave.
Meet with your partner and attorney –
Take the agreement to your attorney for a final version of your agreement. It may not be all butterflies and roses when discussing ownership and responsibility with your partner. Meeting with an attorney will help you work through the issues and will also open your eyes to new areas that need to be discussed. Your attorney will help you put together a finalized agreement.
Revisit the agreement and make changes if needed –
If more issues arise after the final agreement is documented and filed, or if there are gaps and holes in your current agreement, set up a meeting with your partner and attorney again to go over the details and address the concerns.
While there will certainly be headaches and there’s always the looming potential for chaos when getting involved in business with family members or friends, there are also advantages to the arrangement. You get to spend more time with your loved ones; you know your business partner and colleague better than anyone, you’re well aware of their strengths, weaknesses, talents and working personality beforehand, and, in most cases, you can trust them. Really, it’s a matter of weighing the advantages against the disadvantages and putting the proper arrangement in place to ensure a seamless transition from friendship to business partners.
