Starting a project on your own is different from starting with other people. What is even more difficult is starting a business with your friends because of the sentiments attached. Many things change when your friends are involved, and you need to think differently about managerial roles, profit sharing, business development, small business financing, loans, etc.
In this article, we’ll cover the bases of starting a company with your friends along with what you should do and what you shouldn’t do.
Communicate a lot and avoid silent resentment
Sometimes, the close relationship you have with your friends may prevent you from being honest and upfront with them when you should. This builds up silent resentment and grudges that will affect your company and your relationship. Let them know things as they are, and be frank with them when you have to.
Never establish a company based on promises alone; have written legal agreements
Handshake deals are terrible and should never be used to formalize a deal. Have written legal agreements and contracts when necessary.
Have a formal business plan regardless of how many conversations you’ve had before
No matter how much you’ve talked about the business and how well it has stuck in your heads, you still need a formal business plan. A plan shows a formal framework for your company’s proceedings, financing, and how the operation will be run from the start. It helps to get rid of the dusky clouds and gives you a strategic roadmap. You can refer to the business plan whenever you get stuck. Also, a strategy gives you that sense of formality and seriousness instead of a playful enterprise between friends.
Have clear, well-defined roles from the beginning
You need to have clear, well-defined job roles and responsibilities. This way, there won’t be room for confusion, trading blames, and misgivings that will ruin your relationship and hard work. This way, if anything goes wrong, you know who is responsible for taking care of it and fixing things.
Ensure that your friend is someone that will contribute to growing the business positively
You shouldn’t start a project with anybody just because they are your friend. They should be entrepreneurs and ready to contribute something positive to your venture. With them, you should have the confidence that things will go fine.
Have an exit plan
An exit plan is just as important as a business plan. An exit plan will help you decide how the company’s affairs should be split if it fails. It provides a way of exiting smoothly without any ill feelings towards each other.
Never make assumptions for your friend
The fact that you have been friends for years does not mean that you can make business assumptions for your friends or make decisions without consulting them.
Don’t mix business and personal matters
As the saying goes, “never mix business with pleasure.” Things concerning your friendship should be made separate from work matters. Use business emails for the right issues and personal emails for whatever else you want. Avoid dealing with or discussing personal issues during office hours. Do this at the bar or other places when hanging out after work.
Starting a business with friends is a delicate step. You do not want to pollute/spoil your friendship, and you do not want to lose profit and your hard-earned capital. You must find a way to balance things. The tips listed in this article will help you navigate the murky waters of starting a company with your friends and obtaining the financing that you need for the operation.