So it is a new year with probably new beginnings and you may be thinking of starting a business with your friends. Today we will suggest some actions to ensure you and your business associates exhibit the skills and expertise that will make you a formidable team.
There can only be one CEO. Knowing your team’s strengths and weaknesses is key to effective delegation of roles and responsibilities. Don’t be afraid to have frank discussions about potentially touchy subjects like equity, salary, title, and job descriptions. The longer you put these off, the more challenging and uncomfortable they become.
Friends must respect you as a professional. Occasionally, some people will try to get special breaks based on your relationship. Establish clear parameters on how to treat one another in a fair and businesslike way that will preserve the friendship. A written contract is usually a good idea. It doesn’t need to be a book of legalese. A one- or two-page document will suffice, as long as it lays out the critical basics, such as payment terms, who’s responsible for what and the nature of the collaboration. Make sure they fully grasp that it will actually involve WORK.
Define your roles, and do it early. When dealing with friends, taking a more collaborative approach toward everything feels natural. That may work to a point, but it’s better when everyone on the founding team can “own” a different portion of the business. This means understanding the strengths and weaknesses of the entire team (yourself included) and using that knowledge to clearly define everyone’s individual responsibilities. Once you’ve done that, don’t be shy about enforcing it. It’s OK to tell someone to back off of your work and to focus on their own.
If you and your friend have the same experience and skills, you may end up tripping over one another. Two shy and reserved professionals may get along splendidly, but if you’re both hesitant to go to networking events and drum up sales, your business may languish. Look for someone whose strength falls squarely into your area of weakness, and you’re far more likely to be appreciative of each other’s efforts.
We’re taught as children to share and make compromises with our friends, and that democracy is the fairest form of government but a business isn’t a kindergarten classroom or a country, and fairness isn’t a priority for start-ups. You need to be “a kind dictator” when getting things off the ground as there may not be time to run everything through a committee, and, frankly, some things just aren’t up for discussion. Take control and move the ball forward every single day.
You may assume you know all about your friend based on your experiences with them and may not do your homework as closely when it comes to people you don’t know such as asking around and checking their references. But it’s likely you’ve only seen one side and probably the most fun side of their personality. Make sure your future partner is reliable. When your friend says they’ll do something, are you 100 percent certain it will happen? If not, they may not be the right partner for you. You’re going to be busy keeping up with your own obligations and you almost certainly don’t have the time or inclination to micro-manage someone who lacks your sense of personal responsibility.
And last but not least – finances…
You may have avoided the bank by getting a loan from family or friends, but you should still treat the situation as strictly business. Putting the agreement in writing not only protects both parties but also your relationship. After all, borrowing money is not the same as borrowing a car.
Draw up an agreement stating how much money you need, what you’ll use it for and how you’ll pay it back. Your agreement needs to specify whether the loan is secured (that is, the lender holds title to part of your property) or unsecured, what the payments will be, when they’re due and what the interest is. If the money is in the form of an investment, you have to establish whether the business is a partnership and what role, if any, the investor will play.
Small entrepreneurs often don’t take the time to do any paperwork when they borrow from family or friends. Unfortunately, once you’ve made an error in this area, it’s difficult to correct it and you may find yourself with both emotional and legal difficulties.
Starting a business with your friends is worth it. Creating something from nothing, helping and seeing it grow can be a fantastic experience. It’s even better when you can do it with people you genuinely like. It isn’t always easy, and sometimes your strengths as friends can become your weaknesses as a business, but if you take that into consideration and plan intelligently you’ll be in a great position to succeed.
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