Jun 17, 2022 | Starting a Business

Is it a good idea to have my two best friends as business partners?

Q. Dear Zenagos, I’ve heard that running your own business is lonely, and I’ve always been a really social person. I want to start a business with my two best friends. Is it a good idea to have business partners?
–William

Mixing business and friendship can create an explosive cocktail. Running a business is stressful and will introduce new challenges and conflicts that you have never experienced together, even if you have been friends for a long time. Many business partnerships end bitterly, so before you start a business with a good friend, make sure you will be okay if the friendship does not survive.

You don’t need a business partner
The first question you should ask yourself is, “Why?” Why do you think you need a business partner? The answer is that you don’t. Many people gravitate toward a partnership because they are afraid – afraid they will be lonely, afraid they won’t know what to do, afraid they don’t have all of the skills that they need. It is not a good idea to enter a partnership based on fear. Try to set aside the fears and have some confidence in yourself. You are just as brave and smart and resourceful as all of those other people who have started businesses. There is no reason that you cannot succeed on your own. You have everything that you need to be an effective decision-maker. You do.

Having a partner has risks
Believe it or not, it’s a lot easier to run your business alone, as a sole proprietor. When you have a partner, you have to listen to that person’s opinion. Even between two people, there are politics. You may experience “vision conflict,” where you have different ideas about how to proceed with the business. Maybe you want to grow the business organically, but your partner would prefer to grow fast and by acquisition. Maybe you have a different “dream customer” that you want to serve. Maybe the mission is more important to you than profits. Disagreements between business partners can be emotionally charged and very painful, and they can emerge from almost any topic. It doesn’t need to be as dramatic as Breaking Bad to make you truly miserable.

And then there is theft. The history of business is littered with stories of the completely trusted partner who stole from the company. According to the Association of Certified Fraud Examiners, 28% of private companies and small businesses experience fraud and 65% of owner/executive frauds involve corruption (ACFE, 2018). To get an idea for how common the problem is, just search on “What do you do when your partner steals money from you?” You will see that business partner fraud keeps a raft of law firms in business.

There are fantastic partnerships
Zenagos was founded by four good friends who have known one another for decades, and we are having a great time. There are fantastic partnerships that are founded on friendship. If you are determined to go into partnership with your spouse or best friend, how can you increase the probability that it goes well? Here are some tips:

Make sure the friendship is the top priority
If anything matters more than the friendship (your ambition, your reputation, your income), then your relationship will be at risk. For a friendship-partnership to flourish, everyone needs to know that in case of conflict the relationship comes first, and the business comes second. This probably won’t be true if you need the business to work in order for you to survive financially. So, friendship-partnerships are safest in situations where each partner is already financially strong, and the business can be for fun.

Know what each partner brings
In the most stable business partnerships, each partner brings something essential that the others need and do not have. For example, if you are a sushi chef, but you do not have the money to launch a restaurant, you are going to need a financial partner. The investor cannot make sushi (and wants to make sure that you, the sushi chef, stay committed to the restaurant), so the partnership clearly benefits both parties. A partner may bring sales skills, or local relationships, or language skills. Whatever it is, it needs to be critical, not something you could easily get by hiring an average employee.

Do your research
Make sure you really know your partner(s). You have probably heard that a business partnership is like a marriage, but most business partners spend more time with one another than they do with their families. So, before you enter into a business partnership, give serious thought to the question: “Do I want to spend every day with this person – forever?” Are your goals clear? Are your values similar? If you’re not certain, then don’t join the partnership.

Trust yourself
If you need a buddy, spend time with one after work. If you need support, consult an expert – join an industry association, hire a business coach, or get a free business mentor. Don’t use your business as a way to make friends. This may sound melodramatic, but it is a whole lot harder to get out of a partnership than it is to get into one. Trust what you know and feel. If you absolutely know that you want to go into business with your two best friends, then go ahead, and stay focused on taking care of one another. We do, and we’re having a blast!

References

Association of Certified Fraud Examiners. (2018). Association of Certified Fraud Examiners Report to the Nations. Retrieved on July 18, 2022 from https://businessfraudprevention.org/fraud-statistics/

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