Thinking About Going Into Business With Your Friends? Consider These 5 Things FirstTips of the Trade — By Katelyn Oster on March 17, 2014 at 8:00 am
Most of us have been there at least once.
You happen to be sitting around with a couple of friends, relaxing, talking about work. You start talking about how an industry could be improved, how an invention could change the world, or how you could bring something completely unique to market.
Then, it happens. You glance up, your eyes meeting, engaging in a beyond-existential moment of clarity and drive. You have these grandiose visions, you see yourself conquering the world with the people sitting at your table.
Sometimes you merely think it, letting the moment pass. Sometimes your vision gets verbalized.
“We could start our own business…” someone might mutter.
Although these situations don’t come with a warning label or user’s guide, there are a few things that should be considered before jumping into a business project with your friends.
1. Your roles will change.
The absolute hardest thing about going into business with friends is exactly that – going into business with friends. Think about shifting your role in other areas. If your college professor suddenly became your student, how would that change your interactions? You will now have two roles, you will be both friend and business partner. You will all be founders, but only one of you will be President. Only one of you will be CEO. Are the rest of your friends prepared to answer to you if you suddenly take on a higher-ranking role or vice versa?
2. Equity can get messy.
Your partners (and yourself) will have to prove quantifiable value before equity is taken from the company. Giving away too much equity too early might actually hurt the company. Should you decide to raise capital, potential investors might be wary of investing if equity is tied up in too many places. If you must split up the pie early in the game, make sure you’re all on the same page about dilution. If you bring on an investor, shares could potentially get diluted. The end game is what’s best for the company’s growth, and that might not always prove to be what’s best for lining the founders’ pockets in the short term.
3. Set short-term and long-term expectations for each other.
Trust me, there’s always that one partner. This partner initially seemed to be the perfect fit for the position you needed filled, but over time, you find them focusing more on the glitz and glamour of being a business owner than being an owner/operator. Don’t blame them, this particular experience could be new to one (or all) of you. If you don’t set these expectations of everyone’s involvement from the get-go, it is easy for individuals to get sidetracked. Running a startup can be difficult. No one will be handing you tasks or steering you along a certain path for growth. You will invent your own strategies, opportunities and brand. You will all be responsible for the company’s success. This concept can be thrilling and invigorating, but it can also be overwhelming and paralyzing if the expectations aren’t there. Laying the framework for success is the bulk of the challenge.
4. Stay positive.
There is a difference between positivity and naiveté. It is true that when the going gets tough, the tough get going, but sometimes barreling toward adversity blindly isn’t the best way to push through the obstacle. It is also easy to prey on others in your group when you feel like you’re the only one stepping up to the plate. If some people don’t want to charge ahead immediately, speak with them. Examine why they don’t want to stand on the front lines with you. Try and share your positive visions with all of your partners and realize that most of the time, negativity or doubt comes from a place of fear. Sometimes people will present realistic concerns to you, but beware of “concerns” that make them highly emotional. If someone can’t discuss their rationale for disagreeing with leadership decisions, chances are something deeper is going on.
5. Prepare to meet new facets of your personality.
There is a common saying that says you don’t know someone until you go into business with them. This doesn’t mean that it will turn out negatively, but it means that you will see sides of them you’ve never seen in action before. Try and see it as an exciting new chapter in your relationship instead of a confusing change. Should you perceive a sudden change in behavior or personality, it doesn’t mean that person hasn’t been authentic with you. Humans are dynamic beings. We have many ways of dealing with circumstances and challenges. Be honest and understanding with each other.
Above all else, make sure you have fun doing it. This experience is yours. Build it, learn from it and grow with it. Regardless of whether or not your business does a million dollars in revenue or if you have to scrap the idea down the line, you’ve done something purely of your own volition.