Starting a business with a friend can be an exciting venture, but it is a good idea to proceed with caution.
According to a survey by the Small Business Administration, nearly 70% of businesses started with friends fail within the first few years. While partnerships can lead to great success stories, it is also important to take steps to protect yourself and your investment.
Define roles and responsibilities
Clearly outlining each person’s role and responsibilities is a good first step. This helps prevent misunderstandings and conflicts down the line. Determine who will handle finances, operations, marketing and other key aspects of the business. Having well-defined roles ensures that everyone knows what the expectations are.
Create a written agreement
A written agreement is a foundational document that sets the framework for your business partnership. It should cover aspects like ownership percentages, decision-making processes and exit strategies. This agreement acts as a reference point in case of disagreements or unforeseen circumstances.
Establish a communication plan
Open and transparent communication is key in any partnership. Regular meetings to discuss progress, challenges and decisions can help keep everyone on the same page. Foster an environment where ideas and concerns can be freely shared, ensuring that no one feels left out or unheard.
Keep personal and business matters separate
It is easy for personal issues to seep into business matters. Establish clear boundaries between personal and professional relationships. Avoid mixing finances or using business resources for personal matters. This helps maintain a healthy working relationship.
Plan for contingencies
Prepare for unexpected situations that may arise, such as one partner wanting to leave the business or facing financial difficulties. Have contingency plans in place to address these scenarios. Knowing how to handle such situations in advance can prevent hasty decisions that could negatively impact the business.
Starting a business with a friend can be a rewarding endeavor, but it is not without its challenges. By taking proactive steps to protect yourself and your investment, you can increase the likelihood of a successful partnership.