Going into business with friends/family...

Discussion in 'Growing and Managing a Business' started by mvh, Aug 7, 2011.

  1. mvh

    mvh
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    Hi Guys,

    I am seriosly considering starting a part time business with my two best friends, since they share the same goal.
    You always hear about it being a bad idea going into business with friends/family.

    Can you please post a reply if you had personal experience with this, good and/or bad?!
    Do you have any advice/consideration should we go forth doing business together.


    We already had a meeting about moving forward to formalize this, but I feel that if it is a bad idea, that it would be easier to stop than having to boot them out as a partner.
    I am confident in going into business with my one friend, but a bit hesitant with the other in the sense that he is a can be very stubborn at times. In fairness, he will bring great energy and people skills, he may be stubborn; but not-closed minded (it will just take some energy/time to show him otherwise).

    Thank you,
    MvH
     
  2. Fergal

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    Going into business with friends has potential pitfalls but it can still work very well and starting a business is generally easier if you have someone else in the business with you. Having three of you in the business would be good due to the fact that three is an odd number and you will be able to get a majority on any decision made, by putting it to a vote.

    If you do decide to go into business together I would say that it is very important that you all agree to and sign a partnership agreement that includes the following;
    • Ownership of the business - percentage shares etc
    • Decision making - how are decisions made in the business, e.g. by majority vote or other method
    • Duties & responsibilities - who is responsible for what
    • Working hours
    • Job titles
    • Profit - how are any profits to be distributed
    • Losses - how will you deal with losses, should there be any
    • Calculation of profit and losses - clarification as to how profits and losses are measured
    • Departure - how to handle a situation where one partner wants to leave the business
    • Salaries and pay, if applicable
    • Other benefits such as expenses and holidays.
     
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  3. Gary Barzel

    Gary Barzel
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    When going into business with family or friends one should always proceed with caution. Be sure to set aside guidelines and stick with them. Discuss every possible scenario that may occur and write down what actions you will take if they do occur, and have everyone sign them. I would suggest you get a good business attorney, sit down with your partners and work through everyone's role in the business. Make it clear that each one will have his job in the business and that remains his job and shouldn't be run by anyone else. Take into account that there is a possibility that your friendship will be affected, but remember leave your personal pride at home and focus on your business, so it can succeed and prosper.
     
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  4. ladydeluxehotel

    ladydeluxehotel
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    I have no experience about this but on my opinion, having a business being shared to a family or friend is really risky because everything became risky when money is involved. Make sure that whom you will take as your partner is someone you can trust and known for the longest time. A close brother or sister, your parents, your wife/husband and a person you really can call your friend. Goodluck with your decision.
     
  5. daytrader

    daytrader
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    it really depends to you. i personally like to partner with family members especially if he is capable and responsible. if i'm hesitant because i think this person [family member] can't even fix his bedroom just after waking up, i'd have to think about it.
     
  6. James Greg

    James Greg
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    Money is the major thing that breaks partnerships. You should have all your percentages worked out before getting involved. I am currently in business partnership with two of my friends and many times have faced a situation where our partnership along with friendship may come to an end. One friend is taking most of the share and we both know that but as he has the maximum potential we two are acting as we believe all his tall tales.

    But my advise to you, work equally and you may face hard times too when you might have to choose between friendship or business. Choose wisely.
     
  7. mvh

    mvh
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    Thanks everyone, will keep you posted on developments.
     
  8. youngkia1

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    I have not yet tried that one but I think that is a good idea, but the only problem is when money is involve it will be possible that conflict will exist.
     
  9. drucker

    drucker
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    I have worked in a business a couple of times with family and friends and it does really depend on the personalities of each person involved. When I worked with my dad it was okay just not the best so I had to move on to something else. I have since been developing a business with Kareo and I thought about doing at a partnership but since hearing many stories I chose to go it alone but did bring on some friends as independent contractors so they can build there own business along side me and we each have control and are working together. Good luck
     
  10. sigma

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    It is good if both of you have the same direction and same thinking on the business. Many people avoid to run business with friend/family just because they worry that there ate argument in future. In this case, advise to have black and white all the time to avoid arguement and protect both party
     
  11. Liquo

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    I experience one in my life about the situation facing an old friend of mine start business with me, and it was not so good experience as the money matters disturb the friendship.
     
  12. sigma

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    This happen commonly and therefore better write them in black and white at the beginning stage, this can help to reduce the chances for the case happen
     
  13. drucker

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    This is very common you know there is an old saying the only ship that does not sail is a partnership. I really recommend instead of going into partnership if you are looking to do this with another person. Find a way to do it where one is the owner and the other is and Independent contractor that has ties to how the business grows and gets paid on there production as well as the profitability of the company.

    This will accomplish 2 things one they have a vested interest in the overall business but it gives a seperation if something comes up and you need to part ways. I hope this helps.

    DRucker
    Kareo
     
  14. td2011

    td2011
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    My advice is go ahead with it, but don't expect your friendship to be the same, especially with three of you involved. I went into business with a best friend and we had to call it a day after one and a half years, we didn't have the same ideas concerning the future of the business and it wasn't worth loosing my longest friend for it. Anyway I hope it works out for you if you decide to go ahead with it.
     
  15. patrick0001

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    In Malaysia, if a person want to setup a limited company (Sdn Bhd), it require at least 2 persons involve for the particular business. For enterprise business, it can run alone without sharing to other, but the risk is higher. I not sure how is others country rules regulation.

    Some time we are caught in a situation, where by we trusted our family, but family member might not have same capability as friend deliver. In term of business direction, friend have more closer direction with us, this is due to we have same hobby and age.

    If I am you, I will just go for it either one, only comes to real work then you will know their capability. Yes, this is in risk.....what to do? running a business is all the time in risk. Instead of keep thinking and guessing, I will just go for it to find the real answer
     
  16. Jerlene

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    There's a saying that everyone should live by. "Don't go into business with your family or friends." lol It's one of the most important rules of business. Your relationship with your family or friends with crumble, or your business will.
     
  17. Frasier

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    Thanks for sharing important own problem.
    I suggest to when you start business with your friend first make a an agreement which can include
    all the term and condition which you face in the business then after you start the business.
    Without agreement your business fail and you can not run your business.
     
  18. kevinbrown10

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    I agree with Fergal. It is a good idea but you have to keep those points in mind. If you follow these point may be you achieve success rapidly and no arguments will be there.
     
  19. andrewclives

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    I also want to suggest you that you should not go into business with your friends and family.The agreement is necessary in any kind of business which is start under the partnership.If all the things are legal then do not need to worry because it will help you in the condition of dispute between both of you.
     
  20. salichtman

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    Hi andrewclives - That's good advice but...

    Most of the highly successful entrerpeneurs I know or know of in the Internet area started out with friends who were of like mind AND who had important complementary skills. Of course, one of my worst experiences of being ripped off was by an uncle who stole a planned community project from me just before closing. A sad story. One of my best experiences was a consulting firm where my partner became my relationship partner. So it goes both ways.

    In my almost 55 years of entrepreneurship, I have been through enough variations of this to know that such a partnership (whether legally such or not) is like a marriage. You will have lots of disagreements and the key question is whether you and your partner(s) have enough mutual respect to intelligently work through differences that kick up your emotions.

    That said, you really have to get into the details of your venture and how your partner(s) would handle them to see whether you fit together in that way. You should each take on some tasks in building the venture concept and refining it so you can see how things work on that level. You should pay particular attention to any clues that indicate whether your partner(s) are honest and open with you. Give your potential venture partners the same level of check out that you would a potential spouse. Bottom line might be does your intuition say they are right for you and does your experience tell you that your intuition about that is correct.

    Hope this helps.
     

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