Talking Business with your Friend
By Staingirl Elle
You now know why you want to start a business with your friend and the pros and cons of doing business with a friend. You’ve heard the warnings, but you want what Mr. Hewlett and Mr. Packard have. You want that thriving business. And it can be yours, but keep in mind that a business partnership is similar to a marriage. You must have constant communication. You have to talk before you go into business and then you have to talk again while in business, and keep on talking. So what to talk about?
1) Share your vision, values and goals. Why does your business exist? What are your expectations for the coming year, next five years? What do you each expect to gain from this venture? If you and your friend share the mission and vision of your business, you will both be committed to your common goals. There may be the occasional disagreement regarding some of the small steps taken toward reaching your goals, but overall you will know you are in this for the long haul together. This discussion will be ongoing throughout the course of your business relationship. You will have to plan and prioritize for a week, a month, a client, etc.
2) Discuss the pros and cons of starting a business with a friend. Both you and your friend need to know what you are getting into and what the potential consequences are. In addition to the advantages and disadvantages discussed in Part One, the idiosyncrasies of your specific relationship with your friend and of your business may require further discussion.
3) Talk about the money. You may be surprised at how differently each of you view this issue. How much money will each of you put in? If one of you puts in more money than the other, is there a specific reason? Is it meant to be a loan to the company? What are the expected expenses for the first year? What happens if the business needs more money? What happens when the business begins to make money? Do you plan on plowing the money back into the business, or were you planning on distributions? What expenses will you consider business expenses? Are you planning on running your meals, cars, etc., through the business?
4) Talk about the little things. A dress code may matter, depending on the nature of your business. What are the hours of business? What are your time expectations, work habits, temperament?
5) Talk about the huge things. How will you handle the disagreements? What happens next? Will one of you have veto power? Will you each have an area in which you are expected to have absolute authority? And what if there is no surmounting the disagreement? How quickly do you want to expand? What is your philosophy in handling employees? What happens if one of you marries, divorces, dies, has a child? How do these developments affect each partner’s interests?
6) Talk about the possible end of the business relationship. If one of you dies, what happens to that person’s share? Is it a legacy for your children or does your partner get first right of refusal to purchase, and at what value? What happens if your are splitting up because you can not work together? Who gets to keep the business, or do you split it?
7) Talk to your respective attorneys. The talking points in this blog are only the beginning. Your attorney will likely have more questions particular to your needs. And each of you will want your own attorney to assist you with a written agreement. This agreement will protect your interest in the business, if not your friendship.
The second document you will want is a business plan detailing the mission, vision and goals of the company. You and your partner will want to review it from time to time to make sure you are on track, and you may adjust it if circumstances warrant.
And once you’ve gotten the talking out of the way – well, actually it should never end – enjoy the ride. May you and your friend have a fantastic voyage.