Small Business

How to Lose Friends and Infuriate People


By Karen E. Klein Q: I am starting a business with a couple of friends. I've read a lot of advice on family businesses, but do you have any suggestions or advice for someone going into business with friends?

-- K.Y., Beijing

A: We've all heard stories about fabulously successful business partners who were college roommates, or best friends since preschool. But experts are quick to warn that, like spouses, friends often have difficulty establishing enough emotional distance to work successfully together without jeopardizing their relationship or business. Basically, starting a business with friends is like going on vacation with them: It's great when everyone is having fun, but when there's a disagreement, the relationships can sour overnight.

"Friendships are based on shared avocations, enjoyment of each others' company, and the interpersonal dynamics of being supportive and loving towards another person," says William B. Gartner, a professor of entrepreneurship at USC's Marshall School of Business. Business is about skills, solving problems, making decisions, says Gartner, things that friendships don't bring to the table.

POISONED PALS. "Trusting someone in business is good, but it's not the same as business skills and competency," Gartner adds. "I know people who were very close friends since high school who went into business together and had a bitter financial dispute that brought terrible resentment, anger and misery. Five years later, they still don't speak to each other. And that's probably more common than not, unfortunately."

Advance planning can help you ensure that both the business and the friendships thrive. Here are a few ideas:

Firmly establish the goals of the business and each person's roles and responsibilities. Job descriptions and decision-making authority should be outlined well in advance. "It should be extremely clear how the business will operate, especially with regard to how decisions will be made," advises David Weinman, a human-relations consultant based in Bala Cynwyd, Pa. Remember: While your roles should be clear, it's also important to cross-train each other on the job, so you can cover for each other in an emergency.

Be honest with yourself and each other about why you're getting into the business -- and what you want out of it. "Motivations are often difficult to be clear about, and they are also guaranteed to change over time," Gartner says. "One partner might want a huge empire and be willing to put in time and energy galore. Another might just want fun and enjoyment. Still another might want to make a lot of money."

Evaluate the professional and personal strengths, weaknesses, talents and experiences each partner brings to the company and discuss how they can enhance your chances for success. Decide who has the background, capability and interest to be responsible for specific tasks, such as sales, marketing, merchandising and financial management, then put your conclusions in writing. Include the business operating hours, vacation time frames, dollar investments, and draws. Dee Helfgott, a business coach based in Palm Desert, Calif., always advises that partners work together to develop their business plan. "If this is a joint venture, it's important to have each partner involved in the process," she says.

Plan ahead of time for the worst-case scenario, and make formal exit strategy and buy-sell agreements with the help of an attorney. Many friends avoid this step because they don't want their partners to think they don't trust them, or that they're not fully behind the venture's success. "Just assuming that you'll split things 50-50 never works," Gartner says. "Someone always has to be the boss and someone has to have the authority to fire the others, so there's a chance for dissolution and fair payment from the business."

Make sure you share the same values, beliefs and ethics. "When partners don't clarify this from the start, it often isn't until a problem occurs that they recognize core disagreements," Weinman says. Discussing values in advance ensures that you're operating from the same beliefs. If you don't share similar views on core issues, it may

be best to decide against going into business together.

If you're still not sure about diving into a business venture with friends, invest in a partnership assessment. An organizational consultant can assess prospective partners in areas like goal orientation, need for control, problem-solving approaches, and leadership style and give you valuable feedback as well as ongoing consulting.

REFEREE ON CALL. "Having an objective person there to intervene and help work through control and turf issues is very helpful," says Maxine Fechter, a human-relations consultant with People Equities, based in New York City. "I play such a role with my small clients. We initially develop protocols regarding how they will work together, including roles and responsibilities, and then we have monthly status meetings where I serve as advisor and referee."

Trust among friends can contribute to solid business relationships, and meeting the challenges of a business together can enhance friendships. But the bottom line is that horrible conflict can arise in business partnerships. So, if your friendships are extremely important to you, you may want to invest in that joint vacation rather than a joint venture. Have a question about running your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.


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