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What Are The Pros And Cons Of Starting A Business With Friends?

Aug 30, 2022 | Business

Working With Friends

Jim Blasingame who is the President of Small Business Network Inc. and a much-respected expert on entrepreneurship famously said that trust is good business practice. To succeed in business, you must establish trustworthy relationships with your partners, customers, and suppliers. And who better can you trust than your friends? 

The harsh truth is that meaningful personal relationships do not automatically translate into successful business relationships. Look into your inner circle. Some of you might have friends whose personal relationships turned sour after the business they started went belly up. 

The same holds true for family members and married couples. Decades of beautiful friendships were destroyed because they believed it was possible to mix personal affiliation with professional obligations without the risk of combustion.

However, it’s not the same for everyone who partners up with friends. Bill Gates and Paul Allen were childhood pals before they started Microsoft. The late Steve Jobs and Steve Wozniak hit it off and became fast friends before they launched Apple six years later. 

Then, of course, you have Ben and Jerry’s. 

They were besties before they became partners and grew their small businesses into large corporations in a few years’ time. 

So it is possible to mix personal relationships with professional obligations without the friendship blowing up in your face. The question is should you start a business with friends? 

Before you get your buds on a conference call and announce your plans to transition your friendships from crew to a company, find out what the pros and cons are of starting a business with friends.

The Pros Of Starting A Business With Friends

Before we discuss the pros and cons of starting a business with friends, let’s clarify what we mean by “friends”:

  • The relationship started before the business; as far back as your childhood years. 
  • The trust level is high; each person has no apprehension about sharing confidential information and “secrets” with each other. You know that when the going gets tough, your friend has your back and vice versa.
  • Each person can comfortably describe the other person as either a “close friend”, “a bestie”, or a “BFF”. 

But friendships can also arise at work. You meet a supplier, a professional contracted to do a job, or a service provider such as the Bank Manager. After months of engagement, you realize you have a lot in common and decide to become friends and hang out together after office hours. 

The idea of starting a business seems logical because you’ve engaged one another at the professional level. You know what the other person brings to the table and the approach to work; qualities you shared and which contributed to the development of the personal relationship. 

Besides, you came across a study by Harvard that spanned 80 years and concluded happiness is the key to success with close friendships at the heart of it.  

Starting a business with a good friend is exciting. It may have been something you’ve talked about while growing up or while rooming in college. Now, it’s about to become a reality.

And it could be the best move you’ll make in your professional career.

1. Easier and Faster to Establish Trust

Let’s say you amassed 1,000 friends. Not all of them will be business-partner material. In the course of your relationships, you can readily identify who among your friends are business-partner material and which ones are not. 

The person(s) you intend to ask to join your business are those whom you have vetted to have the required hard (technical) and soft (behavior) skills to help the venture succeed. 

Thus, working with these friends makes it easier and faster to establish friends compared to setting up a business with someone you just met at the gym or a trade conference expo.  

2. Shared Values, Purpose, and Vision

There are friends and there are best friends. Your bestie or BFF is the friend with whom you share the same values, purpose, and vision. Oftentimes, you have disagreements but it’s easy to resolve conflicts because while the objective is the same, the approach might differ occasionally. 

This is a great quality to have in business partnerships. 

For example, you and your friends/partners – Steve and Max- agree on streamlining costs to generate more profit.  

You want to reduce salaries and offer better incentives to encourage more productivity and weed out the laggards from the star performers. 

Max disagrees with the reduction of salaries and instead recommends cutting down on rental costs by migrating 50% of the employees to work-from-home arrangements. 

Steve suggested that non-core functions should be outsourced to third-party service providers to lower operating expenses by 40%. 

These are all great ideas that will help the company achieve its goal. Everyone’s on the same page. The difference lies in the road to take in order to accomplish improved profitability.  

3. Smooth Communication Channels

When you’re talking to a friend, you can say anything. Not so with someone you hardly know. If you can share your deepest secrets with your friends, you can easily let them know if there are any problems or serious concerns you want to be addressed on the business front. 

They won’t mind much if you contact them during weekends or just before bedtime. This is just who you are even before you started the business. Someone whom you don’t know at this level will probably not be as receptive to having his personal time compromised. 

In business, communication is very important. The friends you choose to be your business partners must value communication as much as you do. They know the importance of having a quick turnaround time on responses and resolutions to issues. 

There are times when you have to be straightforward and direct. Your friends can readily accept your approach but someone who’s not familiar with you may get the wrong idea.

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4. Familiarity with the Other’s Strengths and Weaknesses

You know all about your friend’s work experience, competencies, and capabilities. You’ve seen him at his best and at his worst. Through your engagements, you’re familiar with his strengths and weaknesses.

This makes it easier to delegate duties and responsibilities. Each person will be given an area of responsibility to manage so that there won’t be an encroachment on territories. Everyone knows what he needs to do in order to help the business succeed.

For example, a friend with great communication and interpersonal skills can handle personnel training, hiring, and client onboarding. A person who’s introverted, analytical, and does well with numbers can take care of back office functions.

Meanwhile, a friend with a gregarious, larger-than-life personality and positive, can-do attitude can take care of the sales front.

5. Cultivate a Positive Work Environment

If you couldn’t spend much quality time with your friends before, now, you get to see them most days of the week.

You get to see your best friends when you step inside the office. Surely, it will make the work environment more positive and vibrant. Everyone is happy and comfortable around each other.

You can take your breaks together and maybe have a couple of pints after office hours.

If you spend 8-10 hours a day at work, that’s 33% of the day. It would be a great idea to spend those hours with people you can get along with.

The Cons Of Starting A Business With Friends

Reality check.

The cons of starting a business with friends can be the flipside of its pros. With a business, everyone invests time and money. Expectations will be different and oftentimes, when these aren’t met, conflicts can easily go off the rails and cross the line from professional to personal.

1. The Trust Slowly Erodes

Consistency is hard to maintain when running a business. Even the most talented person will have periods where the quality of work is spotty. If someone in the group begins to lag and consistently fails to meet his deliverables the entire business will suffer.

You might think that you are pulling more weight than others. Meanwhile, your friend might feel the same way – that he’s doing more work and contributing more to the success of the business than you.

In time, you or your friend might think the other person deserves a smaller piece of the pie. If unresolved, the tension will build to critical mass and it will be harder to manage.

The situation has gotten to a point where you view your friend from a different perspective – that you can’t trust him anymore. And even though the lack of trust is in the context of the working relationship, human nature will inevitably mix it with your personal relationship.

2. Conflicts Aren’t Completely Resolved

In our previous example, you, Steve, and Max have a disagreement on how to improve the profitability of your business.

Let’s assume that you and Max agreed to implement their recommendations and tell Steve that the outsourcing option can be explored after the group sees the results of the courses of action.

Steve agrees only because he’s out-voted not because he believes you and Max are entirely correct. He still maintains his position that based on research, outsourcing non-core functions is the most efficient way to improve profitability.

If one person in your group consistently feels that his contributions are frequently overlooked or disregarded, this could lead to tension that increases over time.

The camaraderie you had as friends will be affected because of the “Who’s the boss?” mentality that’s being cultivated by more dominant personalities. Resentment will start to simmer and eventually boil over to personal relationships.

3. Emotions Get In The Way of the Truth

Before you got into the business, you had no issues calling out your friends if they did things you found offensive. But such might not be the case when it comes to running a business.

For example, your friend is in charge of sales. Based on the financial reports, it’s clear that the root of your business’ struggles is the sluggish performance of the sales team. You took notes that prospects were not properly qualified, there was a drastic drop down in sales calls, and follow-ups were often missed.

If the person in charge of sales wasn’t a personal friend, you’d immediately summon him to your office and discuss his performance without mincing words.

Your approach might not be the same when it comes to your friend. Because of your personal feelings, you hesitate to be as straightforward for fear of affecting the friendship.

In the back of your mind, you’ll be thinking, “If I call Max out, would things be the same if the crew goes for drinks or when we hang together in someone’s house?”

These fears – emotions – will get in the way of being forthcoming to your friend. You’ll be caught in a conundrum, “Should I risk my friendship for the sake of the business?”

4. The Problem with Familiarity

We know what they say about familiarity… and how it breeds contempt.

The saying holds true among our closest circles of friends. The longer you hang out with the same people, you eventually notice habits and attitudes that put you off. It comes to a point where you develop resentment toward certain members of your group.

As friends, it’s easy to resolve these types of issues. You can invite the friend out for coffee and open up by releasing your pent-up emotions. After the first few tension-filled moments, all will be better and you end the get-together with a hug.

However, as business partners, these issues won’t be easily resolved over coffee. The issues don’t just stem from differences in opinion but in matters that have financial implications.

You might have found your friend’s laidback nature “cool” when you were in college. In business, that laidback nature translated to a lackadaisical approach to work. You no longer found his attitude cool but annoying… and frustrating.

Try as you have, your friend refuses to change his attitude. He’ll say that’s how he’s always been and “You can’t change a Zebra’s stripes”. In the end, you’ll realize you were better off just as friends and not business partners.

5. Friendship Burnout

During the first few months, it was great to see your friends every day. As the months go by, you get tired of being with the same people 365 days a year. At the office, you talk about work-related matters. When you’re having drinks at your usual bar, shop talk becomes inevitable as business partners.

You pine for the days when you’d get together with your buddies before you became business partners. Everyone had their respective careers. Thus, even if someone talked about work, it was something new.

As business partners, hardly anyone talks about the latest sports championships, the new Hollywood blockbuster, the popular Netflix series, or family. It’s just work, work, work.

In time, you won’t see your friends as friends but as “strategic partners” or “co-founders”.


So in view of the above… should you start a business with friends?

Before you decide to get into business with your buds, you have to accept the possibility of risking the friendship if things go wrong. It might take years to repair the damage caused by the failed business engagement. In some cases, best friends for life become bitter enemies to the end.

A good analogy is marriage.

When you and your spouse were just dating, things were simpler and carefree. The biggest decisions you faced were what movie to watch, where to eat, where to go for your next vacation, and how to spend more time with each other.

However, things changed when you got married.

Now, you have bills to pay, a house to take care of, shared responsibilities, and perhaps children to nurture and raise. You view each other as equal partners in the enterprise called “family”.

Just like a normal business, in the course of running the day-to-day functions of a family, conflicts between husband and wife will arise. There are disagreements in decision-making. One party feels under-appreciated by the other especially when only one is working.

We’re not saying “don’t get married” but just like choosing a partner for life, you have to be careful when choosing a friend as your partner in business.

That friend should be with you for richer or poorer, in times of profit and losses, above blue or below red, to respect and cherish until bankruptcy do you part.

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