You and your childhood best friend have invented a product you think will change the world. You have spent weeks troubleshooting and fine-tuning the intricate design. The market research has been done and you have both identified your target market, the price of the product, promotional strategy, and the launch date. You are both excited and feel confident in investing your savings in a project that will change your lives.
Great! You’ve covered all the bases to launch a business.. or so you think. in the euphoria of impending business success, many entrepreneurs launch a website and get business cards but fail to address its legal structure and identity. Will there be equality in the division of labor? When and how will you hire additional help? Will your family and friends become part of the business and will they be making decisions behind the scenes that bleed into business operations unbeknownst to your business partner? These concerns are a scratch on the surface of the complex dynamics of a growing business. Here are twelve steps to consider:
- Establish a Legal Structure. Will it be a corporation or a partnership? Consult with an attorney to determine what structure suits you both and works for your type of business.
- Establish and Register the business name according to the rules of your State. Make sure the name you choose is not in use by another business.
- Open a Bank Account in the business name and channel all cost of the business through this account. Hire a CPA. If you cannot afford to do so, hire a book keeper to maintain your books.
- Get Business Insurance. This is essential in the event one of you become ill or dies. survivorship might become an issue so your family should be advised. You may also want to get personal insurance to designate a beneficiary. Contact an insurance professional for further details.
- Division of Labour. You are the idea person and manage the day to day business operations, while your friend takes care of the marketing, promotion and sales. Is this an equitable division of labour? You both need to agree on this and the financial reward each will receive for your efforts. You may also want to include a contingency clause in the event one party becomes ill, gets married and have kids thereby reducing the amount of time available for the business.
- What Is work? Is your definition of work the same as your partner’s? Is working from home considered a contribution to the business?
- Decision Making. Will both of you need to be a part of every decision? You both have strengths in different areas and may feel your opinion on a certain topic should carry more weight.
- Changing Values. You were both young when you started the business. Technology has become a major driver in business success. Your partner has not taken the time to educate himself on the benefits technology offers or on the impact of social media on marketing and promotion. The competition is gaining ground and you are becoming frustrated because your partner is not open to switching gears.
- Spousal Support. What if a future spouse is not supportive of the business or feels he/she knows best about the strategies that will ensure business success. Does this spouse think your contribution outweighs that of your business partner? Do you take steps to separate the business from the personal and do you discuss it with your partner in an effort to identify a solution and ease building frustration and resentment?
- Separating Emotions. Are you able to adopt a business persona when necessary but still interact with your friend when both of you desire. Oftentimes one partner will take advantage of the friendship in a business arena because he knows it will be difficult for the friend to object. Unless clear lines are drawn and the lines remain blurred, the business will suffer.
- Staffing. When, How and Who will you hire? Do you have the same philosophy on team building and branding? Do you share the same opinions about the hiring family and friends even when they are not qualified but you feel a sense of loyalty.
- Exit Strategy. This is a serious consideration. It does not necessarily mean there will be bad blood. One partner may decide they no longer want to be part of a business. You may want to go in another direction or enter a completely different industry. One or the other may move to another state or another country for personal or business reasons. Be specific and detailed about every segment of the business. Leave no stone unturned.
Navigating business and friendship can be a tricky proposition. The friendship dynamic in business can be an awesome strength if used properly. Like in any relationship communication is key. Have a plan, execute that plan, make allowances for changes and always address the elephant in the room. These strategies can help sustain a friendship amid a business breakup.
- Salomie Chung
- Prizm4 Enterprises
- Inspiring Infinite Possibilities
