The co-founders of Bay Leaf Digital went into business as friends with an understandable amount of concern: "When Tory and I decided to start a digital marketing agency together, we were definitely concerned about the downsides. Since we were friends before we were business partners, there was a certain amount of trust going in. Still, we knew that our friendship could suffer if there were disagreements," says Abhi Jadhav, Bay Leaf Digital’s Managing Partner and co-founder.
In the age of millennials, the family business looks a little different. Rather than going into business with blood relatives, many entrepreneurs are working with friends - and there are plenty of experts who support it, like Jules Schroeder, founder of CreateU. In her article, Millennials, Here’s Why You Friends Make the Best Business Partners, she suggests:
"When it comes to the innovation and expansion of any business, open dialogue is essential. With your closest friends by your side, you can trust that you’ll be able to speak your mind without fear of reprehension or losing your job. Chances are, you’ve already navigated conflicts in your friendship, and your bond has the fortitude to withstand any challenges that arise within the work environment in a way that honors all parties and promotes business development."
While the idea is sound on paper - you get along, have dealt with conflict in the past, know how to support one another - the question remains: Is it a good idea in practice? Larissa Pickens, owner of Float Design gets real about the pros and cons:
"Hiring unknown talent requires a lot of effort and energy - sifting through portfolios, setting up interviews, scheduling trial projects, seeing if they're a good personality fit, etc. Being able to bypass that rigmarole definitely seems advantageous. The problem is, in my experience, it rarely works out quite as smoothly as you'd like."
With a wide variety of benefits and drawbacks, we’re digging in. Keep reading for insights from both sides of the argument, straight from the people who have experienced it.
Avoid the fiasco
There are many things that could go wrong when starting a business with friends or hiring them, from arguments fueled by personal grudges to legal missteps. To avoid a potential fiasco, give it a trial run, suggests Taylor Jacobson, Founder and CEO of FocusMate.
"It can be tempting to formalise a partnership quickly because of the big dopamine hit. Resist the temptation. In the current ‘freelance economy’ there’s almost no reason not to do a test run (or two!) before teaming up. Choose a relevant project, set concrete objectives, and see how it works out," says Jacobson.
If the trial goes well, and you want to hire them full-time, start by taking care of the legal paperwork: "One of the first things we did was draft an operating agreement. In the agreement, we agreed on some fundamental rules such as avoiding conflicts of interest, splitting of profits, and dissolution," says Jadhav.
Their agreement was bare bones at the time and updating as they continued in business together was the key to avoiding arguments and question marks:
"As we grew, we recognised the need for finer controls in the agreement, and we addressed issues before they became sore spots. For example, when Tory needed to take a leave of absence from the business, we realised the need to compensate partners for time spent working in the business, and not just for having an ownership stake."
When working through this part of the process, have open conversations. Only one of you can be the CEO and you’ll have to decide on things like salary and delegation of duties sooner or later. The more you can talk about this in a friendly and understanding manner, the better off you’ll be, as this sets the tone for the rest of your partnership.
Enjoy the fun
Working with a friend can be challenging - but it can also be a lot of fun. While it’s important to remain friendly in the office, the distinction between home and work is key to enjoying working or running a business together.
This separation has been crucial for Jadhav and his partner. Not only do they live in the same neighborhood, but they bond over their "obsession with staying fit". This has lead them to train for and compete in running events together, something that strengthens their relationship as friends outside of work.
It’s important to maintain respect for one another as well. For Holly Rollins, President of 10x digital, this translates into a mantra she and her best friend of 20 years live by: "Respect, no drama and transparency. We stick to the facts and honor each other’s roles and talents. This playbook has allowed us to do deals in the boardroom one day and take inan art tour the next."
Finally, don’t forget to have fun as you get to know one another within the business as well. To find the best ways to work together, for example, take a personality quiz, like 16 Personalities, to see where each of your strengths and weaknesses are. It’s fun to compare and contrast and then translate those findings into work duties and roles that you’re excited to take on.
Enjoy running meetings together and signing deals side-by-side. Relish the sheer excitement of working with someone who knows you better than most and who you love spending time with. In a world where most employees are disengaged, you’re a step ahead of the rest.
Ultimately: honesty is the best policy
There was on common thread when speaking with business owners on the topic: the ability to be honest with one another. Kari DePhillip, owner of The Content Factory, says her advice is: "Call issues or problems out in real time, and be ready to cite specific examples and how they impacted you/the work. I've done this consistently, and it keeps issues from building up."
If it’s not working, be honest about that too. Pickens hired someone she had worked with years prior, and though it was a good fit in terms of skills and knowledge, they both realized it wasn’t a great fit in actuality. When they were finally honest with one another and split ways, "There was a sense of relief on both sides."
When you’re able to be honest, find balance between the business and your friendship, and put the necessary paperwork in place, the experience can be rewarding. Now, many years after starting the business, this is exactly what Jadhav and his partner have experienced:
"Consciously or unconsciously, we have established a good balance between business partners and friends. Bottom line - if done thoughtfully, being in business with a friend can be fruitful and fun."