All these discussions lead you to a partnership based business where your friends are also ready to invest.
Every business has its own story to tell. Behind every great idea for a start-up, there is a brain storming session with your friends or relatives. To find out the feasibility of your business plan, you often discuss it with your friends and tweak or improvise it as per their feedback. All these discussions lead you to a partnership based business where your friends are also ready to invest. Since you are new in the business and need support both mentally and financially, you take them in. But, there are many reasons why you should not start a business with your close friends.
1. Problems Defining Roles and Authority: In friendship nobody is big, nobody is small. You all are at the same level. But it is not the same in business. You are supposed to take up roles that you are good at. The authority you get depends on your role which may not be as much as your other friends have in the same organisation. This level difference brings bitterness in your existing relationship and automatically hampers your business decisions.
2. Good Friends Cannot Always Be Good Business Partners: Trusting a friend as business partner is quite easy and alluring as you know each other’s ins and outs. But fact is, no matter how compatible you are in terms of ideas, beliefs and values, when it comes to be in the same business then there are various circumstances that lead you towards clashing viewpoints. There can be many conflicting situations related to developing a feasible business model or framing company’s vision and mission.
3. Lack of Contingency Plans: Your friends and you often share this lay back cool relationship which won’t actually work in business. You need to be proactive to handle catastrophic situations that arise all of a sudden. Having back up plans for worst case scenarios is what you need to ponder upon.
4. Problem Setting Business Goals: There will always be clashes on defining long term and short term goals. You may be insisting on focusing on long term goals whereas your friend may want to fulfil short term goals on priority. Difference in opinion while formulating these goals will be very devastating in long term and can negatively affect the growth of your business.
5. Fall of Business Can Be Fall of Your Friendship: Not all start-ups make it big; many of them hardly survive for 1 or 2 years. And when this downfall occurs you not only suffer financial loss but also it brings strain in your relationship with your friend cum business colleague. So the overall cost you suffer after business failure is much higher than you think.
6. Capital Arrangement to Legal Contract: Every start-up requires initial capital which you often arrange from your personal savings. This combined funding in the venture binds you two in a legal contract. The problem arises when one of you has lean attitude towards growth of your venture as it has heavy impact on the other partner.
7. You Both Struggle For Quality Time Together: Since you both are involved in the business and owe a crucial position in the venture, you cannot very often get time to go on holidays or plan trips together. Even if you both are not going together but often you may need a break at the same time which is not good for the business. Your absence at the same time can be risky for your business.
8. Lack of Desired Expertise: Every business venture needs some area related expertise which is not possible to bring to your business when your partner is your friend. This is something where you may have to compromise but lack of required expertise is actually a loop hole in your business.
9. Problem in Performance Appraisal: You can be honest to your buddy but being a frank supervisor of your friend cum partner’s appraisal is a hard thing to do. Being honest and telling him the areas of improvement can strain your relationship and leaving the issues unaddressed can have a negative impact on your business.
10. Successful Business but Strained Relationship: Who said only failing business can create problem between partners. Success is something that can blow anybody’s mind. A growing business can also cause problems and conflicts between friends for ownership and credit for the success of business.
The intention is not to discourage any start-up with friends but to make you well informed about the problems that may arise in future by doing so.
Source: Business World