Not everyone is impressed with the idea of being a sole proprietor. However, sometimes you have no other way around to start a business with somebody else. The idea you have may require great investment, but you do not have money, you can think of collaborating with someone who can fund your idea.
Having a partnership business with someone whom you do not know is not a better idea. Therefore, many people approach their friends. Working with your friend can be enjoyable, and above all, you have faith in them, but it also comes with challenges. If you are considering having your friend as a partner to run your business, you will have to analyse beforehand whether it is the right decision.
Just because you love spending time with your friend does not mean that you can be great business partners. Business requires a lot of investment. Apart from dipping into savings, you may have taken out loans for unemployed to fund your business. Of course, you will never want to regret in the end. If you are looking to start a business with your friend, consider the following factors:
Do you trust your partner?
If you are starting a business with your friend, note that they will be your business partner. You will have to share profits and losses equally, and above all, your friend will also participate in decision-making.
If you want to take your business ahead, there must be compatibility in you and your friend, and this all could be possible only when you trust your friend. Spending time with your friend is one thing and running a business with them is another. Ask yourself if you trust your friend to that extent.
Do you have the same values?
It is paramount to share the same values with your business partner if you want to go hand in hand. You may have an easy-going attitude while your business partner may be fast-paced when it comes to making money and vice-versa.
Differences in values can create conflicts, and unfortunately, that will lead to poor business growth. Before you arrive at a decision, make sure that you and your friend share the same values.
Does your partner have skills?
If you ask your friend to become your business partner just because you love to spend time with them, you should drop this idea. To grow your business, you need skills, potential, and above all, strategies. Since your friend will be responsible for equal profit share, they must be accountable for participating in brainstorming ways to take the business ahead.
Whether you are looking to open an eCommerce store or selling service to your customer, make sure that your friend has skills to run the business. They should have the capability to brainstorm ways to stay ahead of competitors.
Analytical skills are crucial to identify users’ behaviour and how you can set yourself apart from your competitors. If your friend does not have the skills to participate in business functions with you equally, you should drop the idea of having them as your business partner.
Is your friend financially stable?
You may not find it crucial to think about this side, but it is important. Business is dynamic in nature, and it is all about revenues. It is essential to have someone as your partner that does not fail to stay financially committed. Ensure that your partner does not have too much personal debt and has at least a fair credit rating.
Otherwise, you will likely end up shutting down your business. Poor financial behavior often leads to embezzlement. Most of the partnerships do not last long because of fraudulent attempts. Further, it is paramount to check your friend’s financial behavior because you may need to take on personal loans down the line.
Even though you need it for your business, a lender will check your credit history and financial behavior. You may have difficulty in getting the loan approved if your friend has a blemished credit report. Likewise, if your friend is going through personal problems at the outset like divorce or bereavement loss, it might not be an ideal time to approach.
Other things to do to start a business with your friend
Even though you think that you can start your business with your friend, you should do a lot of things to ensure that you both are on the same page.
- Set boundaries
Professional life should be completely professional. When you are working with your friend, you should completely focus on your business. Avoid discussing personal affairs. Work dedicatedly as long as you are at your office.
- Get mutually agreed on a business plan
It is not entirely your responsibility to work on a business plan. Ask your friend to join you and take their opinions. They may have better ideas than you. You both should equally participate in all business activities.
- Make a contract
Do not forget to make your agreement in writing. This will prevent you from complications that could arise down the road. If you have everything in writing, you will clearly know the route to escape from the trap. Hire a lawyer and get everything in writing like profit shares, compensation rates, investment contributions, and much more.
Before you ask your friend to become your business partner:
- Make sure that they have the potential, skills and creativity to equally particulate in all business activities.
- Analyse that whether you and your friend could be great business partners, whether you both are likeminded, and above all if you both have the capacity to invest in your business.
- Do not take any decision in a rush.
Otherwise, you may end up shutting down your business.