Founding your startup with your closest buddy might seem like a dream scenario. Here's how to keep it from turning into a nightmare of dashed hopes and broken friendships.
“We should start a business doing (fill in the blank)!”
Who hasn’t brainstormed with their friends trying to come up with the next great million-dollar idea? It’s easy to find inspiration when you’re hanging with a close friend (maybe downing some beers) and since you both see eye-to-eye on almost everything, you can change the world together… right?
Not so fast.
In reality, as you’ll quickly learn if you actually do start a business with a buddy, the personality flaws that are so easy to overlook in a friendship may take on a whole new level of importance when it’s your livelihood on the line.
But when it’s good, of course, it can be really good. “You’re around each other all the time so it’s easy to bounce ideas around and quickly act on them,” says Go Overseas founder Andrew Dunkle, 27. Dunkle and friend Mitch Gordon, 33, started their online travel community business in 2009 after they met teaching English in Taiwan, and realized there was a clear gap in quality online information about various overseas programs (teach, study, volunteer, etc.).
“Mitch saw this as an opportunity to build a successful business, and I came on to offer technical support,” Dunkle explains. “We started work on the project in Taiwan before relocating to Berkeley, Calif., so Mitch could pursue an MBA.”
Of course, on the downside, acknowledges Dunkle, “You’re around each other all the time.”
Building a buddy business
That’s why it’s especially important to keep the lines of communication open. According to psychologist Sharon Lewis-Bultsma, Psy.D., the trick is to be able to maintain relationships, because when business is done, your business partner is still your friend. “People often anticipate how others will react to situations, making assumptions that may or may not be true, and respond accordingly,” Lewis-Bultsma says. This is especially common in a buddy business where there is a previous relationship.
No matter how close you are, draw up a partnership agreement. “Put everything down on paper right away,” Gordon urges. “You’ll both be happier in the long run, and you won’t have to worry about the legal stuff. Don’t assume it will be OK because you’re friends, and you trust each other. I’ve seen things go wrong for those who don’t [create an agreement].” If one partner wants to leave, retire or sell his share of the company, what happens? Put it in writing from the start to avoid dealing with sticky issues.
Steven Grant and Richard Cook (both 36) have been best friends since they met at Canterbury Nursery School in Wakefield, Mass., when they were 3 years old. They both studied philosophy in college and their relationship included all kinds of talks, from philosophical to silly. One day, they were arguing over how far the average person would go for a $20 bill. Steve claimed that if he announced he put $20 somewhere, people would search for it. Rich was skeptical, so Steve put it to the test. He hid a $20 bill in a book in the local library, took a picture of it, and posted its location on Facebook. Within 90 minutes, a friend stopped by to see if it was for real. She found the $20, posted her own picture, and a new business idea was born.
Since Plenty of Twenties launched in September 2011, the site has gone viral and given more than $6,000 to perfect strangers by hiding $20 bills all over the country. Businesses take advantage of the hype by sponsoring the hidden $20s - and get an insanely low-cost marketing boost in return.
As far their lifelong friendship goes, “This has been a completely positive experience for me, with little or no negatives,” Grant says. “It hasn’t hurt our friendship. If anything, it’s strengthened it. We’re candid with each other in our friendship and with Plenty of Twenties.”
Of course there are always disagreements: “We disagree all the time! But we listen to each other, and we’re each willing to relent if we sense we’re wrong, or if the other person feels very strongly about a particular point. Trust and money are nonissues, we’re too good of friends,” Grant says.
Grant’s advice for other buddies starting a business together: “Be honest with each other to a fault. Be prepared to endure bad news, frustration, even failure. Don’t point fingers. Things may be great and promising now, but what about when the going gets tough?”
And don’t forget to have fun. Says Grant, “Make sure you always remain friends who run a business together, not business partners who also happen to be friends.”
Image courtesy of Shutterstock.