Going into Business with Friends and Family
There are several decisions to consider when you are first starting a business.
- Where should I locate?
- Who is my target market?
- How much will my overhead cost?
These are all important decisions; however there is one decision that stands above everything else. Who will my team consist of? Finding the right group of people to work with is crucial for many reasons. First, these are the people you are going to be working with for countless hours each week. Therefore, it is best that you see yourself getting along very well with these people. Second, the success of your business is going to be directly related to the amount of work that the founders put in. Simply put, if you choose to work with lazy and unmotivated people, then it is likely that your business will not succeed. Finally, you want to work with people who have strong moral character and people who you can trust. As a business grows, more decisions and money will be involved. You want to make sure that the people you work with are not the types who are going to take advantage of you if the opportunity presents itself. These decisions are just some of the reasons why it can be a good idea to go into business with your family and friends. The benefits of going into business with friends and family are discussed below.
1. Work Well Together
As mentioned above, working well with your team is crucial to the success of your business. Starting a business with friends and family can be a great thing because you have known those people for years. By partnering with friends and family, you should already have answers to questions such as: do I work well with this person? Do we understand each other’s strengths and weaknesses? How does this person respond under pressure? Do I enjoy spending long hours with this person? If you are close with your friends and family, then you should know the answers to these questions and can understand why it would be wise to go into business with them.
2. Understand Their Motivation and Work Ethic
Running a business is not easy, especially when first starting out. It is critical that you partner with people who are going to put in the same, long schedule as you are. Partnering with someone you don’t know all that well may end up haunting you because you will soon find out that he or she does not have the work ethic that you anticipated. Having known your friends and family for such a long time, you learn and see who likes to put in the extra effort and who has no interest. Similarly, you understand what motivates your friends and family. Do they hate to see a job go unfinished? Do they like making money? Do they not like letting other people down (especially their friends and family)? People are motivated by all sorts of things, so it is important to work with people whose motivations will help your business succeed.
Never go into business with someone you don’t trust, you are setting yourself up for failure. Everything may be fine initially, but once difficult decisions need to be made, will they be for the good of the company or for the good of that person? Will that person do things behind your back? Will he or she take advantage of you if the opportunity presents itself? You should have the answers to these questions if you go into business with friends and family, making it easier for you to decide who to work with.
If you choose to work with your friends and family, one of the best ways to finance your business is by pooling your money. The advantages to this include: not having to meet a strict payment deadline as you would have to with any type of loan, not having to pay interest on the money over a set period of time, and not having to go through the extensive process of getting financing from various sources. Finally, when the founders put in their own money, it is another form of motivation because you want to see your hard earned money put to good use.
The combination of a strong team, built with friends & family, and financing from each partner is one of the best and most effective ways to get your business up and running.
Boston College - Carroll School of Management B.S. in Finance and Information Systems.