Who hasn't dreamed about going into business with their best friend? It can feel like the perfect pairing on the surface. You already trust one another, and now you get to spend all of your time together creating something that you're passionate about sharing with the world. However, even the best of friends don't always agree on everything, and when that happens, it can be detrimental for both the business and your friendship.
Before you think too much about fame and fortune, you need to get strategic about your partnership together. That means covering everything – from money to holding each other accountable.
Create a Business Plan and Outline Each Partner's Responsibilities
One of the best ways to get your startup on track from the beginning is to draft up a business plan. This document essentially aligns everyone toward a common vision for the company. It also helps demonstrate the startup's feasibility and contains financial information, such as projected profits and losses and cash flow, that will ultimately attract investors to invest in the company.
Every business plan includes a section on organization and management. Here, each member or partner is profiled, featuring their background and information about their core responsibilities within the company. Document the details of the business ownership with your partner and answer questions like the ones below so you know exactly what each member is contributing to the company:
- What is our goal and how can we keep one another accountable for it?
- Who owns what in the business?
- How do you allocate profits and losses?
- In the event that a partner wants out, what happens next?
Have an Honest Conversation about Finances
This is bound to be an awkward discussion, but it's always a good idea to have the money talk sooner rather than later. Starting a business is an investment of time, energy, and cash, so don't be afraid to be honest about your finances.
Discuss the financial short and long-term future of the business, including whether you'll need to take out a loan or use credit cards, how you'll make payroll, plans for establishing a budget to avoid overspending, and your estimated cash flow. You'll also want to share more about your personal financial history if it includes any outstanding debit or credit score issues that could hinder your business in the future.
Incorporate the Business ASAP
Starting a business that has not yet been incorporated means risking personal assets alongside your professional ones if the company shutters or is served with a lawsuit. In order to keep these assets separate and protected, incorporate or form an LLC to secure assets through liability protection. (And to protect your assets fully, don't forget about small business insurance!) As an added bonus, an incorporated business also helps establish credibility with consumers – essential during the early days!
Go All In with Each Other
In a lot of ways, running a business with a best friend is akin to a marriage. You'll celebrate the triumphs, have a shoulder to cry on when times are tough, and grow in ways you never thought possible while tackling responsibilities you never imagined would be on your plate. For better or for worse, you're now part of a team.
Going all in is about more than just working around the clock and committing solely to the business. It's about taking the time to check in with one another and nurture your personal friendship, too. After all, this is your best friend – someone who knows you inside and out and is willing to ride or die with you on this journey. Prioritize the relationship you have together and make sure you're setting aside time to include "life" within your work-life balance. It's time to go all in together.
About the Author
Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @deborahsweeney and @mycorporation.