Starting a business with family or friends can seem like a great idea. You get to work with people you trust, you can divide the workload, and you can make money together. However, starting a business friends can also be a recipe for disaster. Starting a business with family or friends can seem like a great idea. If the both of you have a thing for businesses, and get the rush with challenges, it surely does seem like a wonderful idea.
Starting a business with family or friends does come with the benefits of it. You can brainstorm ideas on your couch, and when you hit it right, take it over to the boardroom. You can still jot down points that you both agree on, and make the best business ever, on paper. Why on paper? Because different people have different ideas of running a business. And ask yourself, are you really very comfortable talking business to your friend or family? About the cut-offs, the paychecks and so much more. So there goes!
There are several important steps for starting a business with family:
Step 1: Think about what you’re getting into
Before you even begin thinking about starting a business with family or friends, the first step you should take is to STOP and think about what you’re getting into. Starting a business is a huge commitment, and it’s not something you should take lightly. Before you begin, you should ask yourself several important questions:
- Are you willing to work long hours and make sacrifices to get the business off the ground?
- Are you and your family or friends on the same page when it comes to the vision and goals of the business?
- Are you willing to put your personal relationships on the line if the business doesn’t work out?
- Do you have the skills and experience necessary to run a successful business?
- Do you have the financial resources to start and grow the business?
If you’re not sure about any of these questions, you should take the time to think things through before you move forward.
Step 2: Assess Your Relationship
Starting a business with family or friends can be a great way to strengthen your relationships, but it can also put a strain on them. Before you begin, it’s important to assess your relationship with your potential business partners. You should ask yourself:
- Do you have a strong and healthy relationship with your potential business partners?
- Are you able to communicate openly and honestly with each other?
- Have you worked together before? If so, how did that experience go?
- Do you have similar work styles and values?
If you have any doubts about your relationship with your potential business partners, it’s important to address them before you move forward. You may want to consider working together on a smaller project first to test the waters and see how you work together.
Step 3: Define Roles and Responsibilities
One of the biggest challenges of starting a business with family or friends is defining roles and responsibilities. It’s important to establish who will be responsible for what before you begin. This can help prevent misunderstandings and ensure that everyone is on the same page. You should consider:
- Who will be responsible for the day-to-day operations of the business?
- Who will be responsible for financial management?
- Who will be responsible for marketing and sales?
- Who will be responsible for hiring and managing employees?
- How will decisions be made?
It’s important to be clear and specific when defining roles and responsibilities. You may want to put together a written agreement outlining everyone’s responsibilities and expectations.
Step 4: Create a Business Plan
Once you’ve assessed your relationship with your potential business partners and defined roles and responsibilities, it’s time to create a business plan. A business plan is a roadmap for your business that outlines your goals, strategies, and financial projections. It’s an essential tool for securing financing and staying on track as you grow your business.
When creating your business plan, you should consider:
- Your target market and competition
- Your products or services
- Your marketing and sales strategies
- Your financial projections
- Your team and management structure
It’s important to involve all of your potential business partners in the creation of your business plan. This can help ensure that everyone is on the same page and has a clear understanding of the goals and strategies of the business.
Step 5: Get Legal and Financial Advice
Starting a business with family or friends can be complex from a legal and financial perspective. It’s important to get legal and financial advice before you get started.
You should consult with a lawyer and accountant to ensure that you’re setting up the business in the most advantageous way and complying with all relevant laws and regulations. Some of the key legal and financial considerations to think about include:
- Choosing the right legal structure for your business (e.g., LLC, partnership, corporation)
- Registering your business with the appropriate government agencies
- Obtaining any necessary licenses or permits
- Establishing a system for accounting and financial reporting
- Creating a shareholder agreement or partnership agreement that outlines the ownership structure of the business and how decisions will be made
- Getting legal and financial advice early on can help you avoid costly mistakes down the road.
Step 6: Secure Financing
Starting a business with family or friends can be a good way to save money on startup costs, but you’ll likely still need some outside financing to get things off the ground. You may want to consider:
- Self-financing (using your own savings)
- Loans from friends and family members
- Small business loans from banks or other lenders
- Investment from angel investors or venture capitalists
Whatever financing option you choose, it’s important to have a solid understanding of your financial needs and projections. You should also be prepared to explain your business idea and why you believe it’s a good investment.
Step 7: Start Small and Test the Waters
Even if you’ve done all of the previous steps and are ready to launch your business, it’s still a good idea to start small and test the waters before diving in headfirst. You may want to consider:
- Starting with a part-time or freelance business while you build up your customer base and revenue
- Testing your product or service in a smaller market before expanding to a larger one
- Starting with a smaller investment and gradually growing your business as you gain more experience and success
Starting small can help you minimize your risk and give you the opportunity to learn from your mistakes without risking too much.
Starting a business with family or friends can be a great way to pursue your entrepreneurial dreams while building strong relationships. However, it’s important to approach the process with caution and take the time to assess your relationship, define roles and responsibilities, create a business plan, get legal and financial advice, secure financing, and start small. By taking these steps, you can increase your chances of success and minimize the risks to your personal relationships.