While it might seem like a great idea to start a business with close friends or a family member, when differences arise you risk permanently rupturing an important relationship.
So how do you successfully start a business with family and friends?
- Open and direct conversations
Even the closest friends will experience differences of opinion or beliefs. On a social level, it can be easy to avoid contentious areas but it may prove difficult in business. Character traits you admire can become a problem. For example, your friend’s easy-going attitude to money could be problematic if they are responsible for chasing late payments from clients.
Open and direct conversations about each person’s roles and expectations are extremely important. Spend time discussing “What if …” scenarios to test each other’s approach or philosophy in certain situations. For example, is everyone prepared to work long hours and weekends or is family time and life balance more important? What would you do if a significant tender response was required while one of you was on a family holiday?
Think carefully about the risks to your relationship and the long term impacts it may have if the business relationship doesn’t work out.
- Plan for the future
Starting a business involves many start-up costs and processes so it can be easy to ignore the need to plan for the future. But this is a huge mistake. It is important to prepare a business plan that sets out the goals of the business and how they will be achieved. It’s also important to obtain specialist advice on things like:
- The investment and distribution of profits
- How to manage the process if one of you wishes to leave the business
- Succession planning if a partner becomes seriously ill, decides to retire or dies
- What will you do if a partner’s spouse or child wishes to join the business
- Consult an expert
Obtaining legal advice from a specialist in this field will help you work through these issues and identify any conflicting views that could lead to the demise of your business. After all, it is better to discover any significant problems early
before you invest your time and money into the new venture together.
For a checklist to help you work through some of the issues you will need to consider before you begin your new business, click here http://www.tyler.com.au/legal-checklists/establishment-business-with-others
Tyler & Co practice “preventative law” to help you keep lawyers out of your business!
The firm’s principal, Michael Tyler is an Accredited Business Law Specialist, providing a broad range of services for business and property owners. Michael will help you navigate your way through the process of setting up a business structure and preparing agreements to minimise the risk of future difficulties. If you would like to speak to Michael, call him on 02 9966 1799.
Please note: This article provides general information only and is not a substitute for legal advice. The team at Tyler & Co are happy to provide advice that is specifically tailored to your situation. Simply call us on 02 9966 1799 or visit our website http://www.tyler.com.au for more information.