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Should you mix business with friendship?

Last updated on: December 03, 2013 12:44 IST

Preethi Chamikutty,

Working with your childhood buddy may seem like the ultimate opportunity while starting up; however, there are a few things one must consider before taking the plunge. Illustration by Uttam Ghosh and Dominic Xavier

Starting up is no child's play. But if you do want to go that way make sure you have thought it through, assessed the market opportunity, checked out competition and done enough homework before you take the plunge.

Another important aspect of starting up is, whether you want to do it alone or with someone.

My general observation of the space says it's always a good idea to have a co-founder, as the adage goes -- "Two heads are better than one."

But the two heads that come together should be like conjoined twins -- but joined on top part of the body.

Co-founders should be able agree on everything related to business and what is good for the company, for its future.

But finding a co-founder is perhaps more difficult than finding employees for your start-up.

So a friend or relative becoming co-founder is common -- after all they are the people whom you regularly interact and discuss your ideas and dreams with. But is it good idea to start-up with your friend? What can go wrong?

Procter & Gamble did it, so did Hewlett & Packard and more recently Google have done it.

Closer home Redbus, Carwale and have friends at the helm. "It does work out, but what causes trouble is when you look at friendship and trust over actual competence," says Mahesh Murthy, co-founder, Seedfund.

Murthy says he is fine with the idea of friends and even spouses working together, but there should be a mutual understanding that if things don't work out they will part ways. "In the long run, it’s always better to find the best person for the job. But when you are young and broke, and you don't have anyone to trust, a friend will do," he says.

Advitiya Sharma of works with 12 of his friends and says they are going great guns. "The single most important thing that can affect relationships is inefficiencies of communication -- not knowing what each one is doing, what is your place in the whole thing," he says. 

In an article about Twitter in New York Times, Silicon Valley's well-known CEO coach and former CEO of Intuit, Bill Campbell had advised Evan Williams to avoid the pitfalls of hiring friends in business. But Evan didn't pay heed to Campbell and had to pay the price for it.

Even Anand Lunia, co-founder, India Quotient advices against employing friends in business. "Starting up or have a friend as a co-founder is fine, but it's advisable not to employ your friend," he says.

Therefore to do or not to do is not the question here, because there doesn't seem to be a clear answer to it.

However here are few things to bear in mind if you do turn your buddy into a business partner or want to hire him/her in your start-up.

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1. Discuss your goals and objectives

Communication is the key.

Ever wondered why we never know about start-ups from the Stone Age?

Well I think, it's because they never communicated -- neither with each other, nor with outsiders. And that is death knell.

Communicating and exchanging thoughts is essential in any situation.

Mind readers are a rare bunch and it would be wrong to assume your friend is one. Therefore just as you enthusiastically discussed the starting up idea before you started up, discuss your accounts, your people, your finance, your VC -- everything, absolutely everything.

Two heads are always better than one. And because you showed the faith in your friend to make him the co-founder, s/he is worthy and has the right to know everything.

It is said, never hide anything from your lawyer and doctor, we say add co-founder (who is your friend) to the list.

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2. Put things down in B&W

Even if you never liked paperwork, there is a reason it exists.

Nothing moves in the court of law, without evidence, then how can anything move in business without paperwork?

Make a proper agreement. List down your assets, liabilities, responsibilities, have caveats, who is responsible for handling what kind of crisis, things that are allowed, not allowed, what is the extent of levy allowed, money matters -- everything.

You can make a rough agreement, and then ask a lawyer to help you make it formal.

So no problem if you want to just scribble things or put down the points, your lawyer can do the elaborate drafting for you and make it a formal legal document. But do it!

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3. Agree to disagree

Despite the multi-page legal document, do not let friendship go out of equation and thrust the legal document every time there is an argument.

Talks and discussions can solve the biggest problems.

We think the most successful businessmen are people who can negotiate the best.

If there is open communication, we think there will never be any disagreement. But if such a situation arises, remember you are friends too. So try and resolve the conflict through dialogue. Talk it out.

If things do not settle through dialogue, then get your lawyer (the one who made the legal agreement) involved.

Let him/her act as the mediator/counsellor to help you solve the issue.

We say lawyer and not your family or other friends, because the lawyer will be able to tell you the implications if things go out of hand and how it can affect your business.

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4. Know your friend thoroughly

If you know someone fleetingly and have interacted with them casually it is not a good idea to make him/her your business partner.

Never mind how bright or how accomplished this friend is in his/her life.

If is important to know your friend completely.

You should have seen him react/behave during ups and downs of personal life, professional life (if college friends, then how did that person respond to academic pressure, peer pressure?) and while dealing with outsiders.

It is important to know your friend completely, in his/her natural surroundings.

Questions to ask yourself are: Are you compatible? Does s/he irritate you? Is there any conflicting issue between you?

How level-headed is your friend? Can you handle your friend's worst behaviour without a problem, or is that a situation you have avoided?

Know his/her family. Who can influence your friend? To what extent?

Crossing all items on the list is important, because starting up is a responsibility -- not just towards yourself, but also towards people whom you will employ. Therefore small issues between friends should not, and cannot shake the foundation of the business.

Knowing your friend and how to handle him/her is always useful, because hopefully you still want to be friends if the venture doesn't work out.

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5. Setting up processes

Nature of a start-up is busy and there is always the need to handle multiple things at any given time.

Streamlining things by making a process can help automate work and ease work pressure off the founders' shoulders to a great extent.

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6. Trust

Learn to trust. Learn to let go. Learn to delegate.

You cannot do everything yourself, and you should not do either.

There is a reason why teamwork and collaboration is given so much importance. And when processes are set and responsibilities assigned, trust the other person to do what s/he has been asked to do.

This is as true in case of the co-founder/friend, as it applies to your employees.

Trying to micromanage can lead to stress and is counter-productive.

If you are sure about your friend, trust him/her to also do his task without interfering.

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7. Continue being friends

Once you turn business partners, don't forget to be friends.

Remember the time when you were ready to fill in for your friend or do that much extra for the sake of friendship?

Continue doing so as long as it is not unreasonable, or doesn't get out of hand.

And if things do get out of hand, then refer to the legal document you made at the beginning of the partnership and stick to it.

Keep things clean as far as possible. It is a small world and your paths may cross that of your friend's in the future.

"I don't buy that friends and spouses cannot work with each other. We are at a point where we are all grown ups, and if we manage it well, it should not be a problem," says Mahesh.

Do you agree? Disagree? What do you think of this list?

Does it include everything one should think of before starting with friend/s? Is something missing?

Write your thoughts in the comments below.

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