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The Risks of Starting a New Business with Friends

by Lynsey Sutherland

3 min read

Your best friend may be the person you rely on and trust more than anyone else in the world but that doesn’t necessarily mean they’ll make the perfect partner in a new business.

In fact, a Harvard Business School study showed that among technology founders, the group that’s made up of friends proved to be the most unstable, with a founder turnover rate of nearly 30 per cent. But what if you want to take the risks? Find out how to mix work and mateship.

You may not have the same vision for the business

Even if you have similar aspirations as far as your end goal is concerned, you may not have the same plans for how to get there. Growing your business will be your number-one priority and it’s important that you’re on the same page about the ways you plan to do this. If your ideas do differ, someone is going to have to take a back seat. For a case study, turn to Apple’s Steve Wozniak’s desire to have products that were open and changeable versus the ‘simplicity’ approach of Steve Jobs.

Taking advantage of a friend is too easy

When you work with someone you don’t know well personally, it’s easier to set boundaries. You will mutually be aware of the other person’s needs and will test their limit carefully. When it comes to good friends, it’s easy to blur the lines and ask too much.

Disciplining a friend is hard

On the other hand, it’s also tough to find a way to reprimand sensitively or discipline a friend who’s not performing the way they should be. A founding team has to be incredibly honest and open if it wants to succeed and you may find it hard to raise grievances without feeling like you’re risking a friendship.

As best friends and co-founders of the Sakara Life, Danielle DuBoise (left) and Whitney Tingle, told Business Insider: “Don’t take anything personally. This is business. You need to grow a thick skin.”

Skills and friendship may not always translate to the workplace

Your best friend probably knows you inside and out, and you think no-one can complement you better. If you’re considering doing business with them, they may also have an incredible talent set or revolutionary ideas. But do you know what they’re like behind a desk?

Friends may not be workplace compatible – one likes flexibility, the other likes hard rules; one wants to keep things casual and the other wants to wear a suit. Your differences can be the best of you, helping you to find new ideas in compromise and understanding, or they can be your downfall.

You have overlapping networks

When you’re launching a new business, you need a lot of support – both professionally and personally. If you’re working with a close friend, your networks are probably similar, which gives you fewer contacts and a smaller support structure to benefit from.

To overcome this, you’ll both need to put in the legwork to meet new contacts and build on your business network.

However, that’s not to say that businesses founded by friends won’t succeed. In fact, they have every opportunity to become brilliant – just look at Google’s Larry Page and Sergey Brin.

Understanding the risks: test yourselves before launching a start-up together

To know whether you and a friend have the right dynamic and skill set to work together well in a professional setting, it’s a brilliant idea to run a beta project or pilot beforehand.

It doesn’t matter whether this is in an area directly related to your proposed business or even just taking on a challenge for another friend or family member, such as planning a massive party.

The important thing is to avoid launching straight into a new business full-time without giving yourselves a chance to find out how you work together first.

Explore some of Australia’s excellent co-working spaces and try working together to see if you have what it takes to start a small business together.

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