Why You Should be Careful When Starting a Business with Friends or Family

Starting up a business is hard enough when you are trying to get the finances in order to do the job right. Making business plans, getting setup on dedicated internet access, and deciding what needs to be done are all things that will occupy your mind. When it comes time to decide on acquiring employees or partners, the obvious selection pool in most peoples’ minds is their family and friends. After all these are people you already trust.

There are things you need to be careful about before deciding on whom to trust as a business partner. Business relationships are not the same as a personal relationship. So the first thing you should be careful about is the qualifications required to do the work you have in mind. Does this person fit the needs of the business? You need to chose a partner who is going to work well with you and in the process help you build a successful business.

Why You Should be Careful When Starting a Business with Friends or Family

Family and friends can often butt heads with you when you are trying to make business decisions. It can lead to conflict in the work place. In order for a business to be successful, everyone must have a role to play and stay within that role and not overlap places within the business structure. Be sure to read about the things you should know before starting a business with family and friends before you jump into it.

Also when picking a partner, you don’t want someone who is too much like you. You need to have unique skills that will make managing a business successful and well rounded. If you are already good in finance, don’t have a business partner who is also good in finance. You want someone who will add a new asset to the business structure. When choosing family and friends, it could make the process difficult when you go to finalize the partnership agreement and the business structure. You don’t want informality to interfere and leave critical foundations of the business go unaddressed.

Another risk in building a business with friends or family, is the risk of trying to build a business relationship on top of a personal relationship and end up losing both. You have to be prepared to know that when you choose a family member or a friend for a business partner there will be conflict and if the relationship with your partner is also on a personal level, you risk your business relationship and your personal relationship being jeopardized if something goes wrong.  You must have an exit strategy in place.

Entrepreneurship is a great way to go to build a business but so often young businesses go under because the business structure was not sound. To keep your relationships with your friends and family, be careful when starting a business with them. Business life and personal life is best left separate.