There’s no hard and fast rule about starting businesses with spouses, family members, or close friends. Some close-knit partnerships do extremely well; others fail, sometimes permanently affecting the relationship as well. Many factors contribute to the success or failure of these types of partnerships, including the quality of the relationship and the ability to handle disputes.
Whether you want to strengthen your current business partnership, or you are considering starting a business with a meaningful person in your life, the following ideas may help.
The Pre-Business Relationship Matters
It’s not uncommon for closely-connected people to discuss new business ideas. They might even decide to take the plunge together. The pre-business relationships can run the gamut, from on-the-job pals, to college roommates, to spouses or siblings. Whatever the connection may be, it’s important to look beyond your current rapport to identify if it can survive the pressures of a business partnership.
Growing up, you may have been the sibling in charge. Or, you might have mentored an associate. If you go into equal partnership with someone who has always been beta to your alpha, you may both have unexpected issues. They may bow to some of your whims; however, they also want their ideas and decisions to carry equal weight for the first time in your lives.
Of course, this is just one example of a potentially challenging partnership issue. If you dig further to recognize that your different skill sets make for an effective partnership, you may be very willing to give up some control in order to blend your financial brilliance with your partner’s amazing creative abilities.
You also have to think seriously about what the initial relationship means to you because it may undergo permanent changes once profits and losses enter into the mix. Your personal connection may actually become closer, but not always. Friends who work together every day might no longer hang out during the weekend. And, some marriages or romantic relationships could potentially deteriorate.
Separate-But-Equal Roles Generally Work Best in Business
Togetherness only goes so far in business. You and your partner may be dedicated to equally sharing profits, importance, and power; but, if you share responsibility for the same things, you’ll step on each other while also confusing employees. This is a bad situation in any partnership; however it’s more difficult when you want to preserve a personal relationship.
Focus on your individual strengths when defining roles. In a software business, for example, you might put the techy partner in charge of product development, while the business whiz might take charge of financial and operational issues.
Does this mean that you can have two CEOs as long as they have different responsibilities? This is certainly not a common practice, but some businesses have done it — with varying results. Just last year, software company, Salesforce adopted this structure based on its history of a very strong partnership between the CEO and former Vice Chair/President. On the other hand, Whole Foods, Martha Stewart Living, and Chipotle are just a few examples of businesses that tried it before reverting to a single-CEO structure.
Keep in mind that the title doesn’t dictate power or equally-shared profits. Even if you’re the top gun, the second-in-command’s vote carries equal weight if you’re 50-50 partners.
Work and Social Lives Need to be as Distinct as Possible
A disagreement over weekend plans should not move into the office, and while it’s not always possible, work discussions between spouses shouldn’t travel home any more than close friends should bring them to the handball court during recreational time.
With this warning, understand that small business owners are on duty 24 hours a day. You can’t typically avoid blending business with personal life. You can, however, establish a line early that you never want to cross.
Legalities are More Important Than Blind Trust
During the exciting planning phase of a new company, close-knit partners often seem to be in full agreement on every point. It’s tempting to throw money into a new business account, choose a location, and open the doors. But, it’s never wise to allow the trust formed in close personal relationships to trump the legal aspects of the business.
You need strong contracts for numerous issues related to daily operations, and your partnership requires the same consideration. It’s better to draw up contingencies now while you’re each level-headed, rather than face unpleasant surprises if something happens down the road.
If you haven’t formally agreed on how to handle disagreements — or if you don’t know what might happen if a partner needs to leave — then your business is at risk. Seek experienced legal assistance before you take even one step toward starting your business.
Family-Run Businesses Have Unique Advantages and Challenges
Did you know that Wal-Mart is the largest family-owned business in the nation? Clearly, family members can succeed in a big way. In fact, a recent survey of family-run mid-sized businesses revealed that 70 percent of respondents reported revenues of $200 million or more. These businesses account for 64 percent of the country’s Gross Domestic Product, while creating about 78 percent of all jobs.
Survey participants expressed belief that their companies have stronger cultures, and that their desire for generational longevity helps them maintain the long-term mindset that many business owners never seem to achieve. But, less than half of the owners who plan to retire within five years have selected a successor. Understand that only about 30 percent of those desiring a generational transition will do it successfully. Take a lesson: don’t wait until retirement time to plan for the end of ownership.
Don’t Forget: Any Business Partnership Creates Strong Bonds
Particularly in the early days of business, partners probably spend more time with each other and work through more issues than with anyone in their personal lives. Even if you started as total strangers, you’re bound to build a close-knit relationship in short order. The real question is how well you can resolve your differences at work — and how you handle business issues when you get home.
All close relationships require work and attention. Those who dedicate themselves to all of the important people in their lives can be happier at work and at play.