Last week’s post on why 1 should quit being an entrepreneur mentioned that sometimes working with friends can have negative results. I’ve had the good fortune of working with some very agreeable and highly intelligent people. I should say that I’m blessed as I can be a bit hard to work with when people don’t hold up their end of the bargin. Last week, S from American Debt Project along with LaTisha from Young Finances and myself came up with a plan for a project for next year. I’ve been toying this idea around for a while and its fantastic to find others who are just as motivated as me when it comes to taking on new projects.
I am extremely cautious when I decide to work with someone new. I normally rely on my gut, but that doesn’t mean that I don’t do my research before entering in a business agreement with anyone. While doing business with friends may seem like a good idea because you are already familiar with where their strengths and weaknesses lie, it can easily turn into a disaster. However, there are some instances where it can work out, and there are some very successful joint ventures between friends – Google and Disney are prime examples of this. That being said, the majority of such business relationships do not work out as well as hoped. The ability for a friendship-based business partnership to work relies heavily on each party understanding where the boundaries are, and of course, not crossing them.
Advantages of Doing Business with Friends
As previously stated, the primary benefit to working with friends and family is that you already know their capabilities. This cuts down on the learning curve of working with a new person, and the initial employee training has the potential to go faster because you are know what they do and do not need to learn. Unfortunately, in most cases, the advantages of such a partnership end here.
Disadvantages of Doing Business with Friends
In a work setting, having a prior relationship with someone that you hire can elicit a multitude of responses from coworkers, especially when everyone else feels that the person in question is receiving favors simply for knowing you. Not only does this often breed resentment, but it also damages a trusting work environment. Additionally, business has a way of coming in between even the best of friendships, and it can often be difficult to shake negative feelings that are a result of bad business decisions – or even necessary ones. For instance, disagreements about selling the business can easily lead to hard feelings.
The following are a few of the most common problems associated with doing business with close friends and family members:
- Friends and family members often expect favors, like extra time off.
- Other employees can become jealous of perceived favoritism.
- It’s difficult to turn down a friend when they ask for time off.
- It can be more difficult to talk performance issues and budget use.
- Firing friends and family members is hard.
Unless your friend is also the cofounder of your business, or another integral role, then it’s usually best to have someone else act in your place when you have to make difficult decisions. For instance, talking about your friend’s or relative’s performance on the job can be a very tough thing to do in person, especially when their performance is subpar, because it’s difficult to remain objective when you are emotionally vested. This also applies to declining vacation requests, and addressing policy breeches. In this case, having someone else to handle the problem is the best route.
Final Thoughts on Doing Business with Friends
If you do decide to go ahead and hire one of your friends, or even go into business together, it’s important to set boundaries that you both agree not to cross. For example, expecting favors and exemption from the rules is not only bad for your relationship, but it can also easily bring down a business.
In the end, hiring friends and family is a personal choice that can only be made by you; no one else is in the same business position and therefore cannot tell you what the right decision is for your situation. The most important thing to remember in cases like this is that you should always hire employees, and find business partners, based on merit and not on their relationship to you. On a lighter note, doing business with friends and family does have one inherent advantage – in the event anything goes wrong, you know where they live!