Many small businesses start with two friends saying to one another, “Wow! This would be a great idea! Let’s start a business!” and those two friends dive into their new venture. Cut to a couple years down the road and the hope is that those friends are still friends and in business, but we’ve all heard the stories when that is sadly not the case. My (always wise) Father once told me, “How you enter into any partnership is how you will exit that partnership.” If you are thinking about going into business with a friend, here are some things to think about:
(1) Do you really need them? No…. really. I know you like them but what are they bringing to the table that is unique and special? Is it cash? Is it killer connections? Is it their social media savvy? Is it their business background? What is IT that they have that you don’t? If you’re just having them along for the ride (it’s your idea, you have cash, you are willing to put in the work) or to have a friend to hang out with, re-examine your need for a partnership.
(2) How well do you know them? No…. really. How well do you know them? Have you worked together before? If you haven’t, try something small – like volunteer for the PTA board together or volunteer for a non profit auction (run the auction from start to finish, together). Have you seen them under stress? Are they healthy? Do they currently take a lot of sick days at their job? Do they act with integrity in EVERY area of their life? If they don’t act with integrity in one area of their life, 9 times out of 10, they’ll have integrity issues in your business dealings as well. Do you trust them? Do they inspire you with their ideas? You will be spending more time with this person than your spouse (!!!); you had better respect and admire them because unlike your spouse, there’s no love to bind you – just shared goals, values, vision and the all-important paycheck.
(3) Who is working, on what, and when? Who’s putting in what time on what projects? And if one partner is going to work less, are they putting in more money than the other one? Are they bringing a big fish client to the table? Resentments are super easy to build up if you’re working unequal amounts of time. If you’re manufacturing product, whose house will you use? And, will that person be compensated for that? If you’re both using your own houses, what does quality control look like? Who pays for those mistakes? What if those mistakes happen more to one person than the other?
(4) How will you fund the business? And if one partner wants to leave, how will that buy out look? What if the company loses money? Who ponies up more cash for the business? When will you pay yourselves? What do you do with (hallelujah!) profits? Do you reinvest profits or pull them out of the company as additional salary?
(5) How will you establish decision making? Who has 51% and who has 49%? Equal 50% shares sound great but realistically, the buck has to stop someplace and if you’re 50/50, you both need to make equal decisions. How are your communication rhythms? Will you see each other in person daily, weekly? Talk via phone twice a week? How does that look?
Wait a minute, you’re thinking, “This is my FRIEND! None of this stuff will be an issue! It’ll just work out!” Yes … and if that happens, you will be one of the lucky few. But luck favors the prepared. It will not hurt your relationship, if it’s as strong as you think it is, to go through the above list of questions, one by one, and answer them. And then? Write it ALL down in a partnership agreement that covers the above issues in excruciating detail.
Check back next week for an easy check list and survey for you and your potential partner to answer to ensure that you’re on the right track.
Nice business articles! My boyfriend of (almost!) two years and I are talking about going into a partnership soap/beauty business. I’m the creative brains/labor monkey while he is the business/numbers/man scent picker/test monkey. We have a good idea of what we’d make and decided etsy would be a good place to start and maybe do some craft fairs.
The only thing we don’t know is how much we should save up to get it off the ground! Between supplies/license/boring paperwork etc. we have no clue how much would be enough! Any idea what would be a good amount for an online and craft show type business? We don’t plan to do any more than that because we want to keep it small. Thanks!
Good morning, Leanna!
That is so exciting that you are thinking about going into business, you are going to have so much fun watching it grow for you. To get some inspiration for business, here are some blog posts to check out:
Business Musings: http://www.soapqueen.com/category/business/
To figure out how much you will need to start-up your business, I would suggest creating a spreadsheet and listing everything you think you would need to start up. To get you started, here are a couple of kits from Bramble Berry’s website that you could consider purchasing to jump-start your business:
Melt & Pour Soap Fundraiser Kit: https://www.brambleberry.com/Melt-Pour-Soap-Fundraiser-Kit-P5505.aspx
Business in a Box: https://www.brambleberry.com/Business-in-a-Box-P5503.aspx
I would also suggest chatting with the soapers and crafters at the Teach Soap forums to see if they have any suggestions that could help you as well!
Teach Soap Forums: http://www.teachsoap.com/forum/
I hope this helps! Let us know how your business goes and if you get any fun pictures of your products, we’d love for you to share them with us on Bramble Berry’s Facebook page. =)
-Becky with Bramble Berry
https://www.facebook.com/BrambleBerry
Thank you so much! Great advice and the kit recommendations are being seriously considered! However something struck me while I was reading. The business in a box kit is only for CP soap and the M&P fundraiser is well, M&P! Will you guys ever consider a M&P business in a box? When you compare the two the business in the box kit contains so much more awesome stuff! I’d love to see a giant M&P business kit in the future!
Hi Leanna!
At this time we are not considering a melt & pour business in a box, but I love the idea and will pass it onto our team. Thank you so much for being part of our soapmaking community and we can’t wait to see where your business will take you. =)
-Becky with Bramble Berry
Great list!!!! #2, #3, & #4 were big issues when I went into business with someone.
I didn’t know her very well and that turned out to be a disaster. We became fast friends and had a lot in common, we thought, and so we rushed into creating a business together but needless to say it was very short lived.
I think anyone going into business with someone else should ALWAYS use your list.
Oh sad! That is too bad that your partnership didn’t work out but yes, a fast friendship turning into a fast business might be fraught with difficulties. I’m sorry it didn’t work out for you and that business. But, I’m sure you learned something so hopefully that phrase “everything happens for a reason” applies. =)
Great Post, Thanks for sharing information.
Great post! So important to think of and address these matters in advance and not get caught up in the emotion. Over the years, I have learned it’s best to politely decline a collaborative opportunity than to drive it forward without adequate thought. This approach has saved me so much grief through the years. Thanks for sharing this valuable reminder.
I so agree that it’s important to ensure that any opportunity needs to be well through out – or else you end up spinning your wheels or spending your energies on something that wasn’t destined to work out.
Excellent points. Anyone considering a partnership should read and heed. I would think long and hard before entering into a partnership and would put everything possible into writing beforehand.
It could be a terrific way to compliment your own skills and make a perfect team, but it could also be a disaster.
This is so timely for me! Thank you for writting it! I’m looking forward to the checklist and survey!
Excellent article and so true.
right on point! well said
“Luck favors the prepared.”
Brilliantly stated and so true. That is going on my wall right now!!
Thanks! I’m pretty sure someone else really smart said that way before me =)
i got in to something similar and the resolt was to lose a 15 year friendship… :”(
Oh man, I’m sad to hear that for your sake. Partnerships can be really tough …
AWESOME!! I really wanted to know how I can professionally draw the line between knowing someone to enter business and when and what is enough. This will help me a lot! Thanks Anne Marie!
Glad that you found something of value in the post – yay!