Should Friends or Couples Start a Company?
An increasing number of couples, regardless of whether they are married or not, are venturing into new businesses as partners. Whether it is an online retail store, coffee shop or a local restaurant, couples or friends like to do business together these days. For instance, couples owned 20 million of 22 million new startups in the year 2000 in United States.
There is no denying the fact that running a business as a couple is totally different compared to a traditional team. It is also worth mentioning that the success rate of startups owned by couples is very low. In this regard, 70% of businesses fail to survive to the second generation, whereas 90% of them dissolve before making it to the third. It sounds really bleak but it is also a fact that family businesses are much more likely to survive than businesses which are not run by friends or couples.
The flexibility offered by deeply attached and related employees as well as closely related managers make your business more resilient. Having the same surname on all letterheads also offers an unsurpassable competitive advantage because the customers know that they are dealing with someone who cares about them and will go out of their way to provide the best possible services to them.
In this article, you will learn 1) how couples or friends can start a business, 2) advantages and 3) disadvantages of starting a business with friends or as a couple, and 4) examples of companies founded or run by couples.
HOW CAN COUPLES OR FRIENDS START A BUSINESS?
Businesses owned by couples, friends or families also incorporate some really intense and unique challenges, such as problems with succession planning and emotional dilemmas. There are many things you need to consider when you are going to start a new business together with your friend or life partner, some of which are explained below.
Keep Your Relationship and Business Separate. It is always nice to have intimate relations with your partner or friends but these relations should, in no way, have any effect on your business. Business matters and your personal relationships are totally different things and you should be very clear about it. Your love, emotions or respect for someone should not cloud your judgment or managerial sense if you want to make your business successful.
Discuss the Strategy Thoroughly. No business can be successful if it is not based on a comprehensive and result-oriented strategy. You must sit together with your partner to formulate a strategy for marketing, sales, internal accounting functions and customer service. You should thoroughly discuss all the methods and tactics you are going to employ to run your business. It is always important to put an effective and efficient strategy in place, and the same is true for family-owned businesses.
How Viable Is Your Business Plan? While discussing your business strategy, you should also talk about the worst case scenarios. In this regard, you can also consult a trusted business expert to discuss the viability of your business plan and how you are going to implement that plan. You cannot achieve the desired results if you simply try to convince each other without getting external help. You also have to identify the roles each of you will play in addition to understanding the marketplace you want to venture into.
Plan for Your Personal and Business Life. You should also have a separate spending plan for your personal and business life, and this is particularly true for couples. Again, an experienced financial planner can help you establish a good spending plan and adequate emergency funds for both home and work, since startups often have unpredictable cash flows.
Set Aside Your Pride. One of the biggest stumbling blocks in the way of your success will be your pride. Both of you have to set aside your pride because excessive pride always hath a fall. If you cannot let your pride go, you will never be able to anticipate the greater needs of the business or your own shortcomings. Once your pride or ego is out of control, you become too scared to ask for help. You start making major decisions without consulting your partner or team and as a result, your business will ultimately fail.
Don’t Ignore Each Other’s Mistakes. Calling out each other’s mistakes in a kind and effective way can help you prevent a lot of problems in the long run. Instead of blaming each other for business mishaps, you have to recognize your mistakes and learn from them. Try to be as patient as possible with each other because it is necessary for the good of your business. If you lose patience, stress will creep in and you will not be able to concentrate on more important tasks at hand.
Always Delegate Tasks. It is extremely important for you to delegate tasks to yourself according to your particular strengths and weaknesses. One person may be great at budgeting while another may be good at managing employees. You have to figure out what each of you can do in the best possible manner otherwise you will just leave your business in the lurch.
Never Publicize Your Disagreements. Disagreements among business partners are inevitable no matter if you are husband and wife or lifetime friends. But – you should try to prevent your disagreement from becoming public at any cost. It will give an impression that you are not on the same page, adversely affecting the performance of everyone, including your employees.
Don’t Lose Sight of Your Goals. Every successful business makes a lot of money, but you need to remember that the main goal of starting the business was to make your lives better. If you think that your business has made your lives worse than ever before, there is no point to continue.
Define Your Boundaries. Finally, you have to set boundaries right from the start and always work within those boundaries. For instance, some people are comfortable with discussing their personal life at work while others simply won’t talk about their personal matters at the office. You have to do what you think is right despite the fact that there is no right and wrong in this case.
ADVANTAGES OF STARTING A BUSINESS WITH FRIENDS OR AS A COUPLE
There are many benefits of starting a business with your friend or life partner and some of them are explained below.
You Already Trust Each Other: As a matter of fact, there is no better person to be with when you start your business than someone you dearly love and trust. Similarly, your friend or partner is the best person to have around when things get really tough. Trust needs to be the cornerstone of your organizational culture. Starting a business with your friend or loved ones means that you are laying strong foundations for trust right from the start of your business.
You Recognize Each Other’s Strengths and Weaknesses: If you are working with a person you have no prior knowledge about, you will take a long time to recognize his or her strengths and weaknesses. In the case of couples or friends, you already know where each of you perform brilliantly and where you struggle. You have seen each other in good and bad times, probably went to school together and played sports with them. This makes it possible for you to assess things quickly and settle into your respective roles easily.
You Know How to Resolve Matters: As mentioned above, disagreements are commonplace in today’s fast paced business environment. Again, you will have to learn how to resolve matters with someone if you don’t have a personal relationship with him or her. You get to the root of the problem faster when you are working with your friend, husband or wife. You already know how to handle the other person and the best ways to resolve matters.
Successes are Sweeter: Against common perception, the true joy of business success lies in the hard work you put in and the challenges you overcome during your journey to success rather than the ultimate destination. But – achieving big things with your wife or best friend is a totally different story. Feelings are simply unexplainable when you get your first customer or launch your website and celebrate the success together.
Appeal of Working Together: It is a fascinating idea to work with your friend or spouse or anyone else you have known for years. You know how the other person likes to go about his business and you also know how to compliment him for his achievements. You know each other’s foibles and strengths, and can openly call him out if something wrong is going on.
Softer Tax Requirements: Last but not the least, record keeping and tax requirements are much less stringent for startups owned by couples as compared to traditional partnerships. This allows you to attend to more important business needs at the start of the business rather than worrying about tax returns and keeping your books in order.
Medical Coverage and Exemptions for Social Security Credits: One of the biggest reasons why businesses owned by couples crumble is self-employment taxes. However, if both partners are separately paying medical and social security taxes, you are very likely to get credit for medical coverage as well as social security. Similarly, these credits are valid as long as both partners are actively participating in business affairs.
DISADVANTAGES OF STARTING A BUSINESS WITHFRIENDS OR AS A COUPLE
If you are thinking about forming a business partnership, it is always great to start with your friends or life partner. However, chances of attaining success are more remote than the possibilities of failure, and the following explains why.
You Cannot Separate Personal and Business Life: Most couples find it hard to separate business life from personal life. No matter how bad matters at work are, you should not discuss them at home and destroy your private life and vice versa. Both the partners have to develop and exercise greater control and patience regardless of how your business is doing.
You Can Lose Your Partner’s Trust: It is often said that you should not invest the money which you are not prepared to lose and this is particularly true if are thinking about giving money to your relatives or friends. Your relationship will become strained forever if anything goes wrong. As a matter of fact, both of you will not only lose your money but will also lose each other’s trust.
You Cannot Run Your Business Normally: The moment you start doing business with your spouse or friends, you are set on a journey which is almost impossible to reverse or stop. It is always difficult for you to ring the bell or highlight your partner’s mistakes. Similarly, problematic assumptions and unrealistic goal settings on the part of your partner make life even harder for you. As a result, your business will not run as normal businesses do.
Legal Agreements: It is absolutely important for you to put all necessary legal agreements in place no matter how much you trust each other. People tend to behave differently and often get greedy whenever money is involved. Fulfilling legal requirements may offend your partner but it helps prevent a lot of problems in the long run.
Responsibilities Are Not Clear: Most couple-owned businesses suffer a terrible fate simply because none of the partners is willing to take ownership or any kind of responsibility. It is imperative for you to clearly assign responsibilities if you are starting a business with your friend or spouse.
You Can’t Add Value: One of the biggest drawbacks of such businesses is that friends or couples don’t consider each other a partner or boss as they would do in a regular business. You might take more vacations than normal or may not adhere to business hours. You may also hire friends or other family members as employees which are not suitable for the job at all. Consequently, you may not be able to add real value to your business.
EXAMPLES OF COMPANIES FOUNDED OR RUN BY COUPLES
There are many husbands and wives or groups of friends who have teamed up to establish some of the most successful companies in their respective industries. Following are some well-known companies established by couples or friends.
Leonard Bosack and Sandy Lerner, husband and wife, founded Cisco in December 1984 when they were working at Stanford University. As their offices were located in different buildings, they were finding it hard to smoothly email each other due to technological shortcomings at that time. To solve this problem, Bosack devised a method to connect the local area networks of the two building where he and his wife used to work.
Initially, it was not easy for Leonard to sell his new technology to companies that were already providing internet networking services. Therefore, Bosack and Lerner decided to launch their own organization called Cisco Systems. With the passage of time, Cisco Systems has become the biggest manufacturer and provider of internet networking services, systems and products.
The success story of EventBrite, an online ticketing platform for event organizers, is very strange, to say the least. Kevin Hartz suggested Julia run a company with him instead of formally proposing to her. Julia married Kevin and agreed to establish EventBrite with him because he strongly believed that she was going to be the perfect co-founder. Today, the value of EventBrite exceeds $1 billion, and the company has sold more than 100 million tickets.
EventBrite quickly grew in popularity as it provided people with an easy option to sell online tickets for an event and also to bring people together. For many years, EventBrite also remains in the limelight as one of the best businesses to work for in the Bay area.
Founded in October 2006, SlideShare has become the largest platform in the world to share slides and all types of other professional documents and content such as infographics, webinars, PDFs and videos, etc. Jon once attended a conference but could not find a place where he could share the resulting slides online. Therefore, Rashmi Sinha and Jon Boutelle established SlideShare as an online community where people could share their slides.
Today, more than 60 million people visit SlideShare each month and 215 million pages are viewed on average. Similarly, SlideShare is one of the top 150 most popular websites on the planet. It is also pertinent to note that SlideShare hosts more than 15 million uploads from organizations as well as individuals on topics ranging from business to travel, technology, health and education, etc.
As you can see, establishing a business partnership with your friend or life partner entails many advantages as well as disadvantages. Sometimes the experiment works out fine, but sometimes it does not. It all depends on how both partners take this new relationship. If you are serious in making this venture a success, you must anticipate all the worst case scenarios and consider all the benefits, alternatives and ramifications. You also have to decide whether you can live with the consequences and how deeply they will affect your relationship. Finally, if you believe that the risk is worth taking even after considering all these points then there is no reason for holding back.