Going into Business with Friends

Starting a franchise business is not always easy and doing it alone is even tougher. Many cannot afford the financial requirements for the franchise by themselves and need to start the franchise business with another person. That is why many people collaborate. But how can you make a partnership work?

Sometimes, you just have no choice. You have to go into business with other people. Yet, if you can make it work, two heads are definitely better than one!

In fact, some of the most successful franchise businesses are run by a pair. Take for instance the friends behind Google or Bill Gates and Steve Balmer at Microsoft. Successful and friends!

However, it is very important to remember that collaboration works only if everyone is clear about the rules, boundaries, aims and expectations. Some say that you should never go into business with friends or family but Bill gates will definitely disagree with that! You can go into business with anyone you like as long as both you and your partner have a very clear understanding of who owns what and who does what. Each person must be clear on their specific responsibilities.

This means that absolutely everything should be documented up front before you even start your franchise. Unfortunately, people have a habit of re-interpreting the past to suit them or perhaps remember the arrangement differently to you. A conversation in a bar five years ago is not the basis of an agreement.

Because you are family or friends, the idea of a legal document may seem insulting to you and your relationship. You may feel that something agreed with your own flesh and blood or someone you have grown up with all your life does not require something so disparaging as a piece of paper with two signatures. However, instead of seeing it as an insult, see it as something you can fall back on when the friendship or family bond is tense during times when the business is failing or even succeeding. Yes, these ties are even tested when a business venture actually succeeds! Sometimes people just want more.

The best way to turn your conversation into an agreement is to simply document what each of you believes is the exact situation when going into business with each other.

The first thing to agree on is of course ownership. Define who is going to own what percentage of the business. Whoever brings more into the business whether it is money, time, technical knowledge or experience, that one will have the greater share of the company.

Discuss every aspect in detail and document it. Do your best to foresee all possible future scenarios. Take into consideration scenarios such as your partner failing to give up their full time job or expressing a desire to pursue something else. Document what will happen then, the consequences of actions and what is expected of each person. One clause you may wish to insert in your agreement is something that prevents a partner from selling his share in the business without the agreement of the other. Once you have a mutual understanding of how this business is going to be run and included every scenario you can think of, you need to see a lawyer and get an agreement witnessed.

Having that agreement is peace of mind. If you get an agreement drawn up, there can be no misunderstandings.

If you follow these important steps, you can both concentrate on making your business a success no matter whether you are friends, relatives or family.

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