Businessing Magazine Logo Businessing Magazine Logo

What You Should Think About Before Going into Business with a Friend or Family Member

What You Should Think About Before Going into Business with a Friend or Family Member

Joint business ventures can offer amazing future prospects because they enable individuals to combine resources and skills. One half of a joint business venture might be a whiz with finances, while the other party could come with numerous industry contacts, but at the same time, all business ventures present a risk.

When you start a company by yourself, you are the sole decision maker in each and every decisions for your business. You get to decide whether or not to apply for and take out a loan, determine where to open your store, and make decisions on who gets hired. Prior to signing a contract and going into business with a close friend or relative, here are some of the most vital elements you should ponder first.

What’s Your Potential Business Partner’s Work Ethic Like?

The person that you are considering going into business with might have ideas for days. In fact, it might have been them who came to you with the idea of going into business together in the first place; however, talk is cheap. If your friend or relative has been a job hopper or is known to start and abandon a lot of projects over the years, then you should think twice about tethering yourself to them in the form of a jointly owned business. On the other hand, you don’t want to leave your potential co-owners to do the majority of the work either. Ideally, you will bring out the best in each other and be able to work efficiently together as a team.

How Is Your Friend or Relative Doing Financially?

When you start a new company, you are starting from scratch in more ways than one. In addition to coming up with the name of the business and deciding on how it will be structured, you will need to put your good name behind your company. You and your business partner’s personal credit history will be used to determine if you qualify for business loans and credit cards. So, this means that your friend or family member’s personal finances are vitally important to the future of your business. While you can ask your partner about their history, it is smart to check for bankruptcy records online. With, up to date data on bankruptcy filings and dispositions can be compiled. Public Records Reviews will also provide people with information on both personal and business bankruptcies, so you can even find out if your partner has any looming debt related to another company.

Do You Have a Cohesive Plan for the Future?

Disagreements are bound to happen, but when it comes to multiple people owning a company, there has to be a high level of unity. As you begin to make concrete plans for your joint business, are all parties in agreement about what you are going to do in the future? If you have plans to eventually start a franchise and your potential business partner is vehemently opposed, what is going to serve as the tie-breaking authority? If you don’t want your business partner to eventually become a rival, you have to tackle all of your disagreements before they become hindrances.

Can You Do It All on Your Own?

If your future business partner were to take a leave of absence and step away from the day to day operations, do you think that you are capable of handling everything on your own? Sure, you could have several assistants or even hire an expert in your industry to lend a hand, but ultimately, this is your business. All of the hard decisions would be left to you, including any emergencies that came up. In addition to working well as a team, you should work well 100 percent on your own. This is something else to think about before signing on the dotted line.

Are You Dedicated to the Idea of Working Alongside Your Loved One for Many Years?

Most people look forward to and enjoy spending time with their loved ones, whether it be on a Friday night or for an extended holiday. During those times, a lot of fun activities are participated in, where the goal of the get together is to relax and have a good time. When you co-own a business with a family member or friend, the only break you will get from each other is during the holidays. Working closely with someone on a small business venture can be stressful and tedious. Even when you face hard times, you can get through them without too much fuss if you are truly dedicated to working with your loved one from the start.

When you share a business with a relative or a friend, you share long-term goals and dreams. You might start a bagel company with your college roommate so that you can both put your kids through school. Some family-based businesses are started to sustain multiple generations in various locations. Regardless of how your jointly owned business is comprised, you should only go through with it if you are convinced things will work and have considered the above listed aspects.

short url:

by Rebecca Jones // Contributor to Businessing Magazine.

Opinions expressed by contributors are their own.