Recently I was approached by 2 best friends who had started a business together. I went straight to their website to read their story. What a remarkable story! It got me thinking; how although they were not a family business, there are so many similarities.
Firstly, their website told their story and they were aware of the power of their story; how 2 best friends had an idea and 2 very different skill sets and how they come together to take on the world. They were aware of the power of their story.
Secondly, their strong values. The business was built around sustainability and the difference they wanted to make to the environment and reusing materials.
When advising friends in business, we often have the same recommendations as we do family businesses. You need to consider the following, to ensure your friendship lasts and the business prospers.
1. Exit plan – a shareholders agreement is recommended upfront, ensuring whilst things are positive and the 2 friends get on well together, it is the perfect time to discuss “what if” scenarios and agree on valuations and what they want the outcome to look like. I always say, the best time to have this discussion is when things are going well.
2. Estate Planning – always when you enter a business with a business partner, you need to discuss what the future looks like. As much as you love being in business with your best friend, do you want to end up in business with their spouse??
3. Key man insurance – always ensure you have someone look at your insurance policies to ensure the business is protected and both friends’ families are looked after.
4. A Rule Book – it may not be a Family Charter but the same conversations need to be had. Are you willing to offer positions to one another’s family members? If yes, what are the rules around introducing family members.
5. Vision – what is the plan? Do you want to grow and keep the business? Do you want to grow and sell the business? What will you consider to take on external investors? What is your risk appetite towards debt?
6. Values – How do you want to be seen in the eyes of your customers? Are you looking to make a difference to the community? How do you want that to look?
Whether it is Family Business or Friends in Business, the considerations, the advice and the strengths are similar. From the moment I read their story, I knew this was a business I wanted to be involved with. Without the right advice friends in business can run into the same problems as family business. With the right advice, could kick start our economy!