STYLETHREAD -- LET'S TALK SHOP!

hotcocoa · Kate Spade

has anyone ever started a business with a friend?

jah · Dooney & Bourke

I had a jewelry business with a friend. It wasn't a very good experience and really hurt our friendship. To put it nicely, I am a perfectionist, she was not. I wasn't happy with some of the product she developed and she wasn't happy with my control-freak nature. We were both to blame.

Anyway, some things I think you should consider:

-Are your work styles similar? If so, how? If not, why not?

-Do your strengths compliment each other? If so, how? If not, why not?

-Is your friend good managing money? Are you?

-Can your friend meet deadlines? CAn you?

-Do you have similar styles and tastes (if you are going to be producing a product)? If they differ, do they compliment each other? If they differ, do you appreciate and respect her tastes; do you admire it and vice versa?

-Is your ambition level the same? If not, is the ambition level high enough for the lower of the two to support the level of commitment needed to run a business?

-Do you have the same end goal for the business? Is this going to be a part-time gig or full-time? How much money do you both want to make? In 10 years, where do each of you see this business in a "perfect world", in a less-than-perfect world, but a "good world"?

-Why does your friend want to start the business, why do you?

-Does your friend have the same amount of capital to add to the business, do you?

-What will your singular responsibilities be? What responsibility will you share? Is that an even split of work from both perspectives?

If these items don't match up when you look at them from an unbiased perspective, then it isn't a good idea, but if they do and you have the passion to start a business which is DAMN hard work IMO, then go for it!

atlgirl · Gucci

jah brings up some really good points. I have not had a business with a friend, but have run my own business now for nearly five years. I would say this: Have a contract.

Nearly *everyone* thinks they won't need it - such good friends, nothing would ever come between them, blah blah blah. And just like in jah's experience, sometimes it all falls apart and the friendship is damaged beyond repair. Protect both of you legally if you decide to move on it. It's in the best interest of your business *and* your friendship.

Best of luck, if you go forward!

Karina · Chanel

No advice, but I do stand by the "don't mix business with pleasure" saying.

jj · Kate Spade

My DH did. They absolutely had a contract from the beginning and created an LLC.

It has worked for them because my husband is the sales/marketing/manager/client relations guy and his partner is the creative. So it's a good balance.

I think all of jah's questions are excellent. They've never had any issues in the past seven years, but they have definitely gone from friends to solely business partners with a business relationship. It may seem like a negative, but they definitely get along and it works great for them.

I could go on and on about the ups/downs/pros/cons of them starting a business, so let me know if you have any questions

laken1 · Hermes

jah's questions are right on. I TOTALLY agree with a contract - it's like a marriage - no one ever thinks it would get ugly between them but it often does. You wouldn't believe the things I've seen while lending money to small business owners. Just protect yourself financially & know that if you borrow any money, you are both responsible for 100% of the loan, not 50%. I think a lot of people get in trouble that way & don't realize that if the other partner bows out they are 100% responsible. just throwing it out there!

but iirc your husband is an ibanker - so you probably know that!

(maybe i'm confusing your DH job with someone else's?)

-- Edited by laken1 at 16:59, 2006-04-12

hotcocoa · Kate Spade

thanks, girls... and wow! thanks jah for that comprehensive list of questions.

my husband has owned his own biz for about 10 years (but no laken1... he's not an ibanker... must be someone else you're thinking of) and i have several friends who have tried it — some have sadly failed miserably — so i've been pretty close to a few situations and picked up bits of info/advice from those experiences.

if anyone else has any words, i'd love to keep hearing your comments.

Kari · Dooney & Bourke

I am glad you posted this issue. My husband is thinking about the same thing with a friend he's had since childhood.

I think jah's questions are great. I also second the comment about creating an LLC. If it is just a partnership, each person is completely liable both professionally and personally...but if you create an LLC you are not personally liable for the business.

I probably shouldn't bring up gender issues...but I think guys are better at this than girls. Just think about how guys may fight and it might get ugly, but it is over immediately and then they go on as if nothing ever happened. Girls tend to hold on to things and take things much more personally. **I hope none of you ladies gets mad at me for my opinion here**

I also encourage you to visit the small business association website and other related sites that have great info on starting a business and how to evaluate your plan.

But ultimately - Good Luck!

hotcocoa · Kate Spade

Kari wrote:

I probably shouldn't bring up gender issues...but I think guys are better at this than girls. Just think about how guys may fight and it might get ugly, but it is over immediately and then they go on as if nothing ever happened. Girls tend to hold on to things and take things much more personally. **I hope none of you ladies gets mad at me for my opinion here**

i was just thinking about this issue this morning. i realized that the friends i know that have done it (and obviously my husband) are male. i think it can be very different for women — maybe not in all cases, but many women are certainly more emotional than men and it would carry over and have a much different effect on a business relationship. i guess that's why i'm posting this question to a group of intelligent women and value any insight that's offered. another thing i didn't mention is that the "friend" i'm referring to is someone who i've worked with professionally in the past and we became friends afterwards.

laken1 · Hermes

Kari wrote:

I also second the comment about creating an LLC. If it is just a partnership, each person is completely liable both professionally and personally...but if you create an LLC you are not personally liable for the business.

While I don't disagree with this, from a finance perspective, if you borrow money the bank will make the partners / members sign a personal guarantee as well no matter what kind of corporate structure you have. No bank I've ever seen does loans with out them on small business loans (this includes SBA loans).

-- Edited by laken1 at 12:58, 2006-04-14

Kari · Dooney & Bourke

Laken1 is right...I didn't want to get into too many details in my post. I was mostly referring to personal liability if the business were to get sued for any reason...employment issues, torts issues, etc.

laken1 · Hermes

Kari wrote:

Laken1 is right...I didn't want to get into too many details in my post. I was mostly referring to personal liability if the business were to get sued for any reason...employment issues, torts issues, etc.

LOL - there ya go - you are looking at from a lawyer perspective & I look at it from a banker perspective go figure!

hotcocoa didn't even mention that they'd be borrowing any money but I was always amazed that people thought they could take kind of a "if we form a company & it goes down, no harm" kind of approach to borrowing money not realizing their personal liability. So I wanted to be informative... I don't normally think of sue issues, see, which is why you need both in this situation!