How can friends who become business partners keep their partnership alive and thriving? This is an excellent question and a crucial one. While getting my MBA at Wharton, I worked for an M&A (mergers and acquisitions) boutique that valued companies. Many of these valuations were for breakups and many of the breakups were not amicable. Often, the “partners” (I use the term loosely since most of the companies were not partnerships but were corporations and LLCs.) had been long-time friends but their working relationships drastically deteriorated over time and took the friendship with it.
This situation is not dissimilar from what can happen when best friends room together in college. I was a resident advisor (RAs) in college and I would INSIST on a room contract. The best friends usually would not want to work through one and sign it, saying they had known each other for forever. I said that best friends were most likely to take the other for granted. Best friends do things to each other that they would never do to a stranger. (This I garnered from other, more experienced RAs and the Head Resident). I never had any best friendships break apart but those RAs who did not insist on the room contract did. Boys and girls, men and women, did not and does not matter. Sometimes over-familiarity does breed contempt.
Therefore, please be aware and think things through no matter how close you are. If you are about to start or buy a business together, write it down!! It is always amazing how two or more people were in the same conversation at the same place at the same time but the interpretations and perceptions of what was said differ. If you wrote the discussion and terms down, everyone is and will remain on the same page.
Specifically, you should create or do the following:
1. Create and operate under a Buy/Sell Agreement. This is crucial. The Buy/Sell Agreement clearly delineates what happens in the event of a break-up, death, offer to purchase the company, and all the other scenarios partners who are friends typically do not consider. In the event of a disagreement in later years, this written Agreement will help resolve the conflict.
2. Clearly delineate who is the highest ranking person in the company, who is responsible for what, and what those responsibilities are. For example, one partner is in charge of sales and marketing and the other is in charge of finance and operations. One person can be the clear final decision maker overall or the final decision can be determined by who is in charge of that area of responsibility. You both cannot be the decision maker for the all the areas. That would be highly inefficient and lead to unnecessary arguments because you will disagree.
3. Place limits on when business can be discussed. Friends partnering is not dissimilar from spouses partnering. In order to continue to enjoy the companionship and foster the friendly feelings that brought the friends together, the friends/partners must take time at least 1x/month, preferably 2x/month or more to socialize without discussing business.