Let us face it, we always seem to share ideas and values with our friends and usually they are our first customers when we start out in business. In Kenya we have heard of success stories especially with chamas who have been disciplined and consistent, eventually becoming SACCOs or forming stable businesses. At the same time we hear of great friends who become enemies simply because when the business made a breakthrough one or both of them started to place antics that eventually led to its closing.
So here are five characteristics that businesses formed by friends should have:
- Trust: It seems obvious for all businesses to have trust, but it’s not obvious for everyone. Business people rarely think of times when they might need to rely on their partner to make a decision that is in their favor. You may trust your friend to save your life or bail you out of an argument but do you trust them with choosing the stock you want? It is worth thinking through when initiating the business.
- Similar definitions on the type of business: Business is like a child and if parents are not on the same page about how to raise it, emotions will definitely be heightened. It is very important to state what you are selling and what you would like to achieve so as to sustain the business.
- Being clear about the attributes you are bringing to the table: Everyone has a talent; one person can focus on marketing while the other can be in charge of production. If you are not sure what investment you can put in the business, it is better not to start it. Being clear about the contributions each partner can give is vital so as to strengthen the team to success.
- Communication: From the initiation of the business to general day to day operations, partners need to communicate about how the business is going. Confrontation should be expected, and of course it is difficult to handle when you are friends. But it shouldn’t be avoided; it must be addressed so as to solve contentious issues that affect all involved.
- A clear understanding of how the shares are to be distributed: It will be automatic that shares will be split evenly at the beginning. We do not know what the future holds, it is vital to place clauses that protect the business in case friends turn foes. We forget that after a year or two when the luster of owning a business wears off one of the partners may decide to take a job or to become a housewife. It is important to have exit clauses that can allow the other shareholders to buy her shares or even sell them to an outside party at an agreed format.
A partnership with a friend is as risky as any other business, but it can also hold a friendship at ransom. It is important to review the points so as to take a calculated risk.
Have you or a person you know been in a similar situation? Please share your experience with us in the comments section below.
Nyakio Kiruthu left the world of banking after 4years to venture into the world of business. She is a shareholder of Thayu Farm hotel, a family business. She holds a degree in Economics and Masters in International Business which enables her to explore the world of business through a unique perspective.