Should You Start a Business With Your Best Friend?

Should-You-Start-a-Business-With-Your-Best-Friend

We’ve all heard the horror stories of great businesses utterly collapsing because the founders were good friends and the relationship turned sour.

It’s natural. It can be incredibly stressful launching a new business, especially if you’re starting it while keeping your day job.

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In business, things often get complicated. Difficult, impersonal decisions constantly need to be made in the name of creating the best future for the company.

Many entrepreneurs that start a business with a friend wind up with broken finances and ruined friendships—it doesn’t take reading through many of the best business books or taking online business courses to see that common trend.

In fact, if you hedge your business decisions on the wisdom of statistics alone, stoically ignoring your friend’s frantic excitement about “this cool business idea” seems to be the safest route. If you’re still looking for that right business opportunity, check out my detailed break down of the 101 best business ideas.

Heartless, yes, but a Harvard Business School study showed that among technology founders, the group that is made up of friends proved to be the most unstable, with a founder turnover rate of nearly 30%.

Surprisingly, the group composed of total strangers fared better. Add to that the even gloomier 9-out-of-10 failure rate of startups in general, and you’d begin to wonder why on earth you would even consider starting a business with a friend.

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In fact, it’d be entirely safer to stay in the comfort of your day job and preserve your friendships, right?

Wrong.

What if it’s you who came across a great business idea and your gut says you need your talented friend, or even a skilled co-worker, to help turn it into a stellar success?

My advice: Ignore the statistics.

I grew my last business, Case Escape with my best friend to over $160,000 in revenue in our first year alone. It’s continued to grow ever since. Plenty of the world’s most successful entrepreneurs have started successful businesses with their friends.

You can do it too, but first you need a strong foundation for how to manage your newly complicated relationship. Even more importantly, you need to establish ground rules and get some things in writing before you even get started.

Good friends starting and running a business together don’t often equate to a happy ending. Failed partnerships do happen and will likely lead to damaged friendships, or even end up with former partners not being friends at all.


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Take the case of dot com era entrepreneur Scott Testa, who launched a startup with a tech-savvy friend he had known for 15 years. Testa told The New York Times that the venture felt like it was made in heaven at first. But after a while, stark differences in the founders' growth strategies created a humongous rift between them.

Even though the business was relatively successful right away, they ended up not talking to each other and selling the company much sooner than planned. With shattered hopes and hurt feelings, the two friends became estranged acquaintances.

If you want to become a successful entrepreneur, you often have to beat the odds and embrace learning experiences disguised as failures along the way. Going against the flow is a behavioral trait hard-wired into entrepreneurial DNA. If you're too risk-averse, then you're likely not ready to launch a business yet anyway.

After some serious consideration, brainstorming, and weighing the pros and cons (more on this later), if both your business idea and premise of involving your friend as a partner come out as a positive, then you may need to risk failure and your friendship, in order to get your business off the ground.

How-to-Start-a-Business-with-Your-Best-Friend

Many ventures founded by friends do succeed, and in fact represent some of the world's most prominent brands.

Apple with Steves Wozniak and Jobs, Microsoft with Bill Gates and Paul Allen, Google with Larry Page and Sergey Brin.

Hewlett-Packard with Bill Hewlett and Dave Packard, Ben & Jerry's with Ben Cohen and Jerry Greenfield.

However, as John D. Rockefeller put it, "friendships based on business are much better than businesses founded on friendships."

Certainly, life wasn't always a joy ride for these founding partners. Varying tastes, priorities, and approaches often lead to conflicts. A little caution will go a long way, and you need to know the advantages and disadvantages of starting a business with your friend.

If you're still looking for the right business idea, join my free course today: Finding a Profitable Business Idea.

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Pros: The Advantages of Starting a Business with Your Friend.

We spend time with our friends largely to have fun and often because we share some common interests. Our friendships provide genuine companionship, comfort, affirmation, and support. In today's punishing business landscape, finding those qualities would seem like a major plus in your founding partnership.

Having friends as business partners offer the following benefits.

You have a co-founder that you truly know and trust.

Bringing on board years of experience understanding how your friend reacts to certain situations, what their belief systems are founded upon, and knowing what can trigger each other's tempers can be very valuable when starting a business. In this respect, friends can generally solve problems by intuitively drawing on their respective strengths and treading lightly on known character flaws.

You have a co-founder who will likely share many of your same beliefs.

Most of the time, friends share the same interests general belief systems. As birds of the same feather, you and your best friend business partner will likely find it easier to agree on the literally thousands of crucial decisions coming your way, despite having different personal preferences when it comes to details.

You can communicate more emphatically and meaningfully.

Years of building a genuine friendship, playfully insulting each other, and sharing major life events or struggles have broadened your communication channels with each other, for some serious articulation of business goals and strategies.

You can assign and assume roles naturally.

You can both be technologically savvy or creative types, but over the years, you and your best friend know exactly which specific role in the company you will both be best suited for.

Advantages and Disadvantages of Starting a Business with Your Best Friend and How to Do It Ryan Robinson ryrob

Cons: How Founder Friendships Can Ruin Your Business.

Now for the other side of the equation, what needs to be taken very seriously when starting a business with a friend. You'll find that the very same benefits we derive from friendship can also cause major potential problems when we transport those friendships into the less forgiving world of business (which is why my current business as a freelance content marketer is a purely solo act).

Familiarity breeds contempt.

Knowing so much about one person can sometimes erode mutual respect. Similar to the struggles within marriages, this is also a major minefield for business friendships because you're so embedded with the knowledge of one another's personal lives.

Situations can quickly get awkward and uncomfortable.

Friends go to friends for support. There's nothing wrong about that, but when one partner frequently slacks off and thinks the other will consistently pick up the slack, the costs will be incurred by the business. Endorsing unproven or incompetent friends to be part of your business will all but guarantee failure.

Everyone suffers from "Who's-Really-the-Boss" Syndrome.

Unless roles are very clearly defined, a 50-50 business partnership carries the risk of leadership ambiguity. This can quickly trigger power struggles, affecting all aspects of the business including differing opinions on the company's vision, strategy, and daily operations.

Your social networks overlap.

Because long-time friends generally share the same set of acquaintances, you start off with a more limited network, market, and support structure for your business than if your co-founder had been chosen based on expanding your business opportunities.

With these pros and cons in mind, I'm still a huge advocate of starting businesses with my talented friends. Each time I consider launching a business with someone whom I've already developed a personal relationship with, I force myself to take an objective look at how this decision is likely to play out.

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Before starting a business with your friend, you need to ask yourself these crucial questions.

Starting a Business with a Friend? Ask Yourself These 8 Questions First.

1. Do you share the same business goals?

It'd be a red flag if one of you wanted to build a lifestyle business that could last decades, and the other had the goal of creating a high-growth business that could be acquired within a year or two. These fundamental differences in growth strategies would lead to conflict.

2. Do you share the same values?

Just like dating, if your friend (and potential business partner) has a drastically different set of value and beliefs, you should think twice about mixing your finances and futures together.

3. Do your skill sets complement each other?

Make sure you're starting a business with your friend because it would truly benefit you both, not just because you spend a lot of time together and you think it'd be fun.

4. Do your work habits align?

Be sure that you have mutual times you can work together on your business, especially while it's getting started and you're both likely holding onto your day jobs.

5. What's your default strategy for resolving conflicts?

If you argue a lot as friends... chances are, that tendency will carry over into your business.

6. Which specific roles and responsibilities should each business partner assume?

Clearly define your complementary roles, and make sure they engage your interests.

7. How stable are your personal lives?

You don't want to start a business with a friend who plans on selling their belongings and traveling the world for the foreseeable future.

8. Are you both willing to follow each others direction when the subject matter expert speaks?

Be sure you can both handle constructive criticism, and know when to trust your partner's judgement.

How to Find Balance When Starting a Business With Your Best Friend

From my personal experience starting and growing a business with my best friend, here's my essential advice for finding success together.

My Advice on Starting a Business with a Friend.

Be professional while staying friends.

Instead of trying to keep your friendship totally out of the business, embrace your strong bond together and assume a high degree of professionalism when it comes to business matters. Refrain from joking about serious financial matters that'll impact your business.

Get everything in writing from the very beginning.

You don't need to immediately start out with a legal contract drafted by an attorney, but you absolutely must have a signed document in place that clearly specify your company vision, targets, roles, ownership breakdown, investment amounts, conflict resolution protocols, succession plans, and compensation amounts. Without this signed document, you'll both be leaving yourselves up to potential complications that could adversely affect your business and friendship.

Formally discuss and record possible exits, outcomes, and the likelihood of total failure.

Given that well over half a million businesses shut down each month in the US, failure and loss of your initial investment is a very real possibility. If you and your partner lose your business investment, is that going to ruin your friendship? Have an open conversation about that scenario and talk through how you'll both feel sitting on the other end of that rather likely outcome.

Clearly establish your goals.

Once you know what you want to ultimately want to achieve together, you can articulate what is required from each stakeholder. If you want to build an online tool and sell it to a large corporation within the next two years, you better assign clear responsibilities for who will be managing each part of your business, in order to hit that high target.

Establish separate business and personal bank accounts and perform appropriate bookkeeping.

I cannot stress this one enough. Never mix your personal finances together when starting a business partnership, especially with a good friend. Ensure that you have financial best practices in place, to make sure there's no mismanagement of company funds, and that you'll be well-prepared when your first tax season rolls around.

Set up a business entity.

Consider the various pros and cons of starting a partnership, limited liability partnership (LLP), corporation (Inc), limited liability company (LLC), S-corp, or other business entity. You want to choose the structure that best represents your business and your eventual goals. Regardless, you need to define ownership very clearly.

Define roles in your business.

From the very beginning, establish a chain of command and clearly define the roles each partner should assume. If the business was solely your original idea, and you have the relevant domain expertise, industry relationships, and plan to work on it full-time while your partner focuses solely on perfecting one component of your product, your ownership would likely be higher than that of your partners'.

Always communicate.

It's ironic, but a lack of communication ranks among the top killers of friendship-driven businesses. Don't assume that your partner will always feel the same as you do, on key business matters.

Fully understanding and making strategic decisions from day one is a key component to achieving success in today's business environment.

Before launching a business with your friend and putting your financial resources on the line in hopes of success, take a moment to ponder these complexities of business partnerships and discuss them together. You need road map that'll help you find the way to your joint definition success, which all begins with taking the time to properly validate a business idea with real paying customers before building a "complete" solution for your audience..

Remember, some of the most powerful businesses ever established were founded by friends. However, many more have failed miserably and left ruined friendships in their wake. Think carefully before you start a business with your best friend.

Tell me in the comments the #1 lesson you've learned if you've started a business with a friend.

If you haven't yet, but are considering launching with a friend, what are your biggest fears?

Are you thinking of starting a business? Join my course on Starting a Business While Working a Full-Time Job to get the tools, tips, and strategies that'll help you skip a lot of these hard lessons on your own.

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About The Author

Ryan Robinson

Entrepreneur, writer, and content marketer. Join me here, on ryrob.com and learn how to start a business while working full-time. Follow me on Twitter.

47 Comments

  • Ankit Prakash

    Reply Reply September 29, 2015

    Ryan, You spoken the truth 🙂
    Building a company takes completely different approach compared to building a lean business. So, demands completely different talent.

    • Ryan Robinson

      Reply Reply September 29, 2015

      Thanks, Ankit. Have you had any experiences in starting a business with a friend?

  • Sadik

    Reply Reply September 30, 2015

    Hey Ryan

    Very good topic. There are two huge problems to overcome if anyone ever wants to start a business with a friend.

    1. Starting as Equals.
    2. Doing a friend a favor.

    In any business one co-founder may have more experience / knowledge than the other. But friendships by definition are built on seeing each other as equals. This will invariably create ego clashes where one co-founder feels the other is dominating too much. Then your actions can start to be derived from proving yourself right versus what’s best for the business. Total Fail.

    Second point is, in friendship we love our friends. We want to help them out when they are having problems or do them favors. But when in business together, while in the beginning this may not seem much, but eventually one co-founder begins to feel he is doing too much and the other is just enjoying fruits of his labour. This inevitably causes clashes.

    In my experience, starting a business with a long term friend is never a good idea. With strangers you can establish professional rules and call each other out if one is failing etc. In only very rare cases, when all of the friends involved are equally mature, equally responsible and complimenting each other in experience can it work.

    ~ Sadik

    P.S. Very nice blog you have there. All the best with your upcoming courses… 🙂

    • Ryan Robinson

      Reply Reply September 30, 2015

      This is a very good point. Transitioning from a friendship that’s built upon seeing each other as equals, into a business relationship that’s often going to be inherently lopsided due to experience, domain knowledge, contacts, or financial resources is a tricky thing to do.

      That’s one thing my former business partner (and best friend), Matt and I frequently had trouble with. There were parts of our business where he was clearly the domain expert, and yet other topics where I was much more well-versed. Coming to a very clear agreement that you totally trust the judgement of the parter with the most domain expertise is something that would’ve helped us immensely, had we done that at the very beginning.

  • Nabeel

    Reply Reply September 30, 2015

    Good article Ryan,

    very valid points discussed, i’m sharing this.

  • Sameer

    Reply Reply October 10, 2015

    Very informative article. Came at a right time for me. I’m planning to start business with my friends. Good Insights.

    • Ryan Robinson

      Reply Reply October 10, 2015

      I’m glad to hear it! What type of business are you starting?

  • Christian Hipolito

    Reply Reply January 20, 2016

    Hi Ryan,

    This is a very good article and its very informative. My friend and I, were starting a film production company, we both onboard bring different skill set and we do clash but in the end were still mates, sometimes I fear that this business may ruin our friendship.

    I think what we need to establish at the moment are ground rules, so we won’t overstep on things and this article helped me understand that… We need a contract : )

    • Ryan Robinson

      Reply Reply February 9, 2016

      Right you are! I’m all for starting businesses with THE RIGHT FRIENDS for THE RIGHT REASONS. A contract is a must.. it’ll definitely help set clear guidelines and will give you a document to refer back to in the future once you navigate into uncharted waters. Keep in mind that after you’ve been in business for a few months, you’ll want to revisit the contracts you create with each other, and make sure things are progressing as expected. If you’re 50/50 owners, but you do 90% of the work, that’s hardly a fair business partnership if you entered into the agreement under the understanding of a more equal contribution of labor.

  • Sharon Koenig

    Reply Reply March 3, 2016

    Interesting and well-written article on a topic I don’t see talked about too often. I like the notion of friendships founded on business vs. business founded on friendships, because it makes perfect sense in a lot of ways.

    It seems much easier to work with someone who you can be certain is on the same path as you, and to form your relationship based on that, rather than trying to join an old friend’s slightly different path with your own.

  • Shinas

    Reply Reply April 9, 2016

    Ryan gud article… nice reading…
    i am planning a business to start with my friend.. its about opening a cafe.. suggessions are welcome.. we are 20 years long best friends.. but i dont think any clash can occure.. both have same intense of interest..

  • Kosi Yovogan

    Reply Reply June 8, 2016

    Ryan,
    I like the brilliancy and clarity of the ideas and concepts you developed in this article. I want to add that likewise starting business with family member or girlfriend or boyfriend or wife leads to similar results as in the case you exposed about starting a business with a friend. However, as you mentioned that, starting as business partners and ending up as friends, or life partners is the wisest path to take when considering a startup with someone.

  • Kina

    Reply Reply June 10, 2016

    Good insights. Nicely broken down. Nice to see how everything has built up to this!

  • moinak bhattacharjee

    Reply Reply August 22, 2016

    your words are really inspiring but still i need a suggestion from you.i always wanted to do entrepreneurship.and i always wanted to be the ceo or you can say in the limelight of the company.i am crazy about creating apps and softwares.and i wanted to start an app business with a great idea of mine.though i havent thought about a good idea .but i always spend my time on thinking about a good app that ican build,a good idea.few days back my best friend in college ,we were sitting together and he is also crazy about apps.he suddenly a good idea struck him and he told me the idea.and also told that we can start working on this startup idea.at that moment i said ok to him that iam going to start with him.but i always have a fear that whether i can be in the limelight if we start the business.can i ever be the ceo or always he will represent the company and i cannot though being a co-founder.and also i want tobe a 50% part of it.but he always tries to do all the maximum things.but i also want that 50% of the work can be done by me.and i want to acquire that position that whenever the name of the company comes.it features both of us rather than only featuring him.and he tells me to do some parts but i myself want to always take my decision of which part to do.he says as if he orders me. so i need suggestion ,i am scared that can i be equal to him,so should i start a business with him.

    • Ryan Robinson

      Reply Reply August 22, 2016

      Hey Moinak,
      So to be clear, here’s how things look right now based on how I’m reading this situation:
      1. You do *not* have 50% ownership of the business you’re helping your friend with, correct? This means that he owns 100% of the company or do you have an equity stake currently?
      2. The app idea was originally his and he’s proven himself capable of doing a lot of the hard work so far in the business?
      3. You say you want to be equal to him, but it sounds like you want to be superior to him.
      Being completely honest, it sounds to me like you’ve stepped in to help your friend build an app around an idea that was originally his. On top of that, you say he’s doing a lot of work already on the app and is good at what he’s doing.. to me, this implies that at this point, he’s probably a fit leader for your two-man company, especially since he’s clearly driven to bring his idea to life.
      Some tough love for you: Don’t be so damn selfish. Don’t stand in the way of him making his dreams come true. You’re telling me here that you instead, “want to be the CEO or be in the limelight of the company.” If you want that, then you need to quit working with your friend and start building your own app – it’s that simple.
      Based on this limited amount of information, I wouldn’t personally recommend that you start a business with your friends.. if you’re wanting to pursue building an app for the sake of achieving the glamorous lifestyle of being a “CEO,” then your motivations are going to make it much harder to become successful. Without a purpose greater than yourself, and without the ability to acknowledge that your friend is thus far doing a great job of contributing as the leader of your app building project, you’re going to have a very difficult time in business. In my opinion, you need to focus on solving problems that will help others in a meaningful way, rather than get so caught up in pursuing glamour, money and attention.

  • moinak bhattacharjee

    Reply Reply August 22, 2016

    okk ryan.i will surely mark your words and try to change.i asked you this question because in maximum cases such as steve woznaik,paul allen all were ditched at last ,by steve jobs and bill gates,though steve woznaik and paul allen were best friends of steve jobs and bill gates but instead of doing half part of the job they were ditched.same for the case of mark zuckerberg also .he also ditched his best friend though he helped mark a lot.just because of this i always was having the fear.

    • Ryan Robinson

      Reply Reply August 22, 2016

      I can understand your concern about this in the long term, but let’s put things into perspective first. Are all of those people you just named still millionaires or billionaires despite how things turned out with the ventures that got a lot of attention? (Yes). Have all of them gone on to do great things afterwards? (Yes). Don’t let your ambition of becoming famous ruin your chances of creating a meaningful impact on the world.
      Flip your thinking around to be more like this:
      Find a Problem That Bothers You and a Good Number of Others –> Create a Great Solution –> Then Reap the Rewards
      You won’t achieve success in the long run (with or without your friends) if you’re first thinking of a business that’s designed to make you money and fame. You need to solve problems for people, and do so without looking for your way to step into the limelight at every turn.

  • moinak bhattacharjee

    Reply Reply August 22, 2016

    okk. thnku you very much ryan for your advice.i will surely mark your words and try to change

  • surojit sarkar

    Reply Reply August 28, 2016

    Dear Ryan…me and one of my friends have an idea of starting a service app which would provide various services to the society….the only thing is we have this idea but we do not know anything about app designing so we have made a plan of hiring an app designer …. who would build this app for us…and according to our requirements…me and my friend are commerce students .. so when this idea came in our mind we also managed to design various schemes through which this app would generate income… we do not have any capital of our own..so we have decided to show our revenue models to the angel investors…..to be completely honest we do not know where to start from I mean the field work…or the desk work…in other words the designing comes first or the revenue graphs and charts come first….we have no idea about where to start from….your advise would be very kind……nd helpful..regarding where to start from…ryt now we only have this idea nd some contacts…of app designers nothing else…

    • Ryan Robinson

      Reply Reply August 29, 2016

      I got your email, Surojit! I’ll reply there with more detail.

  • surojit sarkar

    Reply Reply September 1, 2016

    appreciate it Ryan..!

  • John Vann

    Reply Reply September 5, 2016

    Dear Ryan,
    Thanks for this article, I have run a successful business for over 10 years, and have recently developed a spin off software solution that has massive potential and is going into a trial phase with some of my clients. The idea for this application came from a discussion with a sub contractor who has since become a friend. I have invested my own time and money into the development and have said all along that I think it only right that my friend be involved in anything that transpired.

    Although now it comes to the crunch, I have to decide in what capacity does he become involved, as a shareholder and co-founder in a new business, or someone who gets a kickback from the future success of the business but with no “shareholder” rights. His input into the design and / or technical content of the system has been minimal and although there has been a belated offer of financial investment now the platform is developed, I am now considering all your points raised about our suitability of working in partnership.

    I feel as though I am being greedy by wanting to retain ownership, but it’s not a financial decision, I think elements relating to vision, core values and work ethics and personal stability are in my thoughts. The dilemma is the risk of losing a friendship and also someone who has contributed to the success of the original business (even through they have been well rewarded for doing so).

    Time will tell,

    Regards
    JV

    • Ryan Robinson

      Reply Reply September 6, 2016

      Hey JV,
      I think you already know the answer to your dilemma 😉
      So, to get the facts clear, your friend:
      • Has contributed “minimal input” into the design and technical aspects of the product
      • Has not invested financial or significant time resources into the business
      • Has not yet signed any formal agreements with you about ownership of the company (?)
      My advice (based solely on what you’ve shared here) is to run with your new software solution on your own. Your friend who has seemingly only “talked about the idea” with you, hasn’t done any of the actual work and I think this would be a sign of what your future would have in store if you were to be partners with her/him in this. Not that the lack of involvement means she/he wouldn’t be committed to the business if you asked them to be, but you should want a partner who’s going to be super proactive and autonomous about making the moves that need to be made for the success of the business, not someone you’ll have to manage (and still owns a significant part of your company).
      This will definitely be a difficult conversation and you may not come out of it with the same friendship in the short-term, but she/he will respect you for putting everything on the table and sharing how you truly feel (what true friendship and understanding means).
      If losing her/his business with your other company will be a major hit to your financial stability, that’s another consideration for you to take into account. One option for the near-term could be to stop working on this project altogether until you can sort out the right solution.

  • Aryan Kapoor

    Reply Reply September 26, 2016

    really great ryan.appreciate your work..but can u plz help me with some questions i am having problem with..few days ago while sitting in my college friends home..we were talking about starting a business together..infact i told him to start a business.so suddenly he got a idea and told me ..for that timingi thought ok. we can start on that..but after few todays ,i got a good idea.and i am wanting to start ..but cannot..it would be very helpfull for me to have a co-founder in my idea..i thought we both will start..i have approached my friend with my idea..but he is telling that he wants to start with the idea which he got.but my idea which i got ,i want to start it fast..and i need a cofounder..but my friend is trying to start with his idea..and also wants me in his idea as a co founder..but i want to start with my idea..what to do..how could i find a trustable cofounder now..??plz suggest..my friend was trusted .but he is not willing to start with my idea .he wants to start with his idea.after that he is telling that he is going to help me in my idea.but the problem is i cant wait so long…plz suggest me ryan??

    • Ryan Robinson

      Reply Reply September 27, 2016

      Hey Aryan,
      As uncomfortable or difficult as it may be for you, the best solution is pretty clear to me: You need to focus on working with just your idea and let your friend pursue his on his own without your involvement.. there may be some fun ways to collaborate and work together in the future, but if you want to give yourself the best chance of success, your business will command all of your free time.
      Finding a co-founder: This is going to sound tough, but bare with me. Let’s first start by asking whether or not you actually need a co-founder. Why do you need a co-founder? What can your friend do that you can’t, yourself? Can you pause and take the time to learn the skills you’d need, so that you can execute and at least create a Minimum Viable Product on your own? Give me a little more detail here about why you can’t build the foundation of your business yourself – I’m not convinced you need a co-founder. When you go into business for yourself, you need to become an expert problem solver.. there will constantly be new challenges and road blocks that come up (every day) in your business and your first reaction can’t be to give up & try to find someone else who can help. There’s a point where you need to become the expert – the authority on what your business is doing or creating for your customers.
      Finally from my personal experience, if the idea is something that you’ve decided you can’t build on your own and you can’t (or won’t) take the the time & effort to teach yourself what you need to learn in order to build at least the basic framework of the business yourself, then I don’t personally think you should pursue this idea. That’s just not what I’d ever advise my students to do.
      In order to be successful in business, you need to be constantly leveraging your strengths – so if you’re starting a business where you don’t currently have any strengths, your only option is to build those skills and abilities. Choosing to instead hire contract help to fill in the gaps or bring in a co-founder can work, but it’s not a very scalable solution right at the beginning of your business unless you can get a co-founder involved who has a meaningful amount of time/resources at stake within your company. You need someone who’s going to care as much as you do, which is very difficult to come by.
      That being said, the best ways to find co-founders is by first evaluating everyone in your personal network who has the skills/disposition to potentially be interested.. from there, I always recommend spreading out to 2nd degree connections, which would be friends of friends. Ask your friends, mentors, classmates for recommendations or suggestions on anyone they know who may be interested in helping out with your project. Don’t be cryptic in your messaging either – nobody is going to steak your business idea so just lay everything out on the table and clearly explain what you want to build & how a co-founder would play into your business. Be fair, because they’re bringing what’s clearly an extremely valuable skill to the table and you need to create a mutually beneficial partnership that has the potential to last for many years. If you exhaust your 2nd degree networks, there are also a ton of websites and events now that are designed to help people in finding co-founders.. here are a few of those:
      Startup Weekend: http://startupweekend.org/ (the only one I’ve personally experienced and would recommend)
      CoFounders Lab: https://cofounderslab.com/
      Founder2Be: https://www.founder2be.com/

  • moinak bhattacharjee

    Reply Reply November 20, 2016

    you didnt reply me in the email..you said you would send a video ..plz check the email ryan..

  • andrew pheiffer

    Reply Reply December 5, 2016

    Hi Ryan

    very interesting article and i’m glad i came across it.

    I’ve recently come up with an idea for a service that will be supplied to possibly 2000 companies across my country. I have spoken to many people about this idea and haven’t had a single bad review of the idea, so i’m positive that it will be a success. And now ive come up with the idea, all the things necessary for it to become a working product and how to get it out for people to buy it. the problem i have encountered is that I have approached my best friend with the idea as he has most of the skills required to create all the programmes and websites needed. and now im stuck at how to share the equity, i feel like even though the idea is mine, my best friend will be putting in most of the work required to get it started. and once it has started he has better people skills than I do and will be the main talker in business meetings. I will be providing alot of the research and behind the scenes work for the idea.

    so im unsure of where to go from here, and what to do about the equity. maybe you can offer advice.

    oh and by the way, our friendship is an extremely good one, we work very well together, when we disagree with something we deal with it promptly and move on, we have been best friends for 10 years and know each other inside out. i see absolutely no problem between us at all. but i feel like this problem is something i should get outside advice from.

    thank you very much Ryan

    • Ryan Robinson

      Reply Reply December 5, 2016

      Hey Andrew,
      GREAT question and thank you for giving me enough backstory to give you some actionable advice.
      #1: In my opinion, anything less than a 50% ownership in the future company for your friend would be extremely unfair and a terribly bad deal for him. Your goal (especially as friends) should be to set yourselves up for longterm success.. which in this case means that your friend needs to feel like he’s being valued & adequately compensated for the value he’s bringing to the table. Which sounds like a lot of value he’s going to be contributing.
      Ideas alone are worth nothing. If you need your friend to build, create or implement everything that will become your future business, it’s going to take a whole lot more than just following your ‘plans’ or ‘ideas.’ Creation isn’t that simple of a process, especially if he’s going to be building software in particular.. the end result very rarely ever looks exactly how you envision it before starting work on it. In short, your friend is going to be extremely invested in the process of building your business and from what it sounds like, will be doing closer to 75%+ of the work for the company in the beginning and potentially moving forward as well.
      Do you think his equity ownership should reflect the amount of work he’ll be doing? I’d offer him 75% if you think he’ll be doing 75% of the work.
      Would you rather own 100% of an idea written down on a piece of paper or 25% of what could potentially be a profitable venture in the future (with a lot of hard work from both of you)?
      If your friend is comfortable with taking on a 75% equity stake in the business with the agreement that you’ll be advising and working with him on building the product, I’d go for that—and it’s actually a great deal for you too. Because in the end if you didn’t have him building the company with your help, you’d simply own 100% of an idea.
      So, it doesn’t need to be 75/25 but I’d really push you to figure out what the work balance (as a percentage) is going to be for the foreseeable future and go with an ownership that’s roughly equal to that. Don’t place much (if any) value on the idea because it really isn’t worth much of anything.. it’ll change shape so much before you get to a marketable product that you may not even recognize it.
      If after a few months (or a year), the work balance has shifted and isn’t what you expected it to be, you can always revisit the ownership in the company and adjust as needed for the new situation.
      Again, the most important thing to keep in mind in your scenario is that when you’re relying on a friend who possesses almost all of the skills you need in order to bring your idea to life.. you have to get him feeling engaged, invested, appreciated and fairly compensated for doing most of the work.

  • Mike

    Reply Reply January 21, 2017

    Read your article today…Wished I had seen it sooner.

    Had a friend want me to do a business with him, He had me invest financial resources in to the idea before it was incorporated or registered and it would be put into a savings account. Then decided because the market had changed he wasn’t going to pursue the opportunity any more. Left a sour taste in my mouth for trusting a friend. He kept saying trust me trust me..and when trust was broken, it was hard to stomach the feeling I had been played. I asked him about my capital and it was more like too bad so sad…i used it up.

    • Ryan Robinson

      Reply Reply January 22, 2017

      Ah, man.. that’s a tough lesson to learn. Chalk it up as a lesson well-learned about starting a business with friends. Especially around when when it’s smart to begin actually mixing finances—I’d always push for having mutual access to company bank accounts as a very early investor/partner. What’s next for you? Are you working on any other projects at the moment?

      • Mike

        Reply Reply January 23, 2017

        He had demanded capital for me to show that I was in as a sign of commitment…Then backed out after I sent him the money. I was pushing for him to incorporate the business and set up accounts, but he wanted to wait until he had another investor on board. The problem was that I warned him you are only pursuing one investor…He had a great idea for a real estate investment business as the real estate values were undervalued in Northern California at the time.

        The good news was that I saw how he acted so reactively to everything around him later on, and realized I would not be a good fit for him. I tried to ask him many hard questions and he always had a blame game going on. Couldn’t work with him as he was not teachable. It would have turned into a fighting game in the end.

        I am not sure what is next. It’s been a difficult season of trusting again and trying to rebuild what was lost. I have been looking for new opportunities in California. Again another friend wants me to work for him as he relaunches his business and this guy works more like me. He has a team around him that are counterbalancing where he is weak. But he doesn’t want me to put money into the company and just wants to hire me to help him. He is raising capital from outside sources and has a lot of good people that are coming around him from what I can tell. He has done a lot of due diligence but still am not in 100% as I still feel the burn of what happened to me. I have a lot of respect for this friend and have no problem serving a friend, but if I were to do a business again, I would want to know what the character is like of the people working with me.

        As a person who thinks word given, word kept, even when it is difficult, I may do what my dad did when he started his own business, kept control of a lot of the balls. He has never grown his business big, but knows exactly where his business is at all times financially. He has a lot of respect from people because everything is paid up in front and the company is very proactive, never reactive to situations. Or if I need investment partners to make it a reality, ensure I really interrogate the people coming to work for me. My greatest weakness is that I expect everyone to have the same values as I do and the discipline I carry to honor my word, even at great expense to myself. I found out many people say they will honor their word, but only when it is convenient for themselves. If they can fudge something, they will make all sorts of excuses of why instead of being responsible for their actions.

  • Anthony

    Reply Reply June 14, 2017

    Dear Ryan,

    My friend and i, want to open a supermarket which also include a breakfast store, the store (i mean the physical place) is owned by my friend, while each one of us will be paying 10 000$ so our start-up budget is divided 50% each.
    So regarding the profit margins for each one of us, what do you suggest ?

    Thank you in advance.

    • Ryan Robinson

      Reply Reply June 19, 2017

      Ah that’s interesting. So your friend (partner) already owns the building outright—or I assume has a mortgage on the space then?

      My opinion, despite you both putting in 50% of the startup funds at this point, is that your friend is actually more invested in the business than you are. If you’re using his store (that he already owns), he’s giving up the opportunity to have other paying tenants in that space. Maybe he even had another business in there previously—either way, he’s been paying property taxes and other state/local/federal costs associated with owning the building I’d imagine.

      What do you feel would be a fair profit split? I’d suggest talking to your friend honestly about this and seeing where you two land. Then—and most importantly—you should regularly evaluate that relationship. If after a few months of opening the store, your friend has been in once and hasn’t done anything aside from keep his initial investment in the business, you should renegotiate if you’re spending 80hrs/wk at the store by yourself.

      There’s no “perfect” answer to your question, but the pay distribution should eventually be broken down to reflect the amounts of work & reinvestment that are going into the business.

      Ultimately, I think starting out at 45/55 partners would be your best scenario (you with less equity), but probably not best for your friend. If you want to offer your partner a larger share of equity in the business (or if he suggests it), I think that’s mutually beneficial. That way, he’s being compensated more for his opportunity cost of relatively passive income he’d otherwise have from another tenant in the space—and the risk of owning the building even if your store closes in a few months. He still has to deal with the space and will incur costs after you’ve left if that happens.

      Are there any other factors we should be considering? Relationships, customers, deals, discounts, etc that either of you are bringing to the table that may affect this?

  • Anthony

    Reply Reply June 20, 2017

    Hey Ryan thank you for your support, what about if i am going to put a 15 000$ and my partner the owner of the property will be putting a 10 000$ as a start-up budget. Moreover,some of the considerations are,that the rent of the property in reality per month is estimated to be around 1600$ if an unknown person wants to rent the property. Regarding the assets/equipment that are available in order to open our breakfast/market store they are valued around 10 000$ they are already purchased by my partner.
    What do you think now regarding the profit margins?
    Thank you in advance

    • Ryan Robinson

      Reply Reply June 20, 2017

      [My personal opinion]: Important decision, yes.. but you’re overthinking this quite a bit. And the person you really need to be talking to about this is your business partner. If your partner also already owns the equipment for the business, that’s another set of assets he *personally* owns that’ll be depreciating in value over time with use.

      You also didn’t mention anything specific that you’re bringing to the table for the business in terms of unique value aside from your financial investment. Are you going to be present at the shop every day? Will that be your partner’s responsibility? So much of what I view as important in ownership of the company is WHO will be doing the work (and how that’s distributed) rather than just who’s put in what amount of money. The money is crucial in the beginning, but theoretically you could get the investment from anyone with enough money—or even a bank/other institution. The financial investment pales in comparison to the investment of time, work and sweat on a daily basis once you get started.

      So my question again… who’s going to be doing what?

      Ideally, you both have some different skill sets/strengths so that the division of labor can be relatively straightforward based on what you’re best at.

      But if you’re just investing financially in the business and won’t be there on a daily basis, 50/50 ownership doesn’t sound fair to your partner. However, if he doesn’t plan on being there often and you’ll be doing all the work (in his building with his equipment) then I’d be hesitant to support 50/50 for the same reason that you’re doing all the work in this case.

      Division of profit, especially in the early days, should be more of a reflection of the division of work as long as you have close to an equal financial stake in the business [my opinion]. Some would argue that since he owns the building and equipment already, your partner should own a larger share in the business.

      I think it’s negotiable, but you should both talk about this together and find a middle ground in terms of financial investment/division of labor that gets you as close to a 50/50 split in ownership as possible.

  • Anthony

    Reply Reply June 20, 2017

    Hey Ryan thanks a lot for everything really appreciated, just want you to know that we will be going to divide the responsibilities also 50% each, lets say we want to open the store for 12 hours per day i will be the manager for 6 hours and the same for him for the next 6 hours, so also a 50/50 split of responsibilities.In the future, ill be trying to get a deal done for our company that will be so beneficial to us ( could be considered as a very added value if it happens), another added value is that my brother will also be supporting us in our responsibilities but as a part time job “for free”, just to gain experience and doing me a favor.
    Thank you for your support.

    • Ryan Robinson

      Reply Reply June 21, 2017

      Awesome, glad it was at least a little helpful. Would you be up for reporting back here and letting me know how you end up dividing it after chatting with your partner? I’d love to hear.

      And definitely let me know if there’s anything I can do to help you guys with your business.

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