Doing business with a friend

Three friends went into business for themselves. The first one said, “I put up 65 percent of the capital, so I’m the president and chairman of the board.”

“I put up 30 percent of the money,” said the second, “so I’m appointing myself vice president, secretary, and treasurer.”

“Well I put up five percent,” pointed out the third partner. “What does that make me?”

The chairman said, “I’m appointing you vice president of music.”

“That sounds mighty fine,” said the third man, “but what does it mean?”

“It means that when I want your advice, I’ll whistle.”

There is a saying that goes this way: “It is better to do business with a stranger and then become friends than to do business with friends and then end up as strangers.”

Many of my friends today are people I used to do business with a couple of years ago. I have learned from them, and perhaps they have learned from me too. I still do some businesses with them and the one important thing I adhere to is that friendship and relationships come first before anything else.

Yes, it is better to do business with a stranger and become friends than to do business with friends (or relatives) and then end up as bitter enemies in many court cases as well.

How familiar the tales when the business was starting, the friends really worked hard to make the business grow. They sacrificed and channeled their energy to grow the enterprise. But when the business grows, expands and become famous, with so many other people from the outside offering unsolicited advice and providing soft whispers, the relationship sours and friends become enemies.

There is now mistrust. There is competition. Business ethics and integrity fly out the window. Copy the database. Quietly and covertly establish a conflicting business. Pirate the existing personnel by offering them a higher pay. Secretly meet with suppliers and vendors, and then court the existing clientele because war is declared!

Many businesses start with friends, but how do you start a business with a friend and sustain the business over the years while remaining as friends?

Starting a business with friends could just be as meaningful or toxic, and in my experience it is so far from the fantasy of immediately growing the business, earning billions, being interviewed in TV business talk shows as the grind and the grit have to be there dealing with the unsavory nuances of starting a business.

Here are a few ideas that may help guide business startups of friends or relatives entering into an enterprise:

1. PUT EVERY AGREEMENT DOWN IN WRITING.

Never trust memory. It fades and it changes over time. Have a third party present to serve as the corporate secretary and operate all meetings and transactions professionally.

2. DEFINE ROLES. (CLEARLY)

You and your partners may be bouncing ideas off each other all day, but your responsibilities should be clearly outlined so that you do not step on each other’s toes or overlap each other’s function. This only causes confusion not only to the partnership, but also to everyone working with you.

3. TAKE TIME TO BE FRIENDS AND NOT AS PARTNERS.

You may think that all those obscene hours put together in the enterprise is more than enough time spent together and you could be wrong. Business requires a high amount of attention and adrenaline, and conflicts are part of business. Take time off and engage in other activities and DO NOT DISCUSS BUSINESS when you do. Talk about other things and interests, you used to have them and that is why you became friends didn’t you?

4. TAKE TIME OFF TO BE APART. (NO GUILT)

I would suggest that you do not see each other on weekends. Take time for yourself. Solitude is very important for one’s emotional, physical and spiritual health. You need a change of scenery and all because that old cliché rings true – familiarity breeds… you know the word that comes next.

5. KNOW WHAT IS WORTH FIGHTING FOR AND LEARN HOW TO DISAGREE PROFESSIONALY.

When friends work together, when family members are involved, the volatility of emotional outbursts is always higher than strangers who know how to restrain themselves properly. Conflicts will always be part of any business, so learn how to handle conflicts in a professional way without putting so many personal drama and emotional attachments into it.

There are so many other ideas and this column does not provide adequate space for them, but the gist is that at the end of the day, relationships should prevail over gains and interests.

I have always been willing to “lose” my side of the profit equation, but would never be willing to compromise on breaking the friendship because the prospect of making money in the future will always be there. But I would be so careful not to compromise on ethics and propriety so as not to be accused of gaining undue advantage at the price of a partner’s loss. And maybe this is why I still have them as friends over the years and the trust factor is as high as ever.

Here’s the deal. After all is said and done, money is still the acid test of character. The foundation of doing business with lasting friendship is built on the character of the partners and not just their skills. Build on the character as well as the business as this will be more profitable in the long run.

(Experience two inspiring days of leadership training with Francis Kong in his highly acclaimed Level Up Leadership on May 17-18 at the Shangri-La Hotel Makati. For registration or inquiries contact April at +63928-559-1798)