The dos and don'ts of founding a business with your best friend

Last updated: 5 August 2024. 

If you are an entrepreneur (or a budding one) there’s a good chance some of your friends are too.

And if so, batting business ideas back and forwards between you will be second nature; riffing excitedly together off those lightbulb moments, thinking how good it would be to actually make a go of it together...

You know their skills. You have that shorthand that can take years to build. You could spend more time with them, potentially sharing a great journey and the success you’ve always dreamed of.

And it's just as likely you will hear that nagging doubt ring in the back of your head: “Never work with friends”.

Just like working with a romantic partner, working with a good friend can bring you closer together, or it can ruin the relationship.

Here are the dos and don’ts that can be the difference between a business and a friendship built to last or heartbreak in both.

The dos

1. Set some ground rules

The first “do”, the most important, and one which sets the foundation for the rest: set some ground rules.

Before you get started it’s absolutely crucial to your chances of success (and your sanity later) that you get rules established and get them in writing. A road map for the next one to five years of the venture.

This not only gets you properly considering the practicalities lying beyond the romance of your big idea but it formalises these responsibilities and provides a framework that will minimise any ambiguity and acrimony, should things not go according to plan.

An Agile Partnership (aka co-founder prenup) is a sensible solution. This ensures that everyone knows what they are expected to bring to the table and that rewards are proportional to contribution and agreed personal milestones.

Awkward conversations need to be had; sobering realities acknowledged- but this mild discomfort at the start can prevent a lot of pain in the future.

2. Establish clear roles at the start

This follows on from the first tip: clearly define your respective titles and responsibilities at the start of your venture. Clear demarcation here helps your business run smoothly and lessens the potential for confusion- even power struggles- as your business scales

3. Agree on your end goals 

An exit strategy is as important as the business plan itself. It’s vital to align your expectations on how things will be built, how they will be run, and how you will eventually leave it.

A formal, legally binding agreement - even as far as separation and buyout clauses to protect both parties - not only staves off legal wrangling but can help preserve the friendship too.

4. Set a conflict protocol

Personality clashes can be poisonous to a working environment, not least in the pressure cooker atmosphere of a startup. And the candour of a close friendship can add further fuel to the fire.

Luckily, if a conflict protocol is agreed upon at the start - a plan in place for when disagreements arise - this danger can be mitigated.

5. Communicate often (and never assume)

The shorthand you share with your friend can be a double-edged sword. It can be easy to plough on assuming you know what your partner is thinking and that you are on the same page.

Silence just breeds confusion, and confusion can come with a heavy price. Keep the lines of communication about everything open. Especially the awkward things…

The don'ts

1. Team up just because they're a friend

If your choice of startup partner is purely based on the fact that you are friends, not a fundamentally sound business case, then it is doomed to failure.

Personal and social compatibility does not necessarily carry over into the workplace.

In fact, it can often make bad situations worse.

If your potential partner is someone who has trouble communicating, or if drafting your co-founder prenup is already exposing fault lines - then walking away now is probably the best call for your bank balance, your blood pressure and your friendship.

2. Be too casual

During working hours it’s best to keep an eye out that you don’t bring too much of the chummy friendship dynamic into the workplace. Indiscipline, lack of focus and sloppy business practices can infect the workplace culture and be tough to eradicate once they have taken hold.

Be careful to draw a firm line between the business and the friendship when you have your founder hat on- even so far as keeping your personal email for personal matters and business emails purely business.

3. Let business take over the friendship

The flip side to that is not to let the business take over and subsume the friendship itself. Set time aside to socialise, even if you are already spending much of your waking days with them!

There are more important things in life than money and success, and friendship is one of them. Keep that time aside to tend to the friendship too, even when you might not feel like it. Oh, and try your best not to talk about work!

And lastly...

4. Listen to the naysayers

The “don’t work with friends” adage was no doubt some hard-won wisdom for many entrepreneurs and their fledgling business ideas. But that doesn’t mean you will be the same.

Many thriving businesses have started from a friendship and what is an entrepreneur if not someone who refuses to be told what can and can’t be done?

If you and your bestie are ready to go into business then make it official.

Set up your limited company, design your co-founder prenup and take care of company admin all on Vestd.

Book a free consultation to find out more.