Most Friends Don't Make Good Business Partners. But Here Are 3 Things You Can Do to Change That. If you and your friends are thinking of starting a business, there are some ground rules you'll need to discuss first.
By Jason Feifer Edited by Mark Klekas
Key Takeaways
- When friends form companies, they're often afraid to lead each other.
- It can be hard to create rigid structures and processes.
- How to use the "disagree and commit" method.
It can be fun starting a company with a friend — unless disaster ruins both the company and the friendship. But good news: You can avoid disaster.
You just need to treat the company like a company — and not like an extension of your friendship.
Here are three ways a company is not like a friendship, and how to balance both.
1. Friendships don't have leaders, but companies do.
When friends form companies, they're often afraid to lead each other.
I heard an example of this recently on my podcast, when I spoke with a guy who co-founded a marketing company with friends. The experience is a lot of fun, he said, but it can also be frustrating — because when they disagree on something, nobody makes a decision.
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"I think there's some hesitancy for any one individual to micromanage or be a little too firm in their point of view," he said, "because we want everybody's voice to be heard."
Here's my diagnosis: His CEO is too uncomfortable being CEO.
That's understandable! Think of it — friend groups don't have official leaders, and nobody wants to boss around their friends. But in a company, someone must make decisions. That person should be thoughtful and open-minded, yes, but sometimes the most generous act is to end discussion so that everyone can move on.
This isn't the CEO's fault. And it isn't the team's fault. It's just how their dynamics are playing out. But if the group wants to move forward, I said, they need to have an open and honest conversation — and because of the group dynamics, the friends can step up and empower their CEO to lead.
They should tell him something like this:
"Look, we're all friends and we value our relationships. But in this structure, there is a leader — and it's you. We may disagree with you until a decision is made, but you make the final call and we're OK with that. Anything else will be chaos."
2. Friendships don't have structure, but companies do.
When friends form companies, they're often afraid to create rigid structures and processes.
Again, I saw this happen with the guy on my podcast.
"We had a really long, drawn-out meeting where we were covering a lot of ground," he said, "but we were not doing a very good job of taking any notes or putting anything down that would allow us to take action on the conversation after the fact."
This is also a natural problem. Friends often feel that their relationship is an asset — that their company benefits from a freewheeling, highly comfortable, creatively open rapport. And they're correct in some ways: Friends are proven partners, and they might support and compliment each other faster or more easily than strangers-turned-colleagues.
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But here's where they're wrong: Friends often feel like structures and processes will stifle their creativity. In reality, structures and processes foster creativity — because they create the room for things to build and grow. If a company has no structure or process, people's creativity will never bear fruit because they'll be so busy talking that they won't have time for doing.
If friends have a meeting, and there's no system for acting on their decisions, then those friends didn't spend their time productively. They just wasted their friends' time!
3. Friendships can avoid certain subjects, but companies can't.
When friends form companies, they often don't know how to navigate the hard stuff.
Why? Because not all friendships are built on hard stuff. Some friendships are just born out of shared interests or experiences — but they're not battle-tested.
What happens when money gets tight? What happens when hard decisions must be made? What happens when someone screws up?
If your friends are also your colleagues, you should discuss the hard stuff early — and have a plan for how to navigate it.
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Here's a plan I love: At the company Smart Passive Income, cofounders (and friends) Pat Flynn and Matt Gartland do what's called "disagree and commit." This means they're giving themselves permission to disagree with each other before a decision is made — but once one of them decides, the other will commit to making it a success.
In other words, it's the opposite of "agree to disagree" — where people will just walk away from conflict without resolving it.
"If we screw this up and experience founder fallout, then this just goes kaboom," Gartland told me. Because they respect the stakes of their relationship, they also respect the power of their decisions — and the importance of navigating difficult terrain together.
In these three ways — empowering a leader, creating structure, and planning for hard things — friends can maximize the best of their relationships while also formalizing a professional way forward.
Friends really can run great companies together. But they must run it like a company — and not just a friendship.
