Author: Tom Aranow, Harrington Daniels Advisors
I would bet that in every community in the country there are at least two friends who are considering going into business together. They like each other, have similar values and every time they get together they have fun. What they might not know is that being in business together can be more stressful and more dangerous than doing business with strangers.
Part of the problem is that the rules of friendship and the rules of business relationships are very different. Friendship is all about emotion and compromise. You defer to me from time to time and then I defer to you. Being in business is all about making the right decisions at the right time.
In business culture we often hear the words, “it’s just business” as a way of explaining or excusing a choice based on dollars and cents rather than friendships or emotion. When we describe an executive who holds everyone and everything in business at arm’s length we might say “He’s all business” when what we mean is that he gives no quarter and considers no emotional compromises in making tough decisions.
As much as friends say and promise that their decisions and their attitudes will be all business in the workplace, they won’t. There are some real ironies here, all of which are created by misguided, unstated or conflicting expectations. For example, friends might assume that they should be able to confront almost any issue honestly and openly. But the truth is that friends are more likely than business associates to be so sensitive to each other’s feelings and may do just the opposite. They may refrain from saying things that simply must be said to keep a business productive.
Consider also that friends are the people most likely to enter into business relationships without articulating their expectations. In partnerships based on friendship there is a pervasive ethic that assumes friends are supposed to trust each other. As such both sides often worry that negotiating the details of a contract may seem unnecessary and even disloyal. As every business lawyer knows well, when important issues aren’t addressed, assumptions are made that lead to trouble, dissension and the dissolution of a partnership that may be worse than the most hostile divorce.
What then should you do if you are one of the two people we referred to above, the ones that like each other and want to work together? First, make a pact with each other that the company will live by the rules of business and not friendship. Make every issue fair game for open discussion. Next, before you create your partnership agree that confronting and articulating all of the important issues on paper in a contract or shareholders agreement, which includes a process for resolving disputes, is neither disloyal nor an indication of distrust. It’s a business necessity that may prevent hard feelings and misunderstanding down the road and that may just preserve your business and your friendship.
Tom Aranow the Senior Advisor for Business Strategies at Harrington Daniels Advisors, in Grafton, and Kohls Group Consulting in Pewaukee. He can be reached at 262-376-9507 or by email at tom@hdadvisors.com