Best friend, worst business partner?

Your best friend has great work ethic, unquestionable integrity, skilled in managing a company and appears to have all the qualifications of a business partner. You know best, after all, she is your best friend. But it’s a common dilemma: do best friends turn out to be the worst business partners?

Reality shows different stories. Some of the best companies in this country were born out of friendships (or at least were nourished by friends and business partners.)

There’s SGV & Co., of course, with the legendary business partnership between Wash Sycip and Fred Velayo, who were classmates at the Burgos Elementary School from Grade 1. Some other friends and business partners featured in the Philippine Daily Inquirer through the years are those of Precy Florentino and Kuh Ledesma (Music Museum Group, Inc.), Global Wireless Connections by Jeremy Obial and Arthur Policarpio, and Marvin Agustin and Raymund Magdaluyo’s Sumo-Sam restaurant.

Yet the apprehension abounds. I asked three successful businesspersons to guest post on this, and also a professional business consultant. Here are their opinions:

Pacita U. Juan
Figaro Coffee Company
Small Business Entrepreneur Awardee, Ernst & Young

Save the friendship! Hehe. Seriously, it does NOT work in most cases. Friends are better kept as friends.

Friends may go into business together but ground rules must be set. Who will handle what? Who is the active partner? Who will be passive? What set of skills does each one have which is needed by the business? Have a skills assessment session.

Wilson Ng
Blog: http://www.ngkhai.net/bizdrivenlife
Ng Khai Development Corporation
Winner of Ernst & Young’s Entrepreneur of the Year Award (2004)

Other than the caveat on going to business with a friend as partner, there is also the caveat in going to business with your spouse. My wife and I have been together managing the family business for 15 years, and we are still doing okay.
 
Of course, the main benefit of working with your friend or spouse is that you know each other very well, and therefore responsibilities and expectations are very clear.  Going into business is also a matter of trust, and doing it with somebody you feel can trust more is a time saver!
 
When I work with my spouse, I don’t have to explicitly say everything. We generally understand already each other halfway down the statement. In short, if you need something done from one to 10, you just say from one to five, and she generally knows where to connect and continue! I can work on a project, and she can take over from it, and vice versa without much explanation, since we already know each other’s style and expectations.
 
Many businesses with friends are done on a handshake, and no need for formal contracts.  Friends are also more willing to be flexible, and considerate.
 
The main downside is that of course issues on business or money, especially when things are not smooth going, or sometimes when things are too smooth going, can also be damaging to the friendship or marriage. When you have arguments over business, or of things taken, that adds another strain to the relationship.

Henry Ong
President, RFP Phils.

People want to partner with friends because of the trust and familiarity in the relationship. But very often, they forget that the business needs skills and sometimes their partners don’t have those skills resulting in unequal allocation of responsibility. This causes money issues and distrust later on. Sometimes two friends may have a successful business but over the long term, when family members of each partner are involved like the wife and children, that’s normally where the problems start. So, it’s important to weigh the costs of breaking friendships over its benefits before entering into partnership. Doing business with friends is better than having friend as partner in business.

Art Ilano
Strategy Professor
UP College of Business
Former editor-in-chief of SME Insight

I’ve seen quite a lot of businesses that are being run by friends. I think it can work out pretty well. Here’s the prerequisite though: early on, it should be very clear that “business is business,” and that they don’t take business with them when they’re doing friend stuff, because you are BOUND to disagree on certain matters sooner or later. So what’s important is that it will be very clear early on that any disagreements should not carry over to buddy moments. They’ll have to learn to compartmentalize.

The next problem will be who takes which position in the business. This should also be very clear from the start, so nobody feels bad if one gets ordered around or whatever. In one successful example I’ve interviewed for instance (Wizard of Ads, run by school mates), they do have official titles and of course one has to be the President and all that, but when they do decision-making, it’s committee-like. Once decisions are made, tasks are then farmed out according to their roles.
Works great and they have strong bonds even after the business has grown.

Hope these help everyone in this situation. Keep on dreaming, Pinoy entrepreneurs!

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