The pros and cons of going into business with a buddy

I’ve built five companies in my startup career, four of which I started with close friends. It’s quite common to build a company with a close friend: you get together, think of a cool idea, and decide to get started. Why not, right? While it can be extremely fun to start up with someone you’re close to, it’s not without disadvantages.

So before you and your friend get started, take the time to analyze the good, the bad, and the ugly side of starting a company with a friend.

The good

1. You have a friend in the trenches. Entrepreneurship can be lonely. My friends who work 9-5 during the day tend to party hard at night. I can’t keep up with that lifestyle as a 24/7 entrepreneur. When we do hang out, I just want to talk about ways to improve my startup — whereas they want to talk about anything but work. That’s why it’s so fun to start a company with a friend. You have someone you can confide in and relate to, at times when not everyone understands.

2. Your friendship sets the tone for culture. Good company culture keeps morale high, attracts top talent, and keeps employees loyal. My co-founder and I often conduct interviews together so that the prospect sees our dynamic interactions and feels how fun it is to work on our team. Because we’re friends, we don’t hesitate to throw a get-together at my place or a poker night at my co-founder’s place.

3. You understand each other’s strengths and weaknesses. It was easy for my friend and I to assign roles and responsibilities, because we knew each other so well. He was emotionally stable, organized, and focused on the big picture, so it made sense for him to be CEO. I was the hustler with the do-whatever-it-takes attitude, so it made sense for me to lead the CMO position.

The bad

1. You have similar networks. Friends usually hang out with the same people and will thus have the same network. This is bad because startups can succeed or fail based on who you know and what introductions you can get. My co-founder and I make a strong effort to go to events (he goes to investor-related events while I go to client-related events) in order to expand our networks.

2. It’s difficult to take orders from a friend. People are accustomed to taking orders from their boss — not their friends. This can become very unpleasant, especially if you’re not communicating tasks in the way that your co-founder likes to receive them. To keep my co-founder and I accountable, every week we get together with the whole team and report our accomplishments and issues. This eliminates the need to give orders throughout the week.

3. It’s easy to take advantage of the friendship. Because my co-founder is my friend, he feels shy about pressuring me to work harder, which can become a vicious cycle: I slack because I feel comfortable around my friend and my friend doesn’t pressure me to work harder because he doesn’t want to mess up the friendship.

4. You don’t want to hurt each other’s feelings. There’s no easy way to do it, but if your co-founder is slacking or missing milestones, then you have to call him out. A founding team that is brutally honest with each other and that can respect feedback has a much greater chance at success.

The ugly

1. The stress of failure is compounded by your friendship. Startups are full of stress, failures, and demoralizing moments. In a previous company, my co-founder failed to raise funding within the given timeframe. It was a very tense time because cash was extremely low and the company would fail if we didn’t raise capital immediately. Similarly, I’ve had moments when I’ve gone through a dry spell closing deals. It’s hard to console a friend when your business’ future is at risk.

2. Failed businesses can lead to broken friendships, and vice-versa. I have seen several failed startups lead to broken friendships. Many times, the founders blame each other for the failure. In other cases, problems that start as personal can end up affecting — or even destroying — the business side. My failed startups with friends have actually led to stronger friendships; it’s all about the level of respect you have for each other. But if you don’t communicate this from the start, it can easily go the other way.

5 Questions to ask before starting up with a friend

Would I do this again? Absolutely — though I always proceed with caution. Here’s what I look for in a friend before I ask him to join my team:

  1. Do we have complementary skills?
  2. Do we have different networks?
  3. Do I trust and respect his work ethic?
  4. Do I trust and respect his decision-making abilities?
  5. Does he have previous startup experience?

Don’t start a company with a friend just because you think it’ll be fun to work together.  Start a company because you believe in what you’re doing — and because you each bring a unique skill set and network to the table, improving your chance of success.

Jun Loayza is the Chief Marketing Officer of VoiceBunny and Voice123. He is also an accomplished lifestyle entrepreneur and the creator of the Drop Ship Domination System. In his entrepreneurial experience, Jun has sold 2 internet companies, raised over $1 Million in Angel funding, and lead social media technology campaigns for Sephora, Whole Foods Market, Levi’s, LG, and Activision.

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched#StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.

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