To start a business with my friend

[Pacificplaza]

I have been friends with her for over twenty years, ever since we were teenagers. We've had some ups and downs over the years but have maintained the friendship despite having lived in various parts of the country and abroad.

We've been talking for a while now about starting a business selling a product that we're both very passionate about, and that we'd make ourselves (to begin with, until if and when we expand). There's a market for the product and she has contacts that would mean we'd have a good chance of getting it into shops. There no reason to think it might not do very well indeed. Which, while this is very exciting does also scare me. I'm worried that once money becomes involved that there's the potential for disputes and I'd hate to lose a friend over something like that. Initially the workload might not be spread evenly either, as she has more free time than me at the moment as I can't afford to leave my job until the business starts turning a profit which could take ages, so I'm worried she might resent the fact I'm not able to do as much to start with.

What's the best thing to do here? Should we have a legal agreement drawn up? I've never done anything like this before so really not sure what the done thing is. Can anyone advise please?

Surely you would sit together and write a business plan and work out how you would share payment depending on input?

So how do we measure input - do we record the number of hours we individually spend on the business kind of thing?

We've got a business plan but haven't covered that aspect yet - I guess I'm trying to get an idea of what is commonly done before we approach writing that bit

i did this with a friend and nearly lost the friendship over it. Please, please , please draw up a partnership agreement which clearly states the terms and conditions for both of you. Resentment over workload can kick in very quickly, especially if things are not going well. A partnership agreement will also clearly cover liability if the business folds as you will be jointly liable for any debts. Please contact your local business gateway/business link/Chamber of Commerce for free advice.

It's the quickest way to lose a friendship, so you need to work it out carefully beforehand.

Are you making a product, eg jewellery? If you were then there's the problem both of design and production. If you were to each design and make your own, then maybe a record should be kept of what's made so that you can each get a profit.

Your business plan has to lay down exactly who gets paid what. Don't do it on the basis of friendship.

I absolutely would not even consider this. Two of my very good friends, who have been best friends since they were about 10 started a business about 3 years ago. They haven't spoken for over a year now and I doubt they ever will.

Oh goodness this is what I'm worried about! No it's a food/drink product so no design input as such, just production and admin. I will definitely get some advice from the business gateway/business link. Surely there's a way it can work between us though? If we're really careful about agreeing how things will work in advance?

Obviously by admin I mean things like sales marketing etc etc as well

Lots of businesses started between friends succeed. And lots don't.
Lots of startups with one person succeed. And lots don't.
Get a contract drawn up and go into it well informed, with your eyes open and a clear definition of what you expect from each other. There's lots of help online and via government initiatives. It's hard work starting up any business but is worth it. Good luck!

There's definitely a way to do it, plenty of folk have successfully gone before you.

The way to do it, is define every aspect of the partnership,
Have you heard of the phrase "fair isn't the same as equal"? Bear that in mind.
One of you may put in more money at the start. One may have more time to commit. One is maybe the business-brain, the other the design guru. It's fair all of this is recorded accordingly. But input doesn't have to be equal. Each of you will input a fair contribution based on what you agreed. It won't necessarily be numerically equally (whether hours, money invested, % profit etc)

Starting a business is like a marriage, but ending one is like a divorce..

I have always tended to work in family businesses - and, often, the family members don't even speak outside the office.

I would see an accountant about drawing up the initial partnership agreement, (or setting a company up - as appropriate).

I have lots of 20 year plus friendships - but wouldn't go into business with any of them.

Good luck, whatever you decide.

Thank you, I'm going to get some advice tomorrow about getting something drawn up

Can you agree different roles so the split of work is clear? So one does production, other does admin and marketing for example?

Chicken possibly although my feeling is that it's unlikely as we're going to be free at different times, so more likely that we'll both be juggling everything just whenever we can!