In the new film "Like a Boss," Tiffany Haddish and Rose Byrne play friends who run a cosmetics company. When they get into debt, a mogul (Salma Hayek) buys a large share of their company and aims to reshape it to her liking, which threatens their friendship.
Laughs aside, the story highlights the inherent risk of doing business with a friend. According to the Small Business Administration, fewer than 80% of businesses survive after their first year, and only around 50% survive five years or longer. So if you're working with a friend, you not only have to navigate the challenges of running a business, you have to figure out whether the friendship can survive even if the business doesn't.
Certified financial planner Lazetta Rainey Braxton, founder and CEO of Financial Fountains, says that forming a business is comparable to getting married. So get to know your partner first. "You have to think about the time of dating to have a better idea of what that potential partner's objectives are, and where they are in their career and entrepreneurial spirit."
The good news is you can protect your business as well as your friendship if you heed some expert advice.
Joanna Rosario and Leslie Valdivia launched Vive Cosmetics in 2017, a few years after meeting through their husbands. The company nods to Hispanic culture via lip shades named for legendary artists like Rocío Dúrcal and Selena Quintanilla-Pérez and with colors such as Villana and La Patrona.
If you're thinking of going into business with a friend, really evaluate their skills and how those could complement your own, Valdivia suggests. "Think about what are your strengths, and find someone who has different strengths. Joanna does different things than I do," she says. "And you do different parts of business with a different type of brain."
Braxton refers to this as "the yin and the yang," and says: "Maybe somebody is better in marketing and the other person is better with finances. Somebody might be better with compliance, and the other maybe fits better with operation."
The sum is better than the parts this way, she says. And this is the beauty of bringing your authentic self to work. "You can feel really great and bring what you do well, and what you don't do well, the other person has your back," says Braxton.
Braxton says it's important to figure out what you would do if the business doesn't work out. "That's scary for people, but you have to think about it. Are you willing to jeopardize your friendship? Do you have another stream of income or other talent that you'll still be OK?"
Focus on everyone's ultimate goal, Valdivia suggests. "What's the North Star for everybody on the team? Make sure that's the guiding light." And, as much as possible, take out the personal part: "Sometimes you have to remove yourself from the feelings and think about what's the end goal here," she says.
When necessary, make sure to voice your concerns to your partner, and share your ideas. "We have really good communication. I think that's really important in a business," Rosario says.
While you can work out challenges impromptu in a friendship, you're dealing with different stakes in a business, so you'll want to have everything laid out in writing. "You have to have your articles, your operating agreement," says Braxton. "How are you splitting proceeds, how are you handling clients. … What if you don't want to do it anymore and you want to exit. It's really a prenup."
Rosario says she and Valdivia started with the foundation of a partnership agreement to make sure they each had their roles. "Because when it comes to friendship, there can be a lot of gray areas as to who's responsible for doing what and how the roles are going to play out," she says. In their case, Rosario handles the shipping and the logistics of packaging, and Valdivia handles the social media.
You and your partner also need to align in all the right areas. While a lot of people may have interest in your idea, she says, you have to consider their work ethic and capacity. "To go on that journey with someone, you trust and believe what they are capable of bringing, and don't mind holding them accountable. It gives you a greater chance of success," Braxton says.
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