Most of us, at some point in our lives, have been sitting around talking with friends when someone says, “Hey, that is a great idea! You should totally build that (start that, try that, do that, open that, make that, create that, etc.).” This simple validation of an idea could be the spark that is needed to launch a successful business.
Going from this simple validation to actually creating a business, however, is incredibly difficult — and why 99% of business ideas never make any money.
Starting a business can be difficult, but it does not have to be impossible, and you do not have to go it alone.
Bootstrapping your business by yourself makes for a great success story, but it is not the only way to start a business, nor it is the best way.
If you are serious about starting a successful business, you should start a business with your friends.
Starting a business with your friends is unique because you already know each other’s knowledge, skills, and abilities. Depending on what your idea is, and what type of business you are running, these abilities will closely define the roles of each member of the business. These abilities will likely also decide the position that each friend will play with your business.
For example, I have a good friend who is studying to get a Ph.D in wireless communications. He may not make the best CEO or CFO, but he would be awesome as the chief technology officer. The same goes for my friend who is in finance. They would make a great chief financial officer, but a terrible IT guy.
Deciding the roles of each person will be key to laying the groundwork for your business. The more clear and transparent you can be in setting up your business, the easier it will be to function within the roles. It is also crucial to be sure that every member of the business is on the same page. Communication amongst friends should be the backbone of your business, and should allow you to communicate better than strangers.
Vet Your Idea
Starting a business with friends often requires a “vetting” of an idea before the business even starts. A business should be created to solve a problem. This could be to design a product that solves a problem, or to provide a service that solves a problem. Look at the startup College Reviews, which is trying to help solve the problem of figuring out which college to pick based on student reviews. Look to solve a problem.
Regardless of what type of business you start, it must solve a problem, and it must solve that problem better than anyone else.
Having friends involved in your business allows you to thoroughly vet your idea and ensure that it truly does solve a problem, before moving forward with the creation of an actual business.
Good friends are those who can be honest with you, and those are the ones you want evaluating your products. Honest feedback is crucial in the initial startup phase of your business.
The more feedback you get in this phase, the easier your research and development will be.
This is the one phase where a business among friends turns south. The people who are closest to you know how to press all of your buttons, and can often hurt you the deepest. Starting a business among friends can be an amazing experience, but it can also turn ugly in a hurry if not managed properly.
You need to be transparent and clear from the beginning. If you plan to incorporate your business, then you should all be in agreement on the roles and percentages of the various members. Shady deals down the road will be much more difficult if the original business documents are in proper order, and everyone is in complete agreement.
A great way to ensure this is setup properly is to create an LLC for your business or investment. This will allow you to spell out everything in advance so there are no questions about money and responsibility.
Communication is also key. Be sure that you are having daily, weekly, and monthly updates and planning meetings to keep each other informed. This is especially true if you are not physically located in the same space. Letting each other know what is going on is a crucial part of a successful business startup.
Have you all seen the movie “Social Network”? Don’t let that happen to you! Although, they are all incredibly rich, so maybe it was not so bad after all . . . .
Editor’s Note: If you liked this article, and need some more motivation, check out How to Become a Millionaire by 25.
DJ works in financial services at a large public university. He lives in the Southeast with his wife and young daughter.