Buddies as Business Partners: Failures and Fruitfulness

Friendship is born at that moment when one person says to another: “What! You too? I thought I was the only one.”  C S Lewis

“DON’T ever work with your friends,” I have been told. “You’ll either break the friendship or break the business.”

I have been business partners with a few of my very good friends for many years now. I have also experienced two ‘failed’ partnerships. One former business partnership was broken for over 18 years! But I thank God that the year before he passed away; my former partner and I had the most beautiful reconciliation. In all these business collaborations, I have learned so much about friendship, business partnership and myself.

So, can friends run a successful business together? Of course! Many companies begin simply because close friends think of a great idea and go for it. Think Steve Jobs and Steve Wozniak of Apple, and William Hewlett and David Packard of HP. If we can’t partner with friends, who else should we partner with in business? If we can’t trust friends, who else can we trust?

Even if we started out as strangers, if we want to grow our business, strangers will become friends.

We certainly can do it all by ourselves – many successes have also come from individual effort – but we will be poorer as a result. Some people think that the only people we can trust are our own family members, but I am not too sure about that. (That will be a subject for another article!)

To make friendship and business thrive, we have to keep these things in mind:

Have a shared vision and values

If there is only one key factor that has kept my business relationships growing all these 25 years, it is a shared vision and set of values. This is often the aspect of business partnerships most taken for granted. For my associates and I, we have a common aim of making Meta Consulting an opportunity and vehicle to impact lives and transform organizations. Our shared vision is to ‘nurture value-based leadership to build great organizations’. We also base our work on our philosophy of Nurturing Values, Engaging Hearts, and Customizing Solutions.

Clarify and have complementary passions, competencies, roles and responsibilities

Running a business requires many competencies: marketing, operations, finance, sourcing, merchandizing and more. We need to have enough passion, talent and know-how to cover all the necessary areas of business. We bring both our strengths and weaknesses into any business.

One underlying fundamental for a successful partnership is having great mutual respect for each other. My partner and I have different personalities, strengths and weaknesses. I am a sentimentalist by nature, and while I work well with others, that makes me more vulnerable as I trust people more readily and tend to be more positive about them. To be honest, I have been burnt many times because of that.

My partner is more insightful, wise and pragmatic. So, he counter-balances and complements my weakness. That’s why I make it a point to consult him on every major business decision. He has a better sense and intuition about people than me. We will not make any major business decision unless we have reached a consensus.

I allow him to hold me accountable for any deviation in our vision or divergence from our values. He leaves me to run the business operations and day-to-day activities. He is less worried about the details as he is a strategizing, big-picture person.

This is one way we clarify the roles, responsibilities and expectations of the business relationship. Examine the strengths and weaknesses of yourself and your partners, and plan accordingly.

Find agreement in the business plan, communications and operations

Besides clearly defining the roles each friend will play in the business, we need to find agreement on the business plan including business strategy, products, services, decision-making processes and creative input, especially financial management.

Clearly outline the business proposition and what is expected of each of you so there is no confusion later. Some questions to clarify:

• What is the goal of your business? How do you define success?

• Who is your customer?

• What is your business model?

• How will you grow your business?

• How will shareholding be split?

• Who will run the business, and where?

• How much time will each of you devote to the business and what roles are you playing? Factor in each other’s concerns and interests before going into business. Discuss all these and clarify expectations early.

• How do you make decisions? Who has what authority and responsibility?

• What kind of communication system should you put in place to keep each partner updated?

With these processes in place, it will minimize misunderstanding, mistrust and misalignment.

Discuss money candidly

Many business partnerships among friends fail or fall because of financial management issues: making too much money or not making enough money.

For my partner and I, the first order of the day is our common perspective about money. Here are some ways we develop it:

We guard our hearts against greed. Profit-making is not the sole or primary purpose of business. Rather, we see it as a consequence and an outcome of running a great organization with a sound business strategy.

We treat staff members as business partners. We believe in profit sharing with all our staff whom we consider as partners in the business.

We are generous with our profits and contribute a substantial portion of our proceeds to non-profit organizations.

We are undeterred by financial losses. We do have some years of financial losses and disasters. But we are committed to make the business succeed, and so financial losses do not discourage us. We believe that with the right strategy and business opportunities, it will return to profitability.

Besides these financial perspectives, we also discuss specific and practical financial arrangements openly and candidly:

• How much share capital is involved and how much share does each person possess?

• How do we split the profit and loss?

• How much do we contribute to charity and non-profit organizations?

Over the last 30 years, we have generated and shared financial successes, as well as suffered severe financial losses. But we have experienced the unseen hand of God many times, and we are grateful.

Communicate and keep each other constantly updated

Another aspect of good business partnership is constant communication. We share perspectives and ideas so that we are on the same page on the big picture and the way we run the business. We update each other regularly on our activities so that we do not take each other by surprise.

Communicating does not mean we agree with each other all the time. We are not afraid to make our opinions known. We argue and fight over ideas, but we always maintain this mutual trust, respect and understanding for each other.

Whenever we have failed in our partnerships with friends, it was when we failed to communicate regularly and candidly. On both occasions, we had simply left all the running of the business to friends, and our own non-communication and non-involvement caused the business to deteriorate and fail.

Learn from and grow through conflicts

We find it important to focus on the issues when we are in disagreement, and take a problem-solving approach that emphasizes the issue at hand, not each others’ faults.

One source of conflict is each others’ habits. Talk through any irritating habits you might have that bother your business partners and friends. My partner and I have learnt to accept each other’s idiosyncrasies, and manage around them. We have come to accept them, lower our expectations and laugh at ourselves.

If your friend has a few quirks that bother you, those and your own bad habits may become an issue once you go into business. Examples are:

Punctuality. If your friend consistently shows up late, how will this affect your business?

Procrastination. If constant delays and postponements become a habit, it will also create problems. It may be all right in friendship but in business, it will affect productivity and profitability.

Disorganization. If one of you is forgetful and loses documents, misplaces things and frequently misses appointments, these can severely affect how well he or she does business and works with others.

Confront problems

Issues must be confronted openly and candidly, not swept under the carpet. My partner and I are not afraid to agree to disagree. We keep the bigger picture in mind, and value relationship above all else. Even if your group fails in the business or someone must leave, the primary focus should be to ensure that our relationship is preserved.

It is important that to have a mediation or arbitration clause included in the business partnership contract. In situations when the conflicts become intractable, a third-party professional mediator can help us resolve it more amicably than ugly fighting in court. This is a better way of resolving irresolvable conflicts between friends who are partners in business. However, this is not always possible. When my first partnership split up, we did not reconcile until 18 years later, just before my former partner’s death. We fought over how he abused the staff, and we eventually parted ways. Thankfully, we were reconciled before he passed away. He finally apologized and asked for my forgiveness after 18 years!

Issues must be confronted openly and candidly, not swept under the carpet.

We were all there for his funeral. I conducted the funeral, and another friend gave the eulogy. It was one of the most wonderful and meaningful experiences of my life!

All these conflicts and periods of relational friction have deepened my understanding of business partnership, friendship and myself. The most important lesson from conflict is the ability to recover, growing through it and not holding any bitterness. So the thought that friendship and business are incompatible is not true. Starting and growing a business with a friend can be a fun, challenging and profitable venture, and while it can also wreck havoc on the friendship, adhering to sound principles will minimize that. Indeed, it can bring more joy and success in both the friendship and business.

After experiencing various periods of both downturns and losses, and profit and joy over all these years, I will never choose to run any business alone!

This is an adapted excerpt from John’s latest book, “Dim Sum Leadership: Your Second Serving”. His previous books, Dim Sum Leadership, Dim Sum for the Family, and Smiling Tiger, Hidden Dragon have won rave reviews.