If you have a shared vision, starting a company with a buddy can work out well. But watch out for the pitfalls
DIANNE RINEHART
Special to The Globe and Mail
October 10, 2007
If life can come full circle by the time you're 30, then it certainly did for
Eryn Green and Tamar Wagman. The two
Toronto women first met as toddlers in nursery school, and three years ago teamed up to launch a baby-oriented small business together."I never thought in a million years that we would go into
business together," says Ms. Wagman, 33, of their lifelong friendship. "We didn't sit there in nursery school writing up a business plan!"
Still, when the inspiration hit for their Sweetpea baby-food company, it seemed a natural fit for their skills: Ms. Green had just spent five years writing business plans for other companies at Ernst & Young, and Ms. Wagman, whose background is in hospitality, had recently had a baby and was frustrated she couldn't find healthy, flavourful baby food.
As well, each woman was at a crossroad: Ms. Green wanted to work for herself and Ms. Wagman had just left her job with a catering company and was looking for new opportunities.
The Globe and MailOver lunch one day, Ms. Green told Ms. Wagman she was looking for a new challenge. "You should make baby food," her friend replied, "because what's out there is horrible." At the time, Ms. Wagman and her chef husband were making their own baby food and freezing it in ice-cube trays.
The two women began doing research and quickly realized that the market was ripe for an organic, preservative-free baby food frozen in 29.6-millilitre (one-ounce) cubes, so parents could pop out the exact amount needed.
Still, they were surprised when their idea was applauded by friends - though the notion of pals going into business together was not.
"Everyone warned us against it," says Ms. Wagman.
Indeed, going into business with friends can be problematic for entrepreneurs, experts say.
"It can sometimes get in the way of making good business decisions," says Elspeth Murray, who teaches entrepreneurship at Queen's School of Business in Kingston, Ont.
"When you complicate the business with friends or family, all of a sudden it's not just business relations that are at stake, but friends, thanksgiving dinner, the family network - whatever," Dr. Murray warns.
"One of the biggest questions is, how will you maintain the friendship if the business doesn't go well, or the business if the friendship doesn't?" she asks. "You have to have that conversation up front."
Stewart Thornhill, who teaches entrepreneurship at the University of Western Ontario's Richard Ivey School of Business, agrees. Friends entering a business are too often like couples in love, "the last thing they want is a messy legal document," Dr. Thornhill says. "They're starting out with rose-coloured glasses."
But to be successful, friends-turned-partners need to spell out what will happen in each eventuality - ranging from how one partner will exit the business, to how a buyout would work, to tie-breaking clauses. "Go into this loosey-goosey and you're asking for trouble," he advises.
Friends of Ms. Wagman and Ms. Green gave them similar advice, insisting the two draw up a shareholders agreement covering all aspects of their small business. They did - though it took them four years to negotiate, because they were too busy, working six days a week, on their product. Sweetpea baby food is now available nationally in 250 stores, including Costco, Babies R Us, Whole Foods, Longo's, Highland Farms, and select Shoppers Drug Marts.
In the past two years, while revenues doubled, the friends say they have had only two minor disagreements. "When you're upset about something you have to talk about it," advises Ms. Green, 33.
Another pair of "friendpreneurs" agree that openness is key to running their small business. Last April, Sari Nisker, 33, and Casey Soer, 32, launched Spynga, a Toronto fitness club devoted to yoga and spinning classes, as well as holistic health regimens.
At first, the Spynga duo, who have been friends since Grade 6, found that their different working styles led to lots of conflict. "In the beginning it was hard not to take things personally," says Ms. Soer. "But now we've come to this balance, recognizing that business is business and our friendship is our friendship."
One helpful strategy is that they oversee different aspects of the business, says Ms. Nisker. "Casey handles operations, does the hiring and staffing and scheduling. I do the marketing and the promotional stuff."
That separation of duties and clear concept of what the business is about works for Ms. Green and Ms. Wagman, too. While they both do all Sweetpea sales and marketing together, Ms. Green takes care of the financial strategy and business planning, and Ms. Wagman oversees food sourcing, dealing with suppliers and product development. "We never overlap," says Ms. Green.
This division of labour is something business analysts say is rare among friends, who often have similar interests and strengths, and can have a huge effect on whether the business will succeed. The Sweetpea founders follow another rule to avoid conflict: they copy each other on every e-mail "so we don't step on each other's toes," says Ms. Wagman.
Another harmonizer, they say, is the fact they have a similar work ethic. "We sacrifice a lot of family time to devote to the business," says Ms. Wagman, "and it would be difficult if one of us felt we were working a lot harder than the other."
Dr. Thornhill says that is one of the stickiest situations for friends in business: "Often there is a real - or perceived -inequity that gets in the way."
Ms. Nisker and Ms. Soer say another thing that keeps them focused on their Spynga business, and out of conflict, is that they not only have the same goal, but also share the same aesthetic sensibilities and passions about how to get there.
"We have the same vision in terms of how we want to grow the business and where we see ourselves," says Ms. Nisker.
The two friends were living and working in New York City when the idea clicked to offer classes combining both their passions: Ms. Soer's cycling and Ms. Nisker's yoga. They realized their shared vision - creating fun classes and a life-changing experiences for customers - would be the driving force and bond for their business partnership.
Still, plenty of business problems can stem from friendship, warns Becky Reuber, who teaches entrepreneurship at the University of Toronto's Rotman School of Management.
"The danger is exacerbated by the extent to which the business is your family income, the extent to which your family's fate hangs on the business," Dr. Reuber says. "If your whole family fortune is riding on the business, your spouse is going to be anxious, the rest of your family is going to be anxious, and that anxiety will create a lot of pressure," including the fact that spouses may try to involve themselves in the business decisions.
And friends have to be prepared that their partnership may fall apart, Dr. Reuber warns. "Businesses evolve and suddenly one partner decides they have enough money and want to take life easy, while the other partner wants to keep going, or one partner thinks the business is doing badly, while the other may be convinced they have a way to make it succeed."
It's then that a trust in your partner's integrity and judgment are necessary, if the partnership is to survive, she says.
Dr. Thornhill suggests that friends ask themselves this: "If that person weren't your friend, would you be in business with them? Do they have the right skill set? Apply the same filters to a friend as someone you would hire off the street."
On the upside, "it can be great doing business with friends," says Dr. Thornhill. "You have an immediate trust factor in the other person's skills and ability, and if the business is doing well, there is nothing better. "
Making it workSome tips from the experts about running a business with a friend:
Put your plans and how to deal with contingencies in writing. "First and foremost, write a partnership agreement," says Stewart Thornhill, who teaches at the University of Western Ontario's Richard Ivey School of Business. "So many do it with a handshake and a smile. It should be like a prenup."
It's best if each friend has complimentary skills. To prevent conflict, you should define beforehand which different areas of the business each person will handle.
Have a solid business plan.
Hire a board of advisers who can give advice removed from the bonds of friendship.
If you don't trust your friend's judgment and integrity, don't go into business with him or her, advises Becky Reuber, of University of Toronto's Rotman School of Management.
Remember, business is business. Your friendship is separate.
Dianne Rinehart
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