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Would you set up a business with your friend?

April 16, 2009

By friend I mean best friend, girlfriend, boyfriend, spouse, relatives. So, would you do it?

Most of you will say no. Good choice. But let me describe to you one scenario where it does work.

My brother lives in the US but he’s also a partner in a small firm in Singapore. He owns 40%, my cousin owns 60%. They struck a deal where my cousin runs everything and my brother is the sleeping partner. He doesn’t want to get involved in the day to day operations. Whenever he flies down to Sg to visit my parents, he takes the opportunity to do whatever paperwork a shareholder needs to do. Other than that, its completely off his radar.

So by restricting his role only to that of financier and keeping an arms length, the partnership is now in its 4th year and doing okay. The dividends have been decent and everyone’s happy.

What about partnerships that don’t work out? There’s tons of them and they usually have one thing in common – partner disputes. The partners disagree over how money should be spent, who to hire and fire, and why business is so slow.

What makes it harder is when two old friends disagree, especially when they’re both dominant characters. Friends get along because its fun and games when they meet. They go to the ball game and paint the town red together. But put two people together long enough and they will eventually discover each other’s “true colors.” Some may not like what they see. If it creeps into the battle of opinions and the struggle for control, it can go downhill pretty fast.

So in my opinion, in business, birds of a feather don’t always flock together. If you are a “yin” and your partner a “yang,” then I think your partnership has a decent chance of prospering. But if both of you are overwhelmingly yin or yang, you may soon reach a point where you’ll start wondering – which would you rather keep, the business or the friendship?

So what does it mean in real life? Think of marriage. If you are a stubborn ass, you’re not going to pick another stubborn ass to get married to (unless you’re really into suffering πŸ™‚ ). You pick someone who’s prepared to let you make all the decisions, someone who just wants to sit back and enjoy life.

And that’s precisely what my brother did. My cousin gets a kick out of taking control and my bro gets a kick out of sitting back and enjoying life. As long as they enter the partnership with that understanding and both of them stick to their roles, things should work out fine.

4 Comments leave one →
  1. April 16, 2009 11:07 am

    i used to think that i can get few of my good friends to be my business partners. but now, i don think so. maybe i know them all too well and i also know that our characteristics don’t match. good friends = yes, but business partners? nope. it’s totally different. and i wouldn’t want to ruin my friendship with them because in biz, anything can happen (including closing down). it’s not very healthy actually.

    but most important thing is, our direction and our mindset are very different. i have this 1 dream and this 1 direction, the main reason why i want to start biz. but some of them are thinking of money and how to get things done to earn more money. so, it’s a totally different thing. attitude is different too.

    and when we know our direction is not the same, why bother to continue, or even start?

    same goes with relationship. i used to go after this person for 3 yrs until i realized that both of us have changed…..and our direction is way too different. i’m the person who always look for meaning/purpose behind the things i do (while trying to survive of coz) but she’s thinking in terms of $$. so it’s very different. and then i decided to give up. it’s a wise choice i believe. πŸ™‚

    Its good that you’ve mulled this before you start rather than after your ship has left port. When you’re starting small, a sole proprietorship can work well but when you reach a certain size a few years later, things may change and partnerships may become important, especially when you want to import fresh funds and business networks. A partner doesn’t have to come from your list of friends. It can be a someone with the same vision, money, and a working arrangement that both of you are happy with.

    I don’t know much about relationships but yes, people may start off having the same vision but they can change along the way. Things can get uncomfortable if paths diverge. Luckily in business partnerships, you can declare terms up front and put in some escape clauses, which you can’t in a relationship.

  2. LC Teh permalink
    April 16, 2009 11:54 am

    I have carpooled with this bunch of guys from SP to Prai since 15 years ago. Along the way some came and some left. But our core members namely me, Wan and Ahmad stayed. Once another member wanted to kick out Ahmad. Reason, he was quite often late leaving the office because of his ‘nice guy’ nature. He would accept last minute things thrown at him by anyone. But I defended him saying everybody bullies him. I’m not going to do that. We stuck together.

    By my calculations, through the years we’ve each saved enough to finance a kid through college (around RM60K). Of course this is not a business but it’s not a bad partnership, I must say.

    That’s a great partnership that yeilded some financial benefits. That’s how villages start – people banding together to do something that’s difficult to achieve on their own. If a member falls sick, you don’t abandon him. You too won’t want to be abandoned when you’re stuck. That’s what partnership is about. And 15 years, wow you guys have my respect. πŸ™‚

  3. April 17, 2009 12:27 am

    well ..the sleeping partner better pump in really a lot of capital is really hard lah if both of us pump in the same amount..

    in the end i am getting 60% , he is getting 40% for doing nothing..painful lah.. it is like 10% for your hard work ..the other partner has all his time to make a million

    I know what you mean. My bro was an angel investor. 40% for the first 5 years and eventually reducing to 10% if certain conditions are met. A lot of VCs operate that way.

  4. April 17, 2009 8:53 am

    yeah, trully agree, for me its non about money, its about the work loads and the decision making~ *sigh*

    No pain no gain. πŸ˜€

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