Mixing Business and Friendship: 3 Ground Rules for Entrepreneurs
August 3, 2015 | Business and Careers
By Sonya Stinson
Seth Sarelson and Jonathan Treiber met on move-in day as freshmen at Cornell University. They lived in the same dormitory and became fast friends. Both were jazz buffs who collected vinyl records, both enjoyed playing tennis and golf, and both even earned degrees in economics. The two often kicked around the idea of owning their own businesses someday.
When they graduated in 2004, they worked for Citigroup in the same New York City building—Treiber as an investment banker and Sarelson in global transaction services, where he helped roll out several new advancements in payments technology.
“As soon as we both started to work there, the entrepreneurial juices started flowing again,” Sarelson said.
In 2006, they decided to leave Citigroup and pursue a startup together. After spending a couple of years finding the right business model, they launched RevTrax, which uses a software platform to track the impact of digital coupons on store sales.
For Sarelson and Treiber, the years of friendship served as a vetting process for choosing each other as business partners. Going into business with someone you know and trust offers many advantages.
Still, mixing business with friendship can have pitfalls. Just look at the pair of former friends who fell out after founding Snapchat and ended up as bitter foes in court. To avoid that fate and set yourself up for a successful partnership, it’s important to lay some ground rules at the start.
Here are three guidelines to help both the business and the friendship survive the merger.
1. Get a detailed partnership agreement in writing. In 2011, Molly and Ted Fienning joined their best friends, Carolyn and Matthew Guard, to start Babiators, a line of children’s aviator-style sunglasses. The two couples met more than 10 years earlier as undergraduates at Harvard University. The Fiennings moved to South Carolina and the Guards to Atlanta, but they often vacationed together and shared their dreams of becoming entrepreneurs. As close as they were, they still knew they needed a clear legal document to govern their working relationship, especially in the event of a conflict.
“When we launched, we crafted a very detailed operating agreement that spells out what to do in the face of a disagreement about something large or different feelings about financials,” Molly said, “when to move on, when to double down.”
Hiring a corporate attorney for this step is a must, she added, “because there are things that you just don’t think about when you’re starting a business that are going to be important two, four or ten years down the road.”
For example, the partners’ attorney made sure the contract included provisions covering how to resolve disputes over the direction of the business and how they would decide whether to sell it, Molly said.
2. Choose your roles wisely. While all four Babiators partners wear the official title of co-CEO, they also have divided responsibilities. The Fiennings are in charge of the design and marketing. The Guards, who have backgrounds in consulting and commercial real estate investment, handle the financials and operations of the business.
Before launching the company, each partner took the Myers-Briggs Type Indicator® test. The results gave them insight into their personalities and helped pinpoint the roles for which they were best suited. Several months into the business, they created a day-to-day decision matrix that outlines what kinds of choices they should make as a team and which ones individual members could handle. It seems to be a winning operation strategy. Babiators now has products in 2,000-plus retailers and more than 45 countries to date.
At RevTrax, Treiber is CEO and Sarelson is chief operating officer. Their complementary skill sets—Treiber is great at sales, Sarelson excels in tackling the operational details—were a big reason they were confident their business partnership would succeed, Sarelson said.
3. Commit to doing your fair share. Each partner must be willing to pull his or her weight, especially during those long hours spent getting the business off the ground.
“Those 100-hour weeks are grueling,” Sarelson said. “If somebody is going to work that hard, the worst thing would be that your partner is on a beach somewhere.”
He and Treiber actually fed off one another’s energy during those demanding days, he added, and valuing their friendship motivated him to keep going when things were tough.
When business partners also have a personal relationship, it can be difficult not to let emotion—whether it’s resentment over how the work is divided or a passionate disagreement about a major decision—get in the way of doing what’s best for the business. That’s why it’s essential to agree on basic ground rules up front. Following these guidelines will help prevent relationship burn-out before you get a chance to share the success of your joint venture.
Originally published on Northwestern MutualVoice on Forbes.com.
Sonya Stinson is a writer for print and web publications, businesses and nonprofit organizations. She writes about higher education, careers, small business, retirement and personal finance.