John D. Rockefeller once said that “a friendship founded on business is a good deal better than a business founded on friendship.” It’s true that there are many challenges to consider when founding a company with someone who is intrinsically linked to your personal life. It takes a lot of maturity to make it work.
Setting up a business with close friends or family can either strengthen a startup or bring it down. There’s no set yes or no as to whether it will work for you so it’s very much a case of weighing up the pros and cons, and a little bit of gut instinct. While many professionals warn against going into business with close friends, there are plenty of examples that prove it can work.
Just look at Airbnb, Ben and Jerry’s, HP and Microsoft. According to The Independent, eight out of 10 startups begin life with friends or relatives of the founder being roped in to help out, a study found. Researchers who carried out a study among 1,000 businesses found the majority prefer to employ their nearest and dearest rather than risk taking on unsuitable candidates.
After leaving university with a finance and economics degree – along with a head full of ideas – I decided that following in the family footsteps – three generations and 130 years in architecture – was not for me. I was definitely of the opinion, originally, that working with family wasn’t where I saw myself.
But the connection to my family heritage proved strong and although not intentional, I found myself working with my dad, leaning on his architectural expertise as I founded Smith Tait in 2012. The company is a Lighting Design Consultancy that is working on some of the largest projects in the world.
Smith Tait is deeply personal to me and is about legacy and heritage and I work closely with my dad to this day. I enjoy a strong and positive working relationship with him. This has worked for us because of the deep respect I have for him and the trust we have between us. But this is not the case for every business and sometimes working with close family members can pose challenges.
The majority of friendships are formed organically, which means that there are no predetermined roles or structural hierarchies. The same cannot be said for business partnerships, which are forged by choice and constructed to include individual roles and responsibilities. This almost always requires one partner to take an authoritative, leading role, which can create imbalance in an existing friendship.
In the book The Founder’s Dilemmas, Noam Wasserman (then a professor at Harvard Business School) studied 10,000 technology and life-sciences start-ups, of which 40 percent were founded by friends. His research, published in 2012, showed that companies with friend-founders were less likely to work – and each social connection on the founding team increased the likelihood of a founder leaving by 30 percent.
In my case, I find that it can work, and that clearly defined roles are essential. In the early days working with my dad, it was challenging because we had different approaches to aspects of the business, so our team would get conflicting messages. We rectified this, and my biggest learning was to have those tough conversations early on, rather than just let the conflict rise.
Wasserman also showed that the most stable structure for starting a company is, in fact, a group of strangers, rather than family or friends. That’s because strangers have fewer expectations of each other; and there’s no concern about jeopardising a friendship when bringing up mistakes or issues.
When faced with these challenges, discussing tough topics can be hard. Wasserman explains that a common experience among friends is a tendency to shy away from necessary, tension-filled conversations for fear of souring their relationship. In my experience, working with my dad came with its own challenges. There was a natural dad/son hierarchy that created tension and would culminate in an annual ‘falling out’.
My natural reaction to his suggestions or advice would be to do the opposite, falling into the parent/child relationship of going against their wishes. It sounds silly looking back on it now, but it was a reality of being 25 and trying to prove that I can “do it”.
One value that is ingrained in my family is mutual respect. In a family business, respecting your parents is just what you learn growing up; becoming business colleagues creates a new dynamic where you are equal shareholders and I think we both found it quite challenging to leave the father / son relationship at the door when we had challenges. I do think that so long as there is mutual respect, any friend-founded business has a morally-sound launchpad.
It’s clear that there are pros and cons associated with going into business with friends or family but ultimately, if you want to grow a stable, highly scalable business, you need to consider what and who works for you. If you can make it work, then make it happen. If consumers have a say, 60 percent said they prefer to buy from family businesses, according to Family Business Magazine and it’s no surprise that the majority of family businesses brand with this key market differentiator.
But also consider that sometimes, our friends and family can be there for us in different ways, as our support network and offering advice, rather than as a business partner. Business and money comes and goes; but my parents won’t be around forever. My dad and I had many challenges working together, we overcame them and I feel honoured and blessed to be walking this journey with him and spend every week for the past 10 years gaining valuable experience from him.
Ultimately, if you think that the challenges can be overcome, building a business with someone close to you will be the most rewarding experience, and I think it’s worth it. What’s the best that can happen?
Rupert Tait, founder, Procurified