The Risks and Rewards of Working with Friends
In an article entitled “15 Reasons Why You Should Not Start Businesses with Friends”, Lifehack makes a compelling case about the incompatibility of friendships and business partnerships.
Recent research by former Harvard Business School Professor Noam Wasserman arrived at similar conclusions, recommending that the most stable structure for starting a company is a group of complete strangers, with fewer expectations of each other, and no concern about jeopardising relationships when addressing mistakes. Companies created by friends are more likely to fail for interrelated reasons of being overconfident and underprepared.
Wasserman describes founding with friends as “playing with fire”:
“It can either forge a stronger team and relationship, or it can blow up the team and the relationship.”
Unfortunately we came across these articles some months AFTER the foundation of Mammoth Creative Ltd, a creative agency established by three close friends ...
Since then, we’ve regularly been asked what it’s like running a business together:
How do you organise your days? Is it as much fun as it seems?
And most importantly, are you still friends?!
So we thought we’d draw from our experience to make some suggestions about the risks and rewards of working with friends. [Spoiler alert – our friendships have survived!]
Risk 1: Overpromising and Underdelivering
In his book The Founder’s Dilemmas, Wasserman identifies overconfidence as one of the main pitfalls for startups founded by friends.
We can relate to this … it is easy to assume that your strong friendships will translate into strong business relationships without considering how your personalities, working styles, and visions will fit together.
Most crucially, the smaller details can get lost beneath the grand vision of where you’ll take your company. At the outset, we spent most of our time envisaging future success, without giving much thought to worst-case scenarios. It is more fun to talk about dream clients than to discuss how to deal with a bad client, and more enjoyable to imagine lavish Christmas parties than to plan for financial stresses.
The excitement of working with friends can overwhelm your strategic thinking, encouraging you to let your emotions override your sound business sense. Spending too much time on blue sky thinking and not enough time on the finer details can cause you to overpromise and underdeliver, while overconfidence will make it more likely that you’ll crumble as soon as you encounter unexpected difficulties.
Risk 2: Dissolving into Chaos!
Founding a business with your friends provides a platform for you to work with complete autonomy, structuring your working life exactly the way you want to.
The risk? That you don’t find or maintain any kind of structure! It is much easier to slip into a disorderly routine when you don’t have a boss telling you what to do.
Risk 3: “Friendship and Money: Oil and Water”
So wrote Mario Puzo, author of The Godfather and other Mafia novels.
And he was right. Mixing friendships and finances is extremely difficult. It is harder to discuss your own pay, to make important commercial decisions, and to deal with the periodic financial struggles that inevitably come with running your own business.
Risk 4: Marking Your Own Homework
As founding friends, it is especially challenging to appraise your own performances as directors and employees. According to Wayne Rivers, President of the Family Business Institute, friends tend to sweep things under the rug instead of addressing issues directly.
How will you self-assess without bias? How will you avoid getting complacent about your own performance? How will you hold your friends accountable?
These are pivotal questions for friends thinking about running a business together.
Risk 5: Relationship Breakdowns
Last year there were 665,495 startups founded - that's 1,823 a day, or 75.9 every hour - more than one per minute!
According to a recent study, 65% of UK employees want to start their own business.
But the life of a startup founder is extremely challenging. More than 50% of startups fail in the first few years.
Founder friends have more to lose if things go wrong. The failure of a shared startup can put relationships under intolerable strain. You’re risking your career, your finances, and your friendships.
Having painted that gloomy picture, let’s move on to the rewards. Because despite all the potential pitfalls, our experience of working with friends has been overwhelmingly positive. Here are some tips on how we’ve made it work.
Write a Business Plan
Writing a business model canvas for our successful application for a Santander Startup Grant was a pivotal moment in our journey.
The business model canvas forced us to discuss and plan things we hadn’t even considered before, like customer relationships and detailed cost structures, and we spent time shaping our value statement as a manifesto. The countless hours you’ve spent with your friends chatting about your company together are NOT equal to a formal business plan. Don’t just assume you have the same vision or the same level of commitment.
Differences of opinion are inevitable and can be healthy in many areas, but we wanted to get on the same page on our general vision for the company. In terms of who we wanted to work with, what kinds of projects interested us, where we wanted to be in 5 years time, and what kind of culture we wanted to build at Mammoth, reaching some consensus of opinion gave us the confidence and clarity to move forward.
Be prepared to make some concessions and compromises – a strong working relationship relies on flexibility and co-operation.
Establish Structures to Succeed as a Team
One of our first steps was to set up a weekly meeting at 9am on Monday mornings, where we discuss projects and plan the week ahead.
This meeting was central to our early success, structuring our week and establishing a professional routine to avoid the chaos of ‘Risk 2’.
Mammoth Mondays are forums for open discussion, honest feedback, and creative brainstorming. We needed to avoid the temptation of slipping into disorderly habits as a group of friends working together, and we wanted to harness the benefits of our friendship, which include the following:
- no time was wasted getting to know each other at the beginning.
- we have an in-depth understanding of each other’s strengths and weaknesses.
- we are motivated by collective as well as personal ambitions.
In addition to establishing working routines, it is also important to clearly define your roles and responsibilities from the outset. Who is in charge of business development? Who manages your social media accounts? Who will deal with your accounting and finance tasks? And who will write a captivating monthly blog? 😉
Communicate Regularly
Make sure you communicate openly and clearly as founder friends, and don’t avoid the awkward and complex discussions that are inevitable when running a business together.
In terms of appraising performances effectively to avoid ‘Risk 4’, we have found it useful to involve our clients and our external networks in our performance reviews. An outside perspective often yields fresh insights, and client feedback has shaped the development of our services.
Battle Through the Tough Times Together
Researchers from London’s Cass Business School and the Wharton School of the University of Pennsylvania found that startups established by people with a strong friendship were more likely to persist if a venture looked like it was failing. Resilience, and entrepreneurial hope in the face of uncertainty, was more pronounced among founder friends.
As lockdown founders, we have faced immense challenges together. Working with friends has helped us battle through as a team rather than fight it out on our own, and our close relationships have enabled us to recognise the moments when one of us needs extra support.
Achieve Together, and Share Personal Successes
Success tastes all the sweeter when shared with friends. The lockdown has prevented us from spending much time together, but our WhatsApp group is filled with celebratory memes, the 🍻 emoji, and images of our Friday evening shared toasts to another successful week!
Having overcome many challenges, we’ve been able to help each other achieve personal goals through our company. Chris has moved into a flat with his partner Helena, Stewart has renovated his house, and I have just completed the purchase of my first house with Ivonne. None of it would have been remotely possible without Mammoth!
Have Fun and Find a Healthier Work-Life Balance
Most people want to work with friends to get more enjoyment from their working life, and it is important not to lose sight of this.
Enjoy more freedom, have fun, and incorporate your interests into your work as much as possible. Never forget that you were friends before you were business partners, and your shared interests can help you maintain your friendships at work.
At Mammoth, those interests include football, cats, VR games, music, food, Buster Keaton films, beer, history documentaries, and crazy golf. We are yet to incorporate all of these interests into one working day at Mammoth, but when we do it is sure to make a special blog post for our Mammoth Monthly readers!
