I have often heard that you shouldn’t hire your friends or family to work with you because you’ll just end up hating each other and getting into fights. After all, your best friend wouldn’t take it very well if you were giving him orders all the time. Though working with a friend or girlfriend can be extremely tough, I have found that if you approach and manage the right way, you can create a wonderful company that is more fulfilling than any other company you could have created with random people.

I founded FD with my best friend Yu-kai Chou, I just started Blockbuster Review with my best friends from high school, and am about to launch In Our Closet with my girlfriend Kim. One question you may have is, “How do you have the time to lead so many projects?“ We can go over that on another post. Right now, lets talk about how to make a business work when your partners are your friends.

Part I: Choose the Right Friend

1. If you don’t have their respect, you can’t lead them

In order to lead, you must have respect. Your best friends have known you for a large part of your life, so they already know your habits, personality, and leadership qualities. They have already decided the level of respect they have for you.

When considering a friend for a business venture, ask yourself these questions before partnering up:

1. Does my friend listen to me when I talk or does he constantly cut me off mid sentence?
2. When I offer an idea, does he immediately shut my idea down or does he add to the idea/say it’s an awesome idea?
3. Does my friend come to me for advice about a specific topic?
4. When I criticize my friend, does he pay attention to what I say or does he ignore my advice?
5. Does my friend put me down in a “joking” kind of way all the time? (ex: “Yea, Jun always drives slow. He’s the slowest driver alive”)

Using these questions, you can gauge whether your friend will respect you as a business partner.

2. Followers are ok. The key is self-motivation

Your friend doesn’t necessarily have to be a leader for your company to function; the important part is that your friend is self-motivated. Startups need people who can take an idea and run with it. Micro-managing is the LAST thing you want to be doing in a startup.

For example, my friend Chris is leading the Blockbuster Review project. His job is to post up all of the reviews that we write because Steve and I don’t have time to post them on the site. Well, instead of simply posting the review, he added the movie poster, Pros and Cons, and movie trailer to each post. He took his role and went above and beyond what needed to be done.

Part II: Making the Company Work

3. Assign each role based on skillset and ability

Hey, this is obvious right? Every startup needs people who are excellent in a specific role so that they can take the lead and make it excel.

Right, it is obvious in a normal startup; however, a startup with best friends can be tricky because friends want to do what they like to do, and not necessarily what they’re good at.

One of my good friends is currently a systems analyst at an IT Consulting firm. He makes an excellent first impression and is one of the best sales people that I know. I wanted to start a company with him and have him lead all sales in the company. He had a completely different mind set though. He likes to design, and he wanted to lead our creative design and branding division instead of sales. I gave him a shot and allowed him to design the website, which fell way short of my expectations. This is a perfect example of when to pull the plug on a project before it even started. I could convince my friend to take the lead in sales, but he would not take ownership of the position and go above and beyond.

4. Ownership

Because you are best friends, ownership in the company can be super tricky. I guarantee you that no matter what, your friend expects to have an equal share in the company. The best solution is to discuss ALL ownership topics before you start the company and have everything written down on paper.

I can’t stress this enough because most people believe that because you’re friends, ownership is mutually implied and everyone naturally agrees with each other.

Ask yourselves these question in order to determine company ownership:

1. How much time are you able to commit to the company every week?
2. What initial capital investment will you be putting into the company?
3. What are your other current forms of revenue?
4. How big of a risk are you taking by starting up this company?
5. What are your opportunity costs for starting this company?

By answering these questions, you will be able to effectively and fairly distribute equity for the company.

—

Hey, it’s not easy starting a company with your best friend. If done improperly, you might even end up hating each other! But if you follow my advice and do it right, the result can be a fun, rewarding experience that hopefully leads to a successful company.

If you’re thinking of starting a company with your friends or already have, please let me know!