Ask Inc.: Mixing Business and Personal?
BY Inc. staff
The founders of Preserve and Fairytale Brownies ask about the downside to doing business with friends
Q: Should a new business rely on friends for help? I've had pals offer me discounts. Is it better to keep friends and business separate?
Rebecca Alvandi Marketing and development manager Maxim Hygiene Products Roslyn Heights, New York
A: Of course, the best way to keep your friends is to never owe them anything and never lend them anything. But friends -- people who by definition like you and want you to succeed -- can be valuable assets, especially in this oh-so unfriendly economy. "I didn't have a hand-in-hand partner, so I engaged my friends in the beginning of the business," says Eric Hudson, who in 1996 founded Preserve, which manufactures household products from recycled materials. Hudson offered equity as compensation to his impressively knowledgeable coterie, which advised him on manufacturing, design, marketing, and sales. Hiring friends as consultants rather than staff can prevent office stress from leaching into personal relations. After all, says Hudson, "You don't want to manage your friends, and you don't want your friends to manage you."
Still, any business arrangement with friends requires more formality than planning a backyard barbecue. You should state your expectations and set terms up front, just as you would with any contractor, especially if discounts are being dangled in front of you. "If something goes wrong, a friend might say, 'I did you a big favor. Why are you treating me badly?' " says David Kravetz, co-founder of Fairytale Brownies in Phoenix. Kravetz prefers to stick with standard negotiations, as he did when he hired a friend to redesign Fairytale's website. He suggests keeping written records throughout the working relationship, in case of a disagreement. "That way, what you're trying to convey isn't misunderstood," he says. "That can especially be an issue with friends, when you want to soften a complaint so that it doesn't sound as bad." Whatever terms you set, says Eileen Spitalny, Fairytale Brownies's other founder, the bar should remain high. "You're still relying on them to do something at a certain quality, within a certain time frame," she says.