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It seems like a fool-proof plan: start up with a close friend. Youll get along (obviously), and youll get to share the exciting, fantastic, scary experience of starting up with someone you care about. Its not a bad idea, but there are a few caveats that you should be aware of before you proceed.
This article wouldnt be complete without a list of questions that you might go through and discuss with your cofounder.
- What do we both mean by the business is successful?
- What do we both mean by the business is not successful?
- What happens if one of us needs to voluntarily pull out, for any reason?
- What happens if one of us cannot work on the business anymore, for involuntary reasons?
- What are the conditions under which wed call the business a failure and pull the plug?
- What is plan B for each of us if we do pull the plug? Are we both prepared for that plan B?
- What do we expect of each other, both in terms of responsibilities and in terms of attitude and effort?
- What is and is not an expense? What is the maximum amount someone can spend on an expense without checking with the other?
- When and how will profits be distributed? How much will be reinvested? What will the reserves be?
- What happens if one partner needs cash and the other wants to reinvest it into growth/expansion?
- How will you handle it when (not if) the hours each partner is working are unbalanced?
So, do yourself a favour, and set out to:
- Make your agreements explicit so that you dont break implicit promises
- Detail your agreements so that your promises are clear
- Dont be afraid of discussing negative scenarios, so that you dont add the stress of misunderstanding to already bad situations
- Write things down so youll remember
- Dont make things work at all costs, so that you dont spend the next years living with a deal thats not acceptable to you
- Dont assume things will get better with time, so youre not surprised when they dont