Going into business with friends and family
Discussion
My two best mates and brother have always dreamed of owning a bar together, we have ideas for setting the scene, the grub, the drink and even the decor and name. We have talked about it for years and now things are getting a bit more serious and we are talking about setting one up when things in the economy look a bit better.
We are all able to put up a 25% stake for 25% ownership and are all thinking along the same lines but everyone says dont go into business with family or friends. We have similar ideas and goals for the bar and can all commit the same amount of time and money.
So what sort of obstacles are we likely to face? I trust these people 100% so why does everyone else think its a bad idea? I know any arguements could lead to permenant fall outs, but we have fallen out before and always got over it.
We are all able to put up a 25% stake for 25% ownership and are all thinking along the same lines but everyone says dont go into business with family or friends. We have similar ideas and goals for the bar and can all commit the same amount of time and money.
So what sort of obstacles are we likely to face? I trust these people 100% so why does everyone else think its a bad idea? I know any arguements could lead to permenant fall outs, but we have fallen out before and always got over it.
Try to discuss every conceivable eventuality. What happens if:
One of you has unexpected financial difficulties and needs/wants to sell?
One of you dies?
One of you gets divorced?
One of you falls out with the family/friends?
The pub failes to take off and loses money?
Five years down the line it's woth a million and one of you wants to cash in?
Etc.
One of you has unexpected financial difficulties and needs/wants to sell?
One of you dies?
One of you gets divorced?
One of you falls out with the family/friends?
The pub failes to take off and loses money?
Five years down the line it's woth a million and one of you wants to cash in?
Etc.
Whether they are your friends and family doesn't really make any difference to whether or not it is a good idea.
Starting a business like this, with partners, is a very bad idea anyway. At least one will fail to pull their weight, another will drink the stock, another will have a spouse who thinks they should be working less or earning more money, or who will want to take money out of the business when the others want to re-invest it. Yet another will develop some long term illness which restricts the hours they can put in. I could go on and on.
If you are going into a business like this then go it alone or with your spouse.
Starting a business like this, with partners, is a very bad idea anyway. At least one will fail to pull their weight, another will drink the stock, another will have a spouse who thinks they should be working less or earning more money, or who will want to take money out of the business when the others want to re-invest it. Yet another will develop some long term illness which restricts the hours they can put in. I could go on and on.
If you are going into a business like this then go it alone or with your spouse.
singlecoil said:
Whether they are your friends and family doesn't really make any difference to whether or not it is a good idea.
Starting a business like this, with partners, is a very bad idea anyway. At least one will fail to pull their weight, another will drink the stock, another will have a spouse who thinks they should be working less or earning more money, or who will want to take money out of the business when the others want to re-invest it. Yet another will develop some long term illness which restricts the hours they can put in. I could go on and on.
If you are going into a business like this then go it alone or with your spouse.
I cannot say this better apart from many other eventualities of one which *will* happen at some time.Starting a business like this, with partners, is a very bad idea anyway. At least one will fail to pull their weight, another will drink the stock, another will have a spouse who thinks they should be working less or earning more money, or who will want to take money out of the business when the others want to re-invest it. Yet another will develop some long term illness which restricts the hours they can put in. I could go on and on.
If you are going into a business like this then go it alone or with your spouse.
You would be surprised how much things can be pushed is things go badly or one or two partners think they are being shafted and it is their job, career and investment on the line.
If something happens you will most likely lose them as a friend, but to make sure that it does not become a saga which ruins the business, although it sounds pedantic but in place the agreed procedures should there be a disagreement.
So, does an investment need 4 votes or 3?
If there is a complete disagreement, what is the figure to buy the other person out? Failing that, put in place a 'blind showdown' clause whereby a partner can buy the other out based upon the higher of a closed bid with your solicitor.
Wacky Racer said:
I have been in business with my (younger) brother over thirty years and we have never had a cross word, and trust each other 100%...so it CAN work......
We just agreed when we started to split everything down the middle to the last penny.....
Ah...We just agreed when we started to split everything down the middle to the last penny.....
But would your brother say the same thing?
Going for four equal shares of a bar sounds like a nightmare to me.
Falling out with your friends is one thing, falling out over money is very very different especially when its alot of money.
flyingjase said:
I'm in business with 2 very good friends, however do NOT do it unless you trust them implicitly - it will end in tears.
I agree with the above but would add....NEVER trust someone 100% in business, even family. I have never had a bad experience and I am actually in business with a good friend who I can trust but I never trust him 100% if that makes sense??? I know he feels the same as me and it doesnt offend but just keeps us on our toessinglecoil said:
Whether they are your friends and family doesn't really make any difference to whether or not it is a good idea.
Starting a business like this, with partners, is a very bad idea anyway. At least one will fail to pull their weight, another will drink the stock, another will have a spouse who thinks they should be working less or earning more money, or who will want to take money out of the business when the others want to re-invest it. Yet another will develop some long term illness which restricts the hours they can put in. I could go on and on.
If you are going into a business like this then go it alone or with your spouse.
+1Starting a business like this, with partners, is a very bad idea anyway. At least one will fail to pull their weight, another will drink the stock, another will have a spouse who thinks they should be working less or earning more money, or who will want to take money out of the business when the others want to re-invest it. Yet another will develop some long term illness which restricts the hours they can put in. I could go on and on.
If you are going into a business like this then go it alone or with your spouse.
Tony
Steve H said:
flyingjase said:
I'm in business with 2 very good friends, however do NOT do it unless you trust them implicitly - it will end in tears.
I agree with the above but would add....NEVER trust someone 100% in business, even family. I have never had a bad experience and I am actually in business with a good friend who I can trust but I never trust him 100% if that makes sense??? I know he feels the same as me and it doesnt offend but just keeps us on our toesIn business things either go well, or they go not so well, or they go awfully.
You may have a friend that you know would never sell you out, but if things go well then this figure may be tens or hundreds of thousands of pounds, what would you risk any of the four may have second thoughts.
On the other hand, if things go badly and your partners have the very real prospect of not only losing their money but also losing the roof over their wives and kids heads, would they still value your friendship over that?
The more partners you have, the more chance there is of this occuring. Secondly the directors cut is not just yours, or shared, if it is split four ways you are going to have to make a very very good profit to make it worthwhile you all taking the risk.
What sounds good in practice doesn't always work out when you plan out the eventualities. You say that you have always gotten over your 'fallouts' with your mates, but how long would it take to forgive your mate if he didn't pull his weight and you lost your house?
Edited by JustinP1 on Thursday 29th January 11:10
Steve H said:
flyingjase said:
I'm in business with 2 very good friends, however do NOT do it unless you trust them implicitly - it will end in tears.
I agree with the above but would add....NEVER trust someone 100% in business, even family. I have never had a bad experience and I am actually in business with a good friend who I can trust but I never trust him 100% if that makes sense??? I know he feels the same as me and it doesnt offend but just keeps us on our toesMany businesses with friends and family are hugely successful, many aren't.
The key to it is to draw up a shareholders' agreement that covers all eventualities (or as many as possible). The problem is that at this stage you are all very positive and optimistic and so thinking about how it could go wrong is seen as being negative. Money well spent now could be money saved later.
As per the above, how would you feel if:
the others voted to do something that you strongly opposed?
you wanted to sell the business but the others didn't (and vice versa)?
one shareholder sold his shares to a man down the pub?
one shareholder ran off with your wife/girlfriend?
i wouldn't say not to do it, but do it with your eyes wide open, and make sure that everyone is well advised. even though you think you might agree on things, you may have different motivations in a couple of years. One person might be dedicated to the business and expect to work in it 24/7, another might want to get out totally in a couple of years. talk it through at length, and then take good legal advice.
The key to it is to draw up a shareholders' agreement that covers all eventualities (or as many as possible). The problem is that at this stage you are all very positive and optimistic and so thinking about how it could go wrong is seen as being negative. Money well spent now could be money saved later.
As per the above, how would you feel if:
the others voted to do something that you strongly opposed?
you wanted to sell the business but the others didn't (and vice versa)?
one shareholder sold his shares to a man down the pub?
one shareholder ran off with your wife/girlfriend?
i wouldn't say not to do it, but do it with your eyes wide open, and make sure that everyone is well advised. even though you think you might agree on things, you may have different motivations in a couple of years. One person might be dedicated to the business and expect to work in it 24/7, another might want to get out totally in a couple of years. talk it through at length, and then take good legal advice.
In my opinion working with friends and family is a bit risky. The more friends & family that are involved the more risk it has of going t*ts up. If I had to bet on a business with 4 mates failing or succeeding, i would bet fail all day long, but that’s just my opinion.
I set up business with a mate in 2006 and although it started well, after about a year one of us had much bigger ideas than the other and the work load began to come uneven. In the end we agreed that i would be bought out of the company before it turned nasty between us and went at it alone.
It is inevitable that between the 4 of you there will be problems with 1 saying he/she is working harder than the other. Or 1 has all the good ideas etc etc.
I hate to sound so negative on your idea but you really should take what everyone has said in this thread seriously and consider every aspect before any money is laid down.
I set up business with a mate in 2006 and although it started well, after about a year one of us had much bigger ideas than the other and the work load began to come uneven. In the end we agreed that i would be bought out of the company before it turned nasty between us and went at it alone.
It is inevitable that between the 4 of you there will be problems with 1 saying he/she is working harder than the other. Or 1 has all the good ideas etc etc.
I hate to sound so negative on your idea but you really should take what everyone has said in this thread seriously and consider every aspect before any money is laid down.
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