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15 Reasons Why You Should Not Start Businesses with Friends

15 Reasons Why You Should Not Start Businesses with Friends

In the wake of the great recession, a generation of so-called ‘accidental entrepreneurs’ emerged and revolutionized the small business environment. This has triggered a gradual evolution in the workplace, which may result in an estimated 40% of the U.S. workforce alone being self-employed by the year 2020. Alongside the age of technological advancement, the changing economic landscape has made it easier than ever for friends and family to launch business ventures with minimal experience and financial resources.

However, just because people have the resources to launch a business does not mean that they should. Despite innovation and increased accessibility, the worlds of commerce and industry remain extremely difficult to conquer. From fluctuating financial markets and unique commodities such as gold to industry competition, there are multiple factors that can undermine a fledgling business and ruin a pre-existing relationship between friends and family members.

With this in mind, here are 15 compelling reasons why you should avoid starting a business with friends and family members: –

1. Friendship Does Not Translate into Business Compatibility

When starting a business venture with a friend or beloved family member, it is tempting to believe that your existing relationship will easily translate into a successful commercial union.

This is rarely the case, however, as even people with similar values and philosophies may not share the same approach to completing various business tasks. This can create significant conflict when establishing a business model or cultivating a company culture, which in turn has the potential to undermine even the most durable of relationships.

2. Friends and Family Rarely Plan for Worst Case Scenarios

U.S. attorney Mark J. Kohler specialises in disputes which unfold between friends and family members who have unsuccessfully attempted to launch a business. His advice is therefore extremely worthwhile, and he identifies one of the key issues is a lack of communication between aspiring business partners.

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More specifically, he advises friends and family members to consider all potential worst-case scenarios in detail before making a fixed commitment, so that they can develop viable contingency plans and prepare their friendship in the event of failure.

3. It Can be Difficult to Create Clearly Defined Business roles

The majority of friendships are formed organically, which means that there are no predetermined roles or structural hierarchies. The same cannot be said for business partnerships, which are forged by choice and constructed to include individual roles and responsibilities. This almost always requires one partner to take an authoritative, leading role, which can create imbalance in an existing friendship and ultimately cause unrest.

There may be a tendency among friends and family members to avoid this entirely, but this may expose the business to a critical lack of leadership.

4. Your Business Goals May Differ from Those of Your Partner

On a similar note, your motivation for launching a business may differ to that of your friend or family member. For example, while you may aim to realize the long-term goal of launching a successful business, your partner may want nothing more than to earn some additional money to supplement their existing income. This is entirely opposed to the foundation of commercial partnerships, which should be formed from a common goal and fixed business aspirations.

Such a gap in expectations can be devastating, as it can trigger arguments, undermine business growth and compromise friendships.

5. The Price of Failure is Far Higher

According to industry statistics and successful entrepreneur Theo Paphitis, an estimated 50% of all small businesses fail during their first 24 months of trading. Such failure often comes at a considerable cost to small-business owners, although this is often restricted to financial losses.

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For those who partner with a friend or family member, however, the failure of a business venture can create a strain that even established relationships are unable to cope with. This means that the cost of failure is even higher, as it can compromise both your personal and professional lives.

6. Financial Arrangements and Friendships Make for Uneasy Bed fellows

There is an old adage which suggests that you should never lend friends or family members’ money, and the same principle can be applied to launching a business venture. This is because each partner may be required to invest some of their personal capital into funding the venture, which in turn creates a financial arrangement that binds two friends in a legal contract. The issue with this is obvious, as a single act of negligence or irresponsible behavior by one individual can impact heavily on their partner.

If you consider the financial cost of successful personal injury claims that arise as a result of carelessness, for example, it is easy to see why friends should avoid funding a joint business venture.

7. You May Struggle to Plan Holiday’s and Breaks Away

Whenever you start an independent business with a beloved family member, you are placing an incredible strain on both your personal and professional time. Booking holidays or breaks away together in the sun can be particularly difficult, as this may expose your business to a lack of leadership at a critical juncture. Unless you have a trusted employee who can hold the ford and lead strategically in your absence, you may need to stagger your holidays and take separate breaks.

8. You Will Place a Huge Strain on Your Finances

While there are many reasons that you may choose to launch a business venture with a partner, benefiting from an influx of capital is one of the most prominent.

The cost of establishing a business can be considerable, so it is natural to share this financial burden with a trusted partner who can also add experience, strength and leadership. Starting a business with an immediate family member is an entirely different entity, however, as you may be drawing capital from a more restricted source and placing a greater strain on your finances.

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9. Friends and Family Business Ventures Usually Lack Expertise

Aside from the ability to provide an initial investment, a carefully selected, independent business partner can also bring considerable expertise and experience to your venture. You may need to compromise on this when partnering with a friend or family member, however, as there is a limited share of equity and it is important to retain the incentive to succeed. By sacrificing invaluable business knowledge, you could enter the marketplace without the necessary tools to succeed.

10. Emotions Can Often Override Good Business Sense

While the national divorce rate in the UK is set to decline thanks partially to the dwindling popularity of marriage, it is still estimated that 42% of all marital unions will end in divorce. This underlines the challenges facing married couples in 2015, especially when you consider the financial pressures caused by rising property prices and stagnating earnings.

The same principle can be applied to familiar business partners who are emotionally invested in one another, as periods of hardship can damage the relationship and cause both parties to act irrationally. It is therefore easy for emotions to override sound business sense, and this can quickly sound the death knell for any commercial venture.

11. It Can be Hard to Appraise Your Partner’s Performance

While honesty should be the bedrock for any successful and meaningful friendship, it can be hard to administer a frank and withering appraisal of those closest to you.

According to Wayne Rivers, who is the President of the Family Business Institute, this can cause a significant issue when friends and family members partner in business. More specifically, it often leaves faults unaddressed and causes operational issues to continue longer than they should. While third party assessments can be sourced and paid for, the potential impact of negative criticism can still damage existing relationships.

12. Relationship Breakdowns can Divide Entire Families and Friendship Groups

While we have discussed the impact that a failed business can have on the relationship between friends and family members, it is important to consider the consequences once conflict has begun to take hold. The fall-out between two family members or close friends can trigger huge divides, and cause even the tightest-knit of groups to splinter and form rival factions. This can lead to an ongoing and acrimonious dispute that involves multiple parties, while leaving a family or friendship group in tatters.

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13. Relationships Can Suffer Even When the Business Venture Succeeds

Entrepreneur and Moz founder Rand Fishkin has some interesting opinions on the partnership of friends or family members in a business environment. He claims that while relationships are likely to suffer under the pressure of a failing business, there is also a strong possibility that they will also crumble if a venture proves to be successful. After all, the relentless pursuit of success can take its toll in a competitive market, and attainment can also change each individual’s outlook and create distance within a relationship.

14. Changing Circumstances can upset the Equilibrium of any Partnership

Over time, the market that your business operates in can change significantly. So too can your personal and financial circumstances, meaning that new challenges must be met with a flexible and suitable response. This can create significant inequity within a relationship, however, especially if one partner is suddenly forced to carry greater responsibility without reward.

If a business requires additional investment but one member of the partnership has fallen on hard times, for example, the other will need to fulfill this financial commitment without gaining any additional equity. This can cause considerable resentment and create a huge divide between once close allies.

15. The Business May Not Always be a Priority

Similarly, changing personal circumstances can alter our priorities and force us to spread our time more thinly. The advent of marriage or parenthood consumes a great deal of time, making it far harder to prioritize a business venture that has already been established with a friend or family member. Even if two partners have entered into an agreement with the same outlook and goals, these can quickly change in the face or rearranged priorities.

This situation can also occur gradually over time, leaving businesses exposed and left to decline without direct action being taken.

Featured photo credit: Paul Inckles / Flickr via flickr.com

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Last Updated on October 22, 2019

How to Make a Career Change at 40 and Get Unstuck

How to Make a Career Change at 40 and Get Unstuck

There are plenty of people who successfully made a career change at the age of 40 or above:

The Duncan Hines cake products you see in the grocery store are a good example. Hines did not write his first food guide until age 55 and he did not license his name for cake mixes until age 73.

Samuel L. Jackson made a career change and starred alongside John Travolta in Pulp Fiction at the age of 46.

Ray Kroc was age 59 when he bought his first McDonald’s.

And Sam Walton opened his first Wal-Mart at the age of 44.

I could keep going, but I think you get the point. If you have a sound mind and oxygen in your lungs, you have the ability to successfully make a career change.

In this article, I’ll look into why making a career change at 40 seems so difficult for you, and how to make the change and get unstuck from your stagnant job.

What’s Holding You Back from Making a Career Change?

There are a flood of amazing reasons to make a career change at 40. Heck, you could argue the benefits of making a career change at any age. However, there is something a little different about making a career change at 40.

When you are 40, you probably have lots of “responsibilities” that come into the decision-making process. What do I mean by responsibilities, you ask?

Responsibilities tend to be our fears and self-doubt wrapped in a bow of logic and reason. You may say to yourself:

  • I have bills to pay and a family to support. Can I afford the risk associated with a career change?
  • What about the friends I have made over the years? I cannot just abandon them.
  • What if I do not like my career change as much as I thought I would? I could end up miserable and stuck in a worse situation.
  • My new career is so different than what I have been doing, I need additional training and certifications. Can I afford this additional expense and do I have the time recoup my investment?
  • The economy is not the best and there is so much uncertainty surrounding a new career. Maybe it would be better to wait until I retire from this company in 15 years, and then I can start something new.

If you have experienced any of these thoughts, they will only pacify you for a short period of time. Whether that time is a few weeks, a few months, or even a few years.

Since you know that you prefer to do something else for a living, you start to feel stagnant in your current position.

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Your reasons for inaction that used to work are no longer doing the trick. What used to be a small fissure in your dissatisfaction in your current position is now a chasm.

Ideally, you never stay in a situation until that point, but if you did, there is still hope.

4 Tips To Change Your Career at 40

You do not have to feel stagnant in your current role any longer. You can take steps to conquer your fears and self-doubt so you can accomplish your goal of changing your career.

The challenge of changing your career is not knowing where to begin. That feeling of overwhelm and the fear of uncertainty is what keeps most people from moving forward.

To help you successfully change your career at the age of 40, follow these four tips.

1. Value Your Time Above Money

There is nothing more valuable than your time. You are likely receiving a pay-check or two every month that is replenishing your income. Money is something you can always receive more of.

When it comes to your time, when it is gone, it is gone. That is why waiting for the perfect situation to make a career change is the wrong mindset to have.

Realistically, you will never find the perfect situation. There will always be something that could be better or a project you want to finish before you leave.

By placing your time above money, you will maximize your opportunity to succeed and avoid stagnation.

If you feel disconnected when you are at work, understand that you are not alone. According to a Gallup Poll, only 32% of U.S. employees said they were actively engaged at work.[1]

Whether you think your talents are not being properly utilized, the politics of promotion stress you out, or you feel called to do something else with your life; the time to act is now.

Do not wait until you retire in another 10 to 20 years to make a career change. Put a plan in place to make a career change now. You will thank yourself later.

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2. Build a Network

Making a career change is not going to be easy, but that does not mean it is impossible.

One benefit to being further along in your career is the people you associate with are further along in their career as well.

Even if most of the people in your immediate network are not in your target industry, you never know the needs of the people with whom they associate.

A friend of mine recently made a career change and entered the real estate industry. The first thing he did was tell everyone he knew that he was a licensed real estate agent.

It was not as though he thought everyone he knew was getting ready to sell their home. He wanted to make sure he was in the front of our mind if we spoke to anyone purchasing or selling their home.

You may have had a similar experience with a financial adviser canvasing the neighborhood. They wanted to let you know they were a local and licensed financial adviser. Whether you or someone you knew was shopping for an adviser, they wanted to make sure you thought of them first.

The power of your network being further along in their career is they may be the hiring manager or decision-maker.

You want to let people know you are considering a career move early in the process, so they are thinking of you when the need arises.

Let me put it to you in the form of a question: When is the best time to let people know you have a snow shoveling business?

In the summer when there is not a drop of snow on the ground.

Let them know about your business in the summer. Then ask them if it is okay to keep in touch with them until the need arises. Then you want to spend the entire fall season cultivating and nurturing the relationship. As a result, when the winter comes around, they already know who is going to shovel their snow.

If you want to set yourself apart from your competition, start throwing out those feelers before the need arises. Then you will be ahead of your competition who waited until the snow fell to start canvasing the neighborhood.

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Learn about networking here: How to Network So You’ll Get Way Ahead in Your Professional Life

3. Believe It Is Possible

One of the greatest mistakes people make when they want to try something new, is they never talk to people living the life they want.

If you only talk to friends who have not changed their career in 30 years, what kind of advice do you think they will give you? They are going to give you the advice that they live by. If they have spent 30 years in the same career, they most likely feel stability of career is essential to their life.

In life, your actions often mirror your beliefs. Someone who wants to start a business should not ask for advice from someone who never started one.

A person who never took the risk of starting a business is most likely risk adverse. Consequently, they are going to speak on the fact that most businesses fail within the first five years.

Instead, if you talk to someone who is running a business, they will advice you on the difficulties of starting a business. However, they will also share with you how they overcame those difficulties, as well as the benefits of being a business owner.

If you want to overcome your fears and self-doubt associated with changing your career at 40, you are going to need to talk to people who have successfully managed a career change.

They are going to provide you a realistic perspective on the difficulties surrounding the endeavor, but they are also going to help you believe it is possible.

Studies show the sources of your beliefs include,[2]

“environment, events, knowledge, past experiences, visualization etc. One of the biggest misconceptions people often harbor is that belief is a static, intellectual concept. Nothing can be farther from truth! Beliefs are a choice. We have the power to choose our beliefs.”

By choosing to absorb the successes of others, you are choosing to believe you can change your career at 40. On the other hand, if you absorb the fears and doubts of others, you have chosen to succumb to your own fears and self-doubt.

4. Put Yourself Out There

You are most likely going to have to leave your comfort zone to make a career change at 40.

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Reason-being, your comfort zone is built on the experiences you have lived thus far. So that means your current career is in your comfort zone.

Even though you may be feeling stagnant and unproductive in your career, it is still your comfort zone. This helps explain why so many people are unwilling to pursue a career change.

If you want to improve your prospects of launching your new career, you are going to need to attend industry events.

Whether these events are local or a large conference that everyone attends, you want to make it a priority to go. Ideally you want to start with local events because they may be a more intimate setting.

Many of these events have a professional development component where you can see what skill-sets, certification, and education people are looking for. Here you can find 17 best careers worth going back to school for at 40.

You can almost survey the group and build your plan of action according to the responses you receive.

The bonus of exposure to your new industry is you may find yourself getting lucky (when opportunity meets preparation) and creating a valuable relationship or landing an interview.

Final Thoughts

Whatever the reason, if you want to change your career, you owe it to yourself to do so. You have valuable in-sight from your current career that can help you position yourself above others.

Start sharing your story and desire to change your career today. Attend industry events and build a mindset of belief. You have everything you need to accomplish your goal, you only need to take action.

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Featured photo credit: https://unsplash.com/photos/HY-Nr7GQs3k via unsplash.com

Reference

[1] News Gallup: Employee Engagement In US, Stagnant In 2015
[2] Indian J Psychiatry: The Biochemistry Of Belief

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