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15 Reasons Why You Should Not Start Businesses with Friends

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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 August 25, 2021

Why Personal Branding Is Important to Your Career

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Why Personal Branding Is Important to Your Career

As a recruiter, I have met and interviewed hundreds of candidates who have no idea who they are.

Without a personal brand, candidates struggle to answer the question: “tell me about yourself—who are you?” They have no idea about who they are, what their strengths are, and how they can add value to the company. They present their CV’s believing that their CV is the key to their career success. In some ways, your CV still has its use. However, in today’s job market, you need more than a CV to stand out in a crowd.

According to Celinne Da Costa:[1]

“Personal brand is essentially your golden ticket to networking with the right people, getting hired for a dream job, or building an influential business.” She believes that “a strong personal brand allows you to stand out in an oversaturated marketplace by exposing desired audiences to your vision, skillset, and personality in a way that is strategically aligned with your career goals.”

A personal brand opens up your world to so many more career opportunities that you would never have been exposed to with just your CV.

What Is Your Personal Brand?

“Personal branding is how you distinctively market your uniqueness.” —Bernard Kelvin Clive

Today, the job market is very competitive and tough. Having a great CV will only let you go so far because everyone has a CV, but no one else has your distinct personal brand! It is your personal brand that differentiates you from everyone else and that is what people buy—you.

Your personal brand is your mark on the world. It is how people you interact with and the world see you. It is your legacy—it is more important than a business brand because your personal brand lasts forever.

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I have coached people who have very successful careers, and they come to me because they have suddenly found that they are not getting the opportunities or having the conversations that would them to their next role. They are having what I call a “career meltdown,” all because they have no personal brand.

A personal brand helps you become conscious of your differences and your uniqueness. It allows you to position yourself in a way that makes you stand out from the pack, especially among other potential job applicants.

Don’t get me wrong, having a great CV and a great LinkedIn profile is important. However, there are a few steps that you have to take to have a CV and LinkedIn profile that is aligned to who you are, the value you offer to the market, and the personal guarantee that you deliver results.

Building your personal brand is about strategically, creatively, and professionally presenting what makes you, you. Knowing who you are and the value you bring to the table enables you to be more informed, agile, and adaptable to the changing dynamic world of work. This is how you can avoid having a series of career meltdowns.

Your Personal Brand Is Essential for Your Career Success

In her article, Why Personal Branding Is More Important Than Ever, Caroline Castrillon outlines key reasons why a personal brand is essential for career success.

According to Castrillon,[2]

“One reason is that it is more popular for recruiters to use social media during the interview process. According to a 2018 CareerBuilder survey, 70% of employers use social media to screen candidates during the hiring process, and 43% of employers use social media to check on current employees.”

The first thing I do as a recruiter when I want to check out a candidate or coaching client is to look them up on LinkedIn or other social media platforms, such as Facebook, Instagram, and Twitter. Your digital footprint is the window that highlights to the world who you are. When you have no control over how you want to be seen, you are making a big mistake because you are leaving it up to someone else to make a judgment for you as to who you are.

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As Jeff Bezos, the founder of Amazon, once said, “Your brand is what people say about you when you are not in the room.”

In her book, Becoming, Michelle Obama writes about the importance of having a personal brand and her journey to defining her personal brand. She wrote that:

“if you don’t get out there and define yourself, you’ll be quickly and inaccurately defined by others.”

When you have a personal brand, you are in control. You know exactly what people will say about you when you leave the room.

The magic of a personal brand is that gives you control over how you want to be seen in the world. Your confidence and self-belief enable you to leverage opportunities and make informed decisions about your career and your future. You no longer experience the frustrations of a career meltdown or being at a crossroads not knowing what to do next with your career or your life. With a personal brand, you have focus, clarity, and a strategy to move forward toward future success.

Creating your personal brand does not happen overnight. It takes a lot of work and self-reflection. You will be expected to step outside of your comfort zone not once, but many times.

The good news is that the more time you spend outside of your comfort zone, the more you will like being there. Being outside of your comfort zone is where you can test the viability of and fine-tune your personal brand.

5 Key Steps to Creating Your Personal Brand

These five steps will help you create a personal brand that will deliver you the results you desire with your career and in life.

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1. Set Your Personal Goals

What is it that you want to do in the next five years? What will your future self be doing in the next five to ten years? What is important to you? If you can answer these questions, then you are on the right path. If not, then you have to start thinking about them.

2. Create Your Unique Value Proposition

Create your unique value proposition by asking yourself these four questions:

  1. What are your personality features? What benefit do you offer people?
  2. Who are you and why do people enjoy working with you?
  3. What do you do and what do people want you to do for them? How do you solve their problems?
  4. What makes you different from others like you?

The answers to these questions will give you the information you need to create your professional story, which is the key step to creating your personal brand.

3. Write Your Professional Story

Knowing who you are, what you want, and the unique value you offer is essential to you creating your professional story. People remember stories. Your personal story incorporates your value proposition and tells people who you are and what makes you unique. This is what people will remember about you.

4. Determine Which Platforms Will Support Your Personal Brand

Decide which social media accounts and online platforms will best represent your brand and allow you to share your voice. In a professional capacity, having a LinkedIn profile and a CV that reflects your brand is key to your positioning in relation to role opportunities. People will be connecting with you because they will like the story you are telling.

5. Become Recognized for Sharing Your Knowledge and Expertise

A great way for you to promote yourself is by sharing knowledge and helping others. This is where you prove you know your stuff and you gain exposure for doing so. You can do this through social media, writing, commenting, video, joining professional groups, networking, etc. Find your own style and uniqueness and use it to attract clients, the opportunities, or the jobs you desire.

The importance of having a personal brand is not going to go away. In fact, it is the only way where you can stand out and be unique in a complex changing world of work. If you don’t have a personal brand, someone will do it for you. If you let this happen, you have no control and you may not like the story they create.

Standing out from others takes time and investment. Most people cannot make the change by themselves, and this is where engaging a personal brand coach is a viable option to consider.

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As a personal brand coach, working with my clients to create their personal brand is my passion. I love the fact that we can work together to create a personal story that defines exactly what people will say when you leave the room.

Other People’s Stories

Listening to other people’s stories is a great way to learn. In his article, 7 TED Talks About Personal Branding, Rafael Dos Santos presents the best Ted Talks where speakers share their stories about the “why,” “what,” and “how” of personal branding.((GuidedPR: 7 TED Talks About Personal Branding))

Take some time out to listen to these speakers sharing their stories and thoughts about personal branding. You will definitely learn so much about how you can start your journey of defining yourself and taking control of your professional and personal life.

Your personal brand, without a doubt, is your secret weapon to your career success. As Michelle Obama said,

“your story is what you have, what you will always have. It is something to own.”

So, go own your story. Go on the journey to create your personal brand that defines who you are, highlights your uniqueness, and the value you offer to the world.

Featured photo credit: Austin Distel via unsplash.com

Reference

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