Business Consideration
compatibility, roles and responsibilities, financing, business planning, possible challenges (bankruptcy), and investment lengthprecision_manufacturing Business & Industry
Starting a business with friends can be a great opportunity to turn a shared passion into a successful enterprise.
Weather buying an existing business, purchasing a franchise, or starting a new business from scratch, it's important to approach the process with caution and consider the potential challenges that could arise. Here are some things to consider when starting a business with friends:Assess Your Compatibility:
Assess your compatibility with your friends before starting a business together. This may involve discussing your goals, work styles, and communication preferences to ensure that you are on the same page.Define Roles and Responsibilities:
Define roles and responsibilities for each partner to ensure that everyone is clear on their duties and expectations. This may involve creating a formal partnership agreement that outlines each partner's contributions, decision-making processes, and profit-sharing arrangements.Type of Business:
There are generally three options: buying an existing business, purchasing a franchise, or starting a new business from scratch.Create a Business Plan:
Create a detailed business plan that outlines your goals, strategies, and tactics. This may involve conducting market research, developing a marketing plan, and creating a financial projection.
More on Business PlanOwnership:
Establishing clear ownership guidelines can help prevent misunderstandings, conflicts, and potential legal issues.
More on Type of OwnershipOngoing Cost:
Considerations the ongoing costs of mortgage, property tax, maintenance cost, license fees, insurance, and an emergency fund. These costs can typically be divided among the co-owners based on their percentage of ownership. It may be beneficial to create a dedicated account to hold money for these ongoing expenses.Tax Planning:
Make sure to consult with a tax professional to determine the best tax structure for your business. This will help you minimize tax liability and ensure that all partners are on the same page.Determine Financing and Investment:
Determine the financing and investment required to start and grow your business. This may involve seeking loans or grants, raising funds through crowdfunding, or investing your own money or resources.Decision Making:
Decide how business decisions will be made. Will they be made by a majority vote (each partner have an equal say) or based on contribution? Make sure that everyone agrees on this before starting the business.
More on Voting MechanismsInvestment Length:
Discuss how long each partner plans to stay involved in the business. This will help ensure that everyone is on the same page and can plan accordingly.Prepare for Possible Challenges:
Prepare for possible challenges that may arise, such as disagreements, financial setbacks, or unexpected changes in the market. This may involve developing contingency plans and seeking professional advice when necessary. This may also include bankruptcy. Determine each partner's liability and how assets and debts will be divided.
Tips for creating Business Cooperation:
Description
Make sure potential participants have a comprehensive understanding of the financial considerations involved. Besides the initial cost of the business, include important information such as maintenance cost, property tax, sales tax, business tax, license fees or permits required that may be applicable. Clearly outline the ownership details, including whether the business will be collectively owned or if individual members will have shares.
Provide a detailed investment length, outlining the expected duration for the venture and the potential return on investment. Share the business plan to give participants insights into the proposed strategies, goals, and revenue projections. Establish a clear decision-making process for the group.Participant
Consider using the Friends of Friends Participant to reach more people, expanding the potential reach of your business funding beyond just immediate friends and family.Approval
Choose Approve Manually to ensure that you can carefully select participants who are trustworthy or have similar standards, such as risk-taking level, as you.Tier
If your business can benefit from raising additional funds beyond the minimum requirement, consider adding a tier with the same price and clearly specifying how the extra funds will be utilized.
For instance, if the money raised hits tier 1, allocate the additional money towards purchasing another machine, and if it reaches tier 2, utilize the additional money for painting the factory.Note to Potential Participants
If the business plan contains confidential information, provide a general idea in the Note to Potential Participants and this information can only be viewed to all potential participants. Once the Deal ends, only actual participants will have access to the information.Poll
Consider using the build-in Poll to vote on any business decisions based on the contribution levels in the Deal, to ensure transparency and collective decision-making.