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Top 5 Issues to think about when starting up with a friend

You have the great idea and the perfect pal whose skill set complements yours.  You’re all set to start up your brand new, brilliant business.  What could possibly go wrong?  Here are a handful of tips that we thought would be useful to mull over while things are still rosy between you.  We don’t mean to sound like doom-mongers, but in the event that things do go pear-shaped, it’s always easier to have a master plan in your back pockets to refer to …

1 – Time to say goodbye…

Is one of you imagining handing over the reins of your successful business empire (as it will be one day!) at retirement age, while the other has hopes of selling out to a keen buyer (with deep pockets, of course) in 5 years’ time.  And what if one of you decides that actually this exciting new venture isn’t what you hoped it would be and you want out?

2 – Speak about the unspeakable

As horrible as it may seem, we are all humans and are vulnerable to accidents, illness and death.  It’s likely that you’re entering business with your friend because of her skills and expertise, so give some thought to what would happen if your business partner suddenly went off sick for 6 months.  Would insurance be the answer to ensure that you had another pair of hands to help out in the office?  Or would it be impossible to continue running the business without her, in which case, what should your next steps be?

3 – Money, money, money…

What if you need some extra cash and have another eager person willing to hop on board as a shareholder.  Will you both be willing to take on another shareholder and to split management decisions and the future vision of the company or would you rather speak to the bank manager and pay interest on a bank loan to avoid giving away that control.

4 – Balancing the scales…

Will one of you be providing more than the other – whether in time, skills or start-up money?  If so, how will this be reflected in salary or shareholding?  And will any cash contributed to the business in the early days be invested as a loan, with the intention that the contributing party can take the money back?

5 – Protect yourselves

Does your business have a client list, a secret formula, a brand or other confidential information that is the key to its value?  If so, have a think about the best way to protect that vital info, whether by imposing restrictions on anyone who leaves the business, or by speaking to Jo about registering trademarks, domain names or copyright.

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