Risk management

As I mentioned in my previous entry, I'm going into business with my best friend. This is not something we do lightly. We realize that more than just our investment is at stake here. This could very well end our friendship.

But we also believe that it doesn't need to be that way. The first step, we believe, is to acknowledge the possibility and plan for ways to mitigate that risk. Before we agreed to go ahead we had a lengthy discussion about our concerns. Here are some of what we came up with.

- We find we can't work as partners.
- What if there becomes a real or perceived imbalance in the division of labor?
- What if one of us runs into financial difficulties? Would this put pressure on the other to help them out by splitting the take more in their favor for awhile?
- We may end up knowing too much about each others' personal finances.
- What if we can't make enough to support either family, let alone both?
- We realize unexpected success and can't agree on what to do with the money? (nice problem to have, but sometimes phenomenal success can be just as deadly to a business as phenomenal failure).
- We just get on each others' nerves.
- Conflicting goals for the business.
- We find success, but can't maintain it.
- Personality dynamic leads to one partner always giving in to the other one.
- One of us decides we want out, even if it means killing the business.
- Making sure we establish criteria for valuing the company should one of us want to buy out the other.
- What if one of us wants to bring in another partner against the other's wishes?
- What if we find ourselves being competitive with one another?

It's not exactly an exercise in positive mental attitude, but if friends are going to be partners, I think these and many more questions should be considered first. In our case we both agreed that our friendship is more important than our business, and that we're willing to chloroform the whole thing if it starts to come between us. But we were also able to discuss all of the above points rationally. In some cases we just agreed that they could become a problem and we just have to trust each other to act responsibly and work it out. In other cases, though, we were able to discuss concrete plans for dealing with the risk should it occur.

Has anyone else gone through a similar process in forming a business partnership with a friend? What was your experience? What things were important to you? Drop me a comment and tell me about it!

Taking the plunge

This blog has languished for awhile now, as I'd largely reconciled myself to the idea that I'm not ready to start a business. For one thing, I've lacked capital. For another I've lacked time and drive.

Well, times change, and desperate times call for desperate measures. Recently a good friend of mine also go laid off. This is the friend of whom I've often said that if I had about $50,000 to put him in business with I'd do it. Well, instead we found an opportunity that can put us in business for about $6,000. I don't think either of us would have the guts to do it alone, but together we've convinced each other to give it a try.

This is a serious endeavor. We've registered a company with the state, got our tax ID, and plunked down some significant cash. We're currently going through the steps to select a product line and find suppliers. If everything goes well, we'll be Internet retailers by the end of the month.

Are we crazy? Quite possibly. But one advantage of having a partner is diluted risk. Though we still lose money if this fails, neither of us loses as much. And if we succeed, we'll at the very least have a revenue stream that will help us both avoid the poor house that much longer while we find real jobs. But our goal/dream is to turn this into our real jobs. We hope by the end of the year to be making enough to be able to stop looking.