By Vanessa Papas
Sisters Kendall and Kylie Jenner went into business together and built an empire. So did dynamic duo Mary-Kate and Ashley Olsen. Then there’s The Jackson Five and The Jonas Brothers, who joined forces and launched musical career. Several other stars have also gone into business with family and friends. Some have racked in millions; but others have fallen short.
“Doing business with family and friends is a part of life and we cannot ignore it. It just needs to be leveraged in a correct way, especially when they have the connections you require or capital that will assist in taking your business to the next level,” says Hashtags Properties CEO Teboho Tsekoa. “Corporate business teaches us to make use of written or contractual agreements when going into any kind of business because relying on a verbal agreement can prove to be very risky.”
Teboho Provides The Following Tips On How To Go Into Business With Family And Friends Safely:
Make Good Choices: Remember that good personal chemistry, whether you were friends before the business venture or partnership arose, can cause a sort of blindness. Forging alliances and making strategic partnerships is an important decision, but basing a partnership solely on the fact that you get along with another person is bad business.
Be Clear About Your Goals: Do you want to expand your business and eventually sell it, or build something your family can pass down? Many make the mistake of not being clear about what your intentions are. If you don’t have the same goals for the business, you’ll have a hard time making plans or coming to a consensus on big decisions.
Lending Of Money Or Capital To A Family Member: This is first a mental transaction before it becomes a physical one, meaning that if you are asked for money, you need to first see if you are in a stable financial position that can survive the loss should that money not be recovered; and secondly, settle with your mind and heart that in the event you indeed don’t get it back there will be no emotional attachment to it and your relationship with the family member will not be tainted. When there is an emotional attachment to a loan it will play on your emotions and you will no longer be able to act rationally should things not go as you had agreed.
Contractual Agreement: Going ahead with a loan, it is of utmost importance to draft a contractual agreement. In today’s time of social media this can be a typed arrangement on WhatsApp or a text message. But it’s best done in a more formal way (over e-mail). In the agreement you need to ensure that all the terms of the loan are stipulated in detail. You also need to include a clause stating a specific amount of interest or percentage of interest to be added to the loan should it not be paid on time. When drafting this agreement, do so with the presupposition that the loan may not be paid, even though the agreement is that it will be. This is done before the money leaves your bank account.
What Happens In Business Stays In Business: Reserve business talk for business time only. When you meet at family gatherings, do not discuss any professional issues.
Accept Your Losses: If it so happens that you do lend a family member a small amount of money and they don’t pay you back as agreed, don’t negotiate to get it back. That person will to their detriment join the list of people that cannot borrow money from you again, though you can advise them that they don’t need to pay you back.
Know The Risks: Going into business together can destroy a relationship – it’s true. Many friends go into a new venture together with great intentions and a strong friendship. Some have endured the trials with their relationships intact, but others
Keep In Mind: Doing business with family and friends is beneficial in that neither party requires a background or credit check, as a financial institution would. The agreement
or business is set up purely on trust relationship and with that you may be
given more financial reward than the bank/s might have deemed you worthy of according to your affordability and credit score. The important thing is to respect business; in so doing business will respect you. But the relationships we have with family and friends are not worth losing over business that did not go as planned.
By Vanessa Papas