“When Mixing Friendship and Business”

Lessons from my Entrepreneurial Journey #7


In the journey of entrepreneurship, its highly probable that you end up having friends as different stakeholders for your company. Who else better than your old friends or classmates whom you know well for years and can trust.

Sometimes, you would have envisioned entrepreneurship long back and now is the time to do this together. If this works, it’s a great potent combination having your friends as your business partners, vendors, investors or any other roles.

However, successfully balancing “Friendship” and “Business” is a complex challenge and a tight rope walk.

  • On one hand, it may lead to your “loss of objectivity” in decision making, because the person happens to be your friend.
  • On other hand, a misunderstanding or loss of trust here or there leads to “loss of friendship” built over years.

Having experienced working with friends in various roles, the following are my learnings on this topic, based on what has worked for me.

    1. Friends as Vendors:

        When you are taking services from a friend, remember that you are the                         customer here.

            a. Ensure timely payment for services rendered on time.

            b. Ensure all statutory compliances.

            c. Have a service level agreement.

            d. When service does not meet your expectations, professionally communicate                   it.

     2. Friends as Customers:

          a. Never pass on your early product to him/her for test trials. Do not expect him                to do you a favor. Your service or the product should win him over rather                 than it being done as a favor.

          b. Never pester your friend to be a early customer for your product.

          c. Meet them once, demo the product, if there is interest, then take it forward.

          d. When the product is ready, do not give discounts, because he/she happens to               be your friend. Deal with him as you would with anyone else.

         e. Commercials/ Followups for payments should be done by your team member                 and not by you.

      3. Friends as Employees /Consultants:

          a. Ensure they are clear that a startup culture is demanding, tough & turbulent.                 They need to have a strong passion, entrepreneurial DNA, “be hands on” &                      tolerance for ambiguity.

          b. Ensure there is a clear Employment/Consultant agreement in place.

          c. Ensure payments on time. Your entrepreneurial financial challenges are                   not your friends’ problem.

          d. Have a formal operating mechanism to set goals, review progress and                             provide feedback. Have regular performance reviews.

          e. When disbursing equity, have a clear SHA (Share Holding agreement),                             capturing the important clauses.

          f. When performance does not meet expectations, be prepared to fire your                       friend. Handle it professionally to ensure your friendship can still continue.

      4. Friends as Investors: When you have a friend as an investor, ensure

          a. You have clearly communicated about the challenges and risks of your                           business.

          b. Have a clear SHA (Shareholder agreement) articulating all his/her rights to                       business.

          c. Ensure a monthly report is sent with highest degree of transparency on the                    challenges and the progress.

     5. Friends as Advisors:

        Be clear on what you are expecting out of this association <Connections,                         Guidance, frequency of meetings, Duration of engagement>. Share what you can         offer and check if that meets their expectations.


  • In gist, there is no right or wrong path here.

          – If friendships expand into successful business relationships, nothing like it. It’s               a great asset for the company.

          – A friendship is a treasure built over several years or decades with great                           memories. Think multiple times of worst case scenarios that can happen,                   before mixing up business with friendship.

  • Exercising the points mentioned earlier should help in balancing friendships and business.

This is the seventh part of a series by the author. Find the previous post here.


[About the Author: Shashi Bhushan is the Founder & CEO of HealthMacro Technologies.  He plunged into entrepreneurship to explore his dream of building something that touches people’s lives. HealthMacro were TiE’s Anthah Prerana 2013 winners. He can be followed on twitter at @ShashiBhushanHR]

1 Comment for ““When Mixing Friendship and Business””


Thanks for the detailed article! I think so many friends/family begin a startup with rose colored glasses on and expectations aren’t created right at the get go which can lead to problems. So many issues can be avoided if the above list of items is taken into consideration and discussed or handled prior to moving forward in business.

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