Going in alone on that one great idea is daunting and it’s always tempting to enlist the help of a friend to start a business. Contractual obligations and safeguards aside, it’s important to understand the real compatibility between friends. Business partnerships that succeed often involve people who share the same goals, work ethic and communication style, while also possessing the different skill sets that are required to keep the operational side of things running smoothly. In other words, research shows it’s as much about the quality and integrity of the friendship as it is about the potential success of the business when friends are working together. For more on this continue reading the following article from TheStreet.
Kathy Braddock of braddock + purcell, a real estate consulting firm, says her friendship with co-founder Paul Purcell began 18 years ago when they were simply business acquaintances.
After years of working adjacently in the tough world of real estate and then later as co-workers, where they relied on each other for referrals and advice — even outside of work hours — they thought it only natural when they came up with an idea to start a business together.
Braddock says she liked that Purcell’s strong work ethic mirrored hers and appreciated his accessibility and good communication skills. Looking back, Braddock says the similarities in work ethic are a major reason why they are successful business partners today.
"He had the same pride in his work and the same ownership [of] his work, working for a company, as I did working for myself. And he was competitive in the same way," she says.
Sharing common interests and career aspirations is one way that friends can be successful at running a business together, but the most important aspect for partners is trust, says Bernhard Schroeder, the director of the Entrepreneurial Management Center at San Diego State University.
"I’ve watched hundreds of people start companies. When people try to marry up on the capability side, if they don’t already super-trust each other, when there’s trouble the first thing that happens is they start questioning capabilities and the reason they start questioning is because they don’t trust the other one," Schroeder says.
The pair met in 1994. At the time, Braddock had owned the Intrepid New Yorker, which provided relocation services for Fortune 500 companies. Purcell was working for The Corcoran Group, a large real estate firm in New York, as the head of their relocation group.
Over time Purcell moved to Prudential Douglas Elliman where he quickly moved up the corporate ladder, at first heading up the relocation division and later becoming its COO. The two real estate brokers kept in touch and at one point Purcell offered Braddock a job at Douglas Elliman — his former position — but she turned him down. A year later he came back to her with a different position as general sales manager, which she finally agreed to in 2000.
With a more corporate job, Braddock now had more time to socialize and was able to get to know Paul outside of work. Braddock considered him to be her closest work-related friend. Eventually they began to talk about going into business together. They thought the market needed services to help consumers pick the right realtor. In 2002, the two friends took the jump and opened braddock + purcell.
Braddock and Purcell have different approaches to their business: Braddock tends to be more direct and quick to make a decision, whereas Purcell likes to take his time thinking through strategies, but the important thing is it works: They’ve never had a fight.
"We’re interchangeable in terms of how we deliver our service," even though our approaches are different, Braddock says.
Another large component to making a friendship a successful business partnership is communication.
"What should be in place is exactly what the business is going to accomplish," Schroeder says. "The more clarity that you have on every step of the way — how are we funding the business, how are we going to get customers — all of those things need to be identified by people, so there are no surprises. It’s better that you actually have a really realistic conversation ahead of time in terms of what the business could or couldn’t do and then go from there."
Cornell college buddies Niraj Shah and Steve Conine have started three Internet-related businesses (one of which while still in school) over the years. Their most successful venture to date is the online furniture retailer Wayfair.
Over the past 10 years, Wayfair, originally called CSN Stores, has grown to roughly $500 million in revenue.
The secret to staying friends and partners is the mutual respect they have for each other and their strengths, Conine says.
In their senior year in 1995, the friends took an entrepreneur and enterprise class where they were charged with coming up with a business plan. Given the fast-growing interest in the internet and later e-commerce, Shah and Conine came up with a business that built websites for small companies in the local college area.
After they graduated, the two moved their business to Boston and continued to work tirelessly throughout the summer and after that. By the time the company was sold in 1998, the partners had added several large clients, including Time Warner, the New York Times, and Merrill Lynch to their portfolio.
"The first three to four years (of working together) were probably the most challenging of our relationship," Conine says. "It takes a while to build up a mutual respect for each other’s talents and figuring out what each was good at. The closest analogy to working with a friend is marriage. It’s a very similar dynamic. With any relationship you got to put effort into it and you got to care about the person you’re building the relationship with."
After selling the company the pair split up for a couple of years but found themselves both back in Boston and both wanting to work together again, continuing on their e-commerce theme. Wayfair came originally from another idea to cull multiple websites selling goods into one architectural framework.
At Wayfair, Shah takes the title of CEO, while Conine is its chairman and chief technology officer.
Even after the dot com bubble burst, the pair was inspired by Amazon’s(AMZN) success and kept seeing the trend toward e-commerce and decided to acquire many of the online small businesses and move them to one online storefront to sell their goods.
At one point, the predecessor to Wayfair had more than 200 separate websites, selling every kind of product imaginable. Slowly they began to collapse the websites and rein in what the website was selling to mainly furniture and décor. Just last September the company changed its name to Wayfair. Going forward, the company will be focusing on expanding awareness of the online furniture retailer.
Putting aside your pride is very difficult to get used to, but critical when first starting out, Conine says.
"When you go from being a friend to working in an environment where your career and livelihood depend on each other, you start to be more critical. In the early years together we would have meetings where we would just want to punch each other. It takes a while to get to the point where you start to see where he is trying to be helpful and has your best interests in mind," Conine says.
This article was republished with permission from TheStreet.