Mixing Friends And Business? Here’s What You Need To Know by Forbes – Entrepreneurs

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Friendship can add magic to business ventures, but it can also add an element of risk. I explore a question from a reader on how to maintain a healthy friendship and business relationship with her co-founder.Getty

Reaching out to a friend for help in widening your perspective is a tremendous form of collaboration. I think of it as strategic research that can be vital to winning an important negotiation. Over the years, I’ve gotten negotiation questions from readers all over the globe. With their permission, I’m sharing their questions and the discussions we have had. 

This week, I got a question about what to do when you’re negotiating a business deal with a friend. What is the best way to navigate when there’s more on the line than just a bottom line? 

Dear Tanya,

A friend of mine launched a business and it’s in an industry that we each have a decade of experience working in. I love the app that she built, and I know it will help a lot of people. I’ve been volunteering my time and advice, and my friend – let’s call her Susie – wants me to join in an official capacity. In fact, she wants me to join as her co-founder. Like so many start-ups, she doesn’t have much cash, so we’re talking equity and other ways to create value and compensation for my contribution.

Business-wise, this partnership makes a lot of sense. But here’s the thing: Susie and I have a long history. She’s been my friend since college, and she was my maid of honor at my wedding. We’ve been friends for nearly 20 years, and I consider her one of my best friends. I’m a little nervous about going into business with her because I’ve seen how going into business with friends can sometimes go bad. The stakes seem high, and not just from a business perspective.

What should I do to prepare for this equity negotiation with my best friend?

Sincerely worried,

— Susie’s Best Friend Forever

Dear Susie’s BFF,

Negotiating business with friends can be tough but not impossible. You have to strike a balance between negotiating competitively (claiming value and equity for your work) while also acting collaboratively (building a business with someone.) At the same time, you don’t want to jeopardize your long-term relationship. You clearly value your friendship, so the usual business option that people execute – walking away from a bad or losing situation – isn’t much of an option.

The great news here is that you are starting future negotiations with a great social asset – that of deep trust. The next question I would ask you is how honest can you be with Susie? How strategic are you both in making decisions? Do you have clear alignment on your core values, and are those core values a part of this business you might grow together? If you answer “yes” to these questions, you are both starting from a robust position. Be sure to work out communication habits at the beginning of the partnership to make sure you are both on the same page and stay on that page for the business as well as your friendship.

I know that building deep friendships was vital to me when I was on the campaign trail. Political campaigns are very similar to start-ups in that you’re constantly drinking from a fire hose of information and decisions. You have to figure out quickly who you can trust, who is reliable, and who to avoid because you are always running against a clock. Friendships were often the glue that held our teams together when we needed it the most. Those friendships made us fearless and wildly productive because we wouldn’t want to let the team down. But know that the pressure can be clarifying. Beating the clock either cemented those friendships or tested the weak points in ways that dissolved relationships.

Let’s consider what the science tells us about negotiating with friends. I often think of Adam Galinsky’s research around perspective-taking and empathy. Perspective-taking is the cognitive skill of understanding the way another person might think about an issue. It’s all about strategy and not emotion. Empathy is all about emotion and involves understanding how another person feels about an issue. I like to think of perspective-taking as thinking about measurable outcomes, whereas empathy is focusing more on people’s satisfaction levels. Galinksy’s research found that when empathy alone was activated, it didn’t lead to better negotiation outcomes. In fact, perspective-taking yields the best individual outcome when optimizing on a situation that involves the sale of property or settling on a salary or compensation package. 

So when it comes to your own compensation in entering into this partnership, I strongly encourage you to be strategic and consider perspectives – yours, Susie’s and the business – and be sure to prioritize your own objectives first. Be clear about your own goals and objectives and communicate those to Susie. Also, be sure to find a good lawyer to help you hammer out contract details.

This partnership also has the potential to be a competitive advantage for both of you, and yes, it is linked to your gender. A study from 2016 by Hilla Dotan shows that women negotiate and achieve better outcomes when they are bargaining on behalf of those they care about. Her research found that “men do not exhibit a difference in this respect. What’s important for women is the sense of fighting for others, for their friends, for something bigger than themselves.” Consider how powerful that could be for your startup. This might be one of the toughest deal you’ve ever made, but it also has the potential for forging a business that will be tough enough to succeed.  It’s amazing what can happen when women support one another.

Have a negotiation question for Tanya? Send them to her via Twitter.


December 13, 2018 at 07:01PM
https://www.forbes.com/sites/tanyatarr/2018/12/12/how-negotiating-with-friends-can-be-the-toughest-deal-you-ever-make/?ss=entrepreneurs
Forbes – Entrepreneurs
http://www.forbes.com/entrepreneurs/
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