Working with friends and family: a complementary dish or recipe for disaster?
You can choose your friends, but you can’t choose your work colleagues. Except of course if you’re running your own business; then you can choose exactly who you want to work with and for many, those new colleagues might well be friends or family.
Many of the world’s biggest businesses have started from friendships: think Microsoft’s Gates and Allen; Google’s Brin and Page; and Ben and Jerry’s…well, Ben and Jerry. Family businesses are probably even more numerous: Warner Bros, McDonald's, Estée Lauder…the list goes on.
The bonds that tie
Unfortunately, friendship and family bonds aren’t always strong enough to survive the perils of working together. Gates and Allen might have co-founded one of the biggest companies in the world, but they still fell out in the early 1980s. And if its family businesses going wrong, look no further than here (external link) for some disastrous celebrity family business break-ups.
If you’re a small business owner, freelancer or contractor, then chances are you might either choose to partner with friends or family or look to that same network for work opportunities. And why not? You know those closest to you well; you enjoy their company; and, hopefully, share many of the same values and ambitions. Choosing to work with friends and family can be a major plus point of going out on your own.
Before you take the plunge to mix business with a friendship or a family relationship however, it’s worth doing some due diligence at the outset to help ensure the relationship will survive the inevitable strains of working together.
If you’re setting up a business with friends and/or family:
- Do you share the same objectives for the business? These can range from financial to work/life balance. Are your values and principles aligned? If not, you could be heading for conflict.
- How closely do your working habits match? What if one of you has family commitments that might mean they need more flexibility in their working day? Will it create tension if they aren’t around when you need them to be or vice versa?
- How will you solve disputes when they occur? Who makes the final call?
If you decide to take on work from friends and/or family:
- Are you willing to have your work overseen by a friend? How would you react if they wanted you to do a piece of work in a way that you don’t think is right?
- What if they weren’t happy with your work? How would you resolve the issue?
- Are you happy to discuss your costs with a friend? It can be awkward discussing rates with friends and family. Are they expecting you to do the job at a discount?
- Will you be able to separate your work from your family/social life?
Of course, all of these issues can be pre-empted or resolved by good communication and being open and honest with each other. If you’re setting up a business together, forming a partnership agreement (external link) is vital with clear agreement on areas such as split of profits and equity shares. Here’s some more helpful advice (external link) from entrepreneur.com if you’re thinking of working with friends or family.
Don’t forget the insurance issues
There are also several insurance implications when it comes to working with friends/family. If a friend is doing some work for you, for example, you should consider buying a public liability policy to protect yourself in case either of you causes any damage or injury to a third party in the course of your work. Liability insurance for employees is also one to think about. Broadly speaking if you have any employees, it is a legal requirement to have an employers’ liability policy. Should an employee injure themselves at work and sue you, you would be able to use your cover to give them their compensation. Even if a friend/family member is volunteering to help, they could be classed as an employee and have the same rights.
If you’re a family business, you might not need employers’ liability if only employing close family members, but you will if you are trading as a limited company. Click here (external link) for guidance from the HSE on whether or not the law requiring all employers to hold employers’ liability insurance applies to you.
Also, if you’re doing work for a friend and something goes wrong, a professional indemnity policy will ensure that losses caused by a mistake you’ve made can be covered…which will help you to keep your friendship intact.
Tell us your experiences
Had a good/bad experience working with friends and family? We’d love to hear about it, especially if you have any tips on how to avoid conflict and how to successfully balance business and pleasure when working with friends and family.
At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.