Business vs friendship - help!

[Andrew_MS]

Hi all,

I am posting with a problem and hoping that you can offer some advice. A couple of years ago I started a tech business with one of my best friends, it's been a side hustle for us both as we have regular full time jobs.

We both intended to give it our all and eventually turn it into a full time operation. Unfortunately, it hasn't panned out that way and I now find myself in an awkward and frustrating position.

The main issues are my partner has slacked on his side - it's fair to say I've done 80% of the work and development over the past two years, despite us having a 50/50 ownership split. I have confronted him on this numerous times, but he leans on our friendship and always has a sob story or excuse. Work, family, stress, whatever. Normally this wouldn't wash but because we have been friends for 20 years Ive let it slide.

The other issue is that the business requires funding to grow, I am willing to invest some of my own savings but he refuses. He says he has nothing to invest, and even refuses to consider a business loan. He has a very misinformed attitude about how growing a business works, so I now find myself at a stalemate.

It's also become apparent that his skillset as a dev is not quite what he made it out to be. Even when present he is not really performing to the level I expected. But of course, its now too late!

I am finding the situation very stressful, I have brought it up in the past but he always plays the friend card, saying he's under lots of pressure and he will get back on track.

What are my options here and what would you guys do in my shoes? I see my options as:
1. Walk away and put it behind me (maybe request to still have an ownership stake as it was my idea but not be responsible for running etc)
2. Invest some money into it but demand a higher ownership stake
3. Offer to buy him out
4. Sell my share of the company

I should also say the business is only making a modest turnover currently (less that 20k pa), but there is potential for much more. Basically I do not want to put in further time, effort and money myself if its not matched. Why should I do 80% of the work for equal gain!?

Thanks for reading and hope for your advice, a valuable lesson has been learned about mixing business and friendship...

 

[Mr D]

What sort of business is it?
Limited company?
Partnership?
Other?

 

[Andrew_MS]

It's a limited company

 

[Chris Ashdown]

Either buy him out or close down the company and restart on your own

He is not doing his work properly so even offering to invest yourself and take a bigger share, does not solve the main problems that you are still carrying dead wood or slightly decaying wood

Who owns the copyright to whatever you sell? the company , you or him

 

[MOIC]

Get legal advice first, then present your partner with your intentions.

 

[Tin]

Only my thoughts here and I'm no expert but I'd go down the buy him out route. If you believe that with some funding and you're willing to do that to take the business further, then how could you trust him from here on in?

 

[Mr D]

Unless you have an agreement otherwise, he keeps his shares until he sells them or decides to give them up.
Can sit back and get half the dividends.

His employment and shareholding usually two separate issues.

Or rather than buy his shares perhaps sell yours to him and let him run the company alone?

 

[Mark T Jones]

First off, move away from the blame thing If one thing is certain it’s that if your partner were here, they would have a different version of events


Second, ignore the ‘friend ‘ thing. This is a business discussion with a business partner

third. Separate the people from the problem. In this case the problem appears to be that you have differing views in the trajectory of your business. And that is the discussion you need to be having. It may well be that your aims are too different to move forward, or that you simply decide that you would prefer to do something alone. At that point you need to have a business discussion around how best to divide and seoarate

 

[Ian J]

Either buy him out or close down the company and restart on your own

Seconded

 

[The Byre]

As Warren Buffett said, "A friendship based on business is better than a business based on friendship."

Never go into business with a friend - it's very bad for the business and it is even worse for the friendship.

 

[Onthebrightside]

I agree too.

Tell him that you feel you want to enact your strategy for this type of company (you really feel it's something you need to do), but if he doesn't want to put in more time or money you understand his view and difficulty. You hope he understands and supports you (that honesty will hopefully keep your friendship alive whatever happens - and I sense that you want to do that).

Advise that you feel so strongly that your strategy can work that you are going to start another company to enact it. State that this will put you in the same position as him in regard to the current company and you will no longer be able to put the time/money etc., so what does he want to do - see what he comes up with.

If your statements regarding this man are correct then my feeling is that whatever you say isn't going to get him off the starting blocks and what you are looking at is going it alone Hopefully though you will be able to keep the friendship if you approach it tactfully.

 

[Andrew_MS]

Wow thanks for all the input guys. It definetely confirms what I was thinking, time for a frank conversation I think.

 

[Lisa Thomas]

Buy him out.

 

[Stas Lawicki]

Some great advice above (@Mark T Jones has come up trumps again...!)

Couple of things from me having been in the exact same position:

1) Don't go investing in legal advice and valuing the business to anything more than what you feel are the bare minimums. You'll blow a load of cash on something you can handle yourself. I have no idea what your business does but by the sounds of it, it is not generating much if any money. To therefore 'buy' somebody out might be a bit fanciful as is probably not worth anything. Offer instead a nominal amount in exchange for releasing their shares back into the company and resigning as a director - works for either you or him.

2)If getting out is something you feel you should do, then don't delay. Offer as above, if you can and feel you want, try and retain the friendship, but otherwise life is way tooooooo short for this nonsense. Move on!

Don't panic! this sort of things happens all the time. Just be decisive and don't be too attached the business or your pal if you can help it !

Good luck!

 

[patery]

Buying him out. He doesn't sound very interested in it so i'm sure if you throw a fair amount of money at him for the share he'll budge. Hope your friendship and business relationship works out for the best!

 

[richard10002]

We dont know what the business does, so it's a bit hard to advise, other than very generally.

Does the business have any assets? Property, equipment, vehicles?
Liabilities - loans, lease agreement
Anything in the agreement that prevents you doing this separately on your own in the same area?

One "off the wall" thing that came to mind is that you give him your shares, resign from the company, wish him all the best, and start again on your own. Given what you say about him, any regular customers would probably go with you.

There could be many reasons why you cant do this, but it would make things simple if you could.

You definitely need to stop working for him, and with him, so buying him out/paying him off, seems essential.

 

[Darren Lenton]

No matter what you decide, make sure that you have full ownership of any product that has been developed or is in development.

there are too many risks where business split up with one originator taking the developed business further, to only find that after exponential growth, the old partner wades in asking for their share as they were part of the original product development/ idea.

 

[brianj_hill]

Hi all,

I am posting with a problem and hoping that you can offer some advice. A couple of years ago I started a tech business with one of my best friends, it's been a side hustle for us both as we have regular full time jobs.

We both intended to give it our all and eventually turn it into a full time operation. Unfortunately, it hasn't panned out that way and I now find myself in an awkward and frustrating position.

The main issues are my partner has slacked on his side - it's fair to say I've done 80% of the work and development over the past two years, despite us having a 50/50 ownership split. I have confronted him on this numerous times, but he leans on our friendship and always has a sob story or excuse. Work, family, stress, whatever. Normally this wouldn't wash but because we have been friends for 20 years Ive let it slide.

The other issue is that the business requires funding to grow, I am willing to invest some of my own savings but he refuses. He says he has nothing to invest, and even refuses to consider a business loan. He has a very misinformed attitude about how growing a business works, so I now find myself at a stalemate.

It's also become apparent that his skillset as a dev is not quite what he made it out to be. Even when present he is not really performing to the level I expected. But of course, its now too late!

I am finding the situation very stressful, I have brought it up in the past but he always plays the friend card, saying he's under lots of pressure and he will get back on track.

What are my options here and what would you guys do in my shoes? I see my options as:
1. Walk away and put it behind me (maybe request to still have an ownership stake as it was my idea but not be responsible for running etc)
2. Invest some money into it but demand a higher ownership stake
3. Offer to buy him out
4. Sell my share of the company

I should also say the business is only making a modest turnover currently (less that 20k pa), but there is potential for much more. Basically I do not want to put in further time, effort and money myself if its not matched. Why should I do 80% of the work for equal gain!?

Thanks for reading and hope for your advice, a valuable lesson has been learned about mixing business and friendship...

Business and friendship don't nicely co-exist. A friend is not the same as a business partner. A business partner will have to some degree, a shared vision and values. Your partner obviously doesn't have these and if you want the business to flourish you need to separate the two.