Ideally, when true friends do business, all the natural laws of negotiation are suspended. The gladiators lay down their swords, and water flows uphill. The buyer demands to pay more, and the seller even insists on taking less!
But the real world instructs us differently: Friendship is better for business than business is for friendship. Valued relationships will often explode or dissolve when business deals get rocky.
At best, it’s a scenario that promotes unrealistic expectations and hurtful miscommunication. For one thing, odds are you’re more likely to have a spat with a friend you’re making a business deal with than one you’re not. There are simply more opportunities for you and your friend to get your signals crossed.
And who hasn’t been astonished by how differently some friends act when doing business? You think you know someone well, but suddenly; he or she morphs into the insanely competitive or disgustingly docile. But actually, it’s a deeper dilemma.
In life, the friendship is important in and of itself. But in deal-making, the relationship takes a back seat to business. So experienced deal-makers are not unduly ruffled by greedy, grabby, pushy, evasive, high-handed, disingenuous and/or manipulative opponents. “Let every eye negotiate for itself and trust no agent,” as Shakespeare wrote. In reality, however, we would never expect true friends to treat us this way. Should they dare, then business becomes all too personal.
It’s better to remain open to the possibility. Be selective, but when you do these deals, aspire to an unusual level of candor. Consider laying your cards out on the table early. If you’re unsure about how to handle an issue fairly, look to some objective standard or custom and practice for guidance. Here, it’s even more important to plan for the downside. Make some contingency plans that are not only appropriate but will also keep everyone involved on speaking terms.
Of course, you should write everything down, just as you would with any other deal. But friends owe each other more than strict compliance with the letter of some contract. Be exceptionally clear with each other about your expectations, large and small. Talk it out fully before the fact.
You must remember that the stakes are higher when you do business with good friends. Not only can your deal go south, but so can your friendship. And most of us would agree that it’s much easier to make a good deal than it is to make a good friend.
My hardest customer to satisfy has always been friends or family members. These have also been the hardest customers to collect from. Being in business for over a pretty good period, I’ve learned how to handle family and friends who become customers. So here are a few tips for you.
Get It In Writing
Early in my business, I contracted to build a site for some friends who had begun a non-profit organization. To help them out, I agreed to build a web site for them free of charge. Because it was free, I assumed they wouldn’t put too many demands on me. But I was wrong!
They turned out to be some of the most demanding clients I’ve had. All of my web hosting is done through an affiliate allowing me to earn commission from each account. Well, the affiliate requires a credit card for monthly billing or they require that the client pay the account annually. Because they didn’t have a credit card and the annual fee was kind of steep for their budget, I agreed to put their hosting bill on my credit card and they agreed to pay me monthly. First off, there was the time, effort and costs that went into billing them monthly. Then, they were slow every month in their payments. Because they were friends, at first I was quite passive in my collection efforts.
Also, I had been negligent in getting our agreement in writing, so I was hesitant to cancel their account even though they were over 60 days past due. To rectify the matter, I forwarded to them a contract stipulating policies, etc. and then told them the site would be shut-off if I didn’t receive payment within 30 days. Fortunately, that time I received payment, but later I ended up having to cancel their account due to non-payment.
Don’t assume that you and your family or friend can work out your disagreements. Have everything in writing just as you would with any other client. Be clear on return or cancellation policies especially. If you know that they are difficult to deal with, consider referring them to a colleague and ask the colleague for a referral fee. Many people do much better working with strangers.
Special Family/Friends Discounts
I know that it is very difficult not to give special favor to your family or friends, but this can also cause problems. Can you keep track of what discount you gave to other friends or family? Was it 15% or 20%? Who gets this discount? Is it just for first cousins or do third cousins qualify? People talk you know. And you can really upset folks by showing favor to one person and not to another. If you still want to do something for family and friends, I’d suggest making up some coupons for “first time customers” and handing them out to family or friends, or a “preferred customer” coupon that gives everyone the same discount. Whatever you do, be sure to be professional and consistent.
In God We Trust, All Others Must Pay
This is my new business motto. I saw a sign with this motto on it in a craft store one time and thought it was hilarious. Now, being a business owner, I understand it clearly! In addition to web design and freelance writing, I also own a custom-fit bra salon (although I’m phasing out of this business). I can’t tell you how many times I’ve agonized because I let friends or family take product on “credit”.
To this day, some still owe me and I know that I’ll probably never see that money. I consider it a bought lesson because I should have never let them walk out of my shop without paying me. I hope you will adopt this motto. It will save you lots of heart and pocket ache.
Be sure to make your business hours very clear to family and friends. If you do not, you’ll be getting business calls at home at 9 p.m. in the evening. The call will be camouflaged, but eventually, they’ll get around to their reason for calling you. Set strict business hours and protect your personal time.
Separate Business From Pleasure
One problem in doing business with family/friends is that things can get a little muddy. If we’ve talked about the kids for over an hour, can I really justify billing you for that time? No, I cannot. So a business appointment is a business appointment. I’ll call you later to catch up on the kids. This is very important.
What I found myself doing was cheating myself. I’d spend two or three hours with my client (friend), half of that time was spent just chit chatting. I couldn’t very well charge them for the full three hours, so I would have wasted an hour and valuable/billable time. Now I try and keep to an allotted time. I always say how long I have to meet and I control the conversation. If something private comes up, I always bring them back to the topic of business.
If you put these policies in place at the onset of your business, you will avoid problems with family and friends. Family and friends can be some of the easiest clients to snag, but make sure that you conduct your business decently and in order.
Be Happy – Maintain a Balance between Friendship and Business.