Tips to ensure that working with friends does not end badly
Ed Browne, a partner at Madgwicks Lawyers in Melbourne, often advises friends who are starting a business together. He outlines the benefits and drawbacks.
"The good thing about doing business with friends is you understand the people you are working with and you don't have that learning curve of getting to know your colleagues," he says.
"The downside is when things go wrong, you lose a friend. We deal with that regularly: friendships broken by business relationships that didn't work out."
Browne says the main cause of conflict is when someone decides to leave the business and there is a dispute about how to divide assets, intellectual property rights or profits.
"The other thing that causes trouble between friends is when the business is not making money and there is a perception that one of the friends is not doing what they should be doing to get the business going," Browne says.
He says the best way to avoid grief is to have a clear agreement that covers contingencies: such as what happens if someone wants to leave the business; if someone gets sick; if a family situation means one person needs to move interstate; if one party wants to bring in a new partner, or if one person dies.
"Sometimes these are not discussions that friends have because they don't want to offend or damage the friendship or they think, 'because we're friends, we'll work it out as we go', or 'she's my friend, she'd never do that,' " Browne says.
"Our job as advisers is to say, 'we're going to ask you these questions because our experience tells us you will face these issues and may not have thought of them because you're starry-eyed about the great business you're going to launch.' "
For seven years architect Anna Dutton has enjoyed running Bower Architecture with two of her close friends from university, Jade Vidal and Chema Bould.
"It was always a dream for all three of us to have our own practice with creatively fabulous people we respected and admired, and we found that it in each other," she says.
After university each of them gained experience in other firms before launching the business.
Dutton says the planning was a useful and surprising process. "There were things that came up that we'd never thought of. It did prompt honest discussions. It was a good platform to really bring things to the table."
One unexpected issue that came up was how they would treat parental leave.
"When you start the business you're not necessarily thinking about family leave immediately.
"We had to work out how we were going to be equal in the way we treat our time at work and time off work to be with family - looking at how the business can support that person, and how the business can continue to operate without one person being involved."
Dutton says an honest discussion among the partners is key to great business and friendship, in day-to-day interactions and long-term planning. "One of the good things about being friends is that if there's ever disagreement we're very quick to talk about it, resolve things, then move on," she says.
When all goes to plan, working with friends can be as good as the dream suggests. "The best thing is coming to work every day and looking forward to hanging out with your mates. While we work hard, we have a good time together," Dutton says.
Frequently Asked Questions about this Article…
Working with friends can be great because you already understand each other and skip the early 'getting-to-know-you' phase. But the downside is that, if things go wrong, you risk losing the friendship. The article suggests weighing the benefits and planning carefully so the relationship and the business both survive.
Make a clear, written agreement that covers likely contingencies: what happens if someone wants to leave, how assets, intellectual property and profits will be divided, provisions for sickness or death, rules for bringing in new partners, and plans for family-related moves or leave. The article stresses that these practical items stop disputes before they start.
According to the article, disputes often come up when one person wants to leave and there’s disagreement over dividing assets or IP, and when the business isn’t making money and some partners feel others aren’t contributing enough. Lack of clear agreements and expectations fuels these tensions.
A formal agreement sets expectations and outlines how to handle exits, illness, family moves, new partners and death. The article notes advisers ask tough questions founders may be ‘starry-eyed’ about, and that documenting answers prevents misunderstandings that can destroy friendships.
The article highlights things people don’t always think about early on—parental leave, how the business will operate if one partner is absent, who will cover roles during long-term illness or an interstate move, and how time off will be treated. Honest planning surfaces these surprises.
Very important. The partners at Bower Architecture say honest discussion—both day-to-day and about long-term planning—helps them resolve disagreements quickly and maintain the friendship. Regular, open communication complements formal agreements.
Look for signs of solid planning and governance: written partnership agreements, clear role descriptions, contingency plans for exits or family leave, and evidence the founders communicate well. The article implies businesses that prepare for real-life events and have honest discussions are less likely to implode.
Yes — the article gives the example of Bower Architecture, where three university friends have run a successful practice for years. When friends combine careful planning, clear agreements and good communication, working together can be both personally rewarding and professionally sustainable.
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