16 Common Mistakes When Starting a Business with Friends You Need to Avoid

You’re sitting around with your friends, maybe after a night out or one of those “deep life talks” at 3 AM, and someone says, “Why don’t we start a business together?” It sounds like a good idea, right?

Who better to build an empire with than the people who’ve been through thick and thin with you? Your best buds know you better than anyone else, so naturally, you think, this is going to be easy.

Well, it probably isn’t.

Starting a business with friends can feel like combining your best relationships with the most stressful, life-altering endeavor you’ve ever attempted. What could go wrong, right?

The road to that sweet victory lap as business partners is littered with traps, and the biggest ones? They’re right at the beginning.

You know, when you’re all still convinced everything’s perfect, and nobody wants to ruin the “vibe” with real talk. Let’s go into where things can—and often do—go seriously wrong.

Friendship + Business = Trouble?

Before we even touch on the mistakes to avoid when starting a business with friends, let’s pause and address the elephant in the room: mixing friendship and business can be a recipe for disaster.

Now, this isn’t always the case; many people manage to make it work and still meet for drinks on the weekend. But often, mixing the two can bring out a version of your friendship you never wanted to meet.

Think of it like dating your best friend—sounds perfect on paper, but in reality, when things go sideways, you don’t simply lose a partner; you lose someone who knew all your secrets, your Netflix password, and, well, everything. It’s the same with business. When emotions mix with money, things get… sticky. And fast.

But hey, this article isn’t here to tell you NOT to do it since there are just as many pros than cons to starting a business with your friends.

Just to make sure that when you do, you don’t trip over the most common mistakes people make. 

Because trust me, if you’re about to dive into a business with your best friend, you’ll want to avoid these pitfalls to be successful in the long term.

16 Common Mistakes When Starting a Business with Friends

Partnering up with friends might seem like the shortcut to entrepreneurial bliss, but it’s also a potential minefield of mistakes—mistakes that can ruin both your business and your friendship.

Now, let’s get real about some common pitfalls you’ll want to avoid if you want to come out of this with both your business and your relationships intact.

Here are some of the most common mistakes when starting a business with friend.

1. Assuming Everything Will Just Work Itself Out

Oh, how optimistic you are. The fatal flaw of most friend-led startups is the assumption that just because you’re friends, you’ll magically agree on everything. You won’t. “We’ll figure it out as we go” is not a business plan —it’s a fast track to disaster.

Real life is about to slap you in the face with difficult questions like, “Who’s in charge of what?” and “How are we dividing profits?” And if you haven’t set those boundaries before things get messy, it’ll be like untangling earbuds that’ve been in your pocket for a week.

• Not having a solid plan because you trust your friend to “figure it out” later is a fast track to chaos.
• Without structure, even small issues can snowball into unmanageable problems.
• Assumptions about shared values or goals can cause friction when your visions don’t align.
• “Winging it” doesn’t cut it—successful businesses are built on clear, well-thought-out strategies.

2. Not Defining Roles and Responsibilities Clearly

In the beginning, everyone’s hyped and willing to do anything to get the ball rolling. But fast forward a few months, and suddenly, you realize you’re all stepping on each other’s toes, or worse—nobody’s doing the tough stuff.

Define the roles early on. And no, “We’ll all just do everything” isn’t a role. Someone needs to be the decision-maker, the marketing person, the finance brain.

Because if everyone’s in charge, no one is, and chaos will quickly follow.

• Ambiguity leads to confusion and frustration when you’re not sure who’s handling what.
• Overlapping responsibilities can create unnecessary competition or resentment.
• If no one is accountable for specific tasks, important things can slip through the cracks.
• Clearly defined roles ensure efficiency and minimize conflict over decision-making.

3. Letting Personal Issues Bleed into the Business

Look, your buddy might be amazing to have at parties, but their habit of disappearing for days without answering texts? Not so fun when you’ve got a major deadline.

Personal traits that seemed harmless or even funny before might suddenly become red flags when there’s money on the line.

Mixing personal and professional boundaries will test your friendship in ways you never imagined. A minor spat about who forgot to send a client email could easily turn into a full-blown argument that dredges up that time they ditched you at a concert three years ago.

• Personal disagreements can easily cloud professional judgment, making business decisions emotional.
• Unresolved personal issues can create tension, undermining the entire operation.
• Work drama becomes unavoidable when there’s no separation between personal and professional matters.
• Personal baggage left unchecked can derail meetings, slow progress, and hurt productivity.

4. Avoiding the Awkward “Money Talk”

You know how nobody likes talking about money? Multiply that by 10 when you’re talking with your friends. Yet, it’s probably the single most critical conversation you need to have before anything even starts.

Who’s putting in the initial capital? How are you splitting profits? What happens when you need more money down the line?

These are uncomfortable questions, but if you don’t hash them out early, expect some ugly confrontations later. Trust me, nothing strains a friendship like unpaid bills and unanswered Venmo requests.

• Skipping the money conversation early on can lead to messy misunderstandings down the road.
• Without clear agreements on salary, profits, and investments, resentment can build.
• Financial disagreements are one of the top reasons businesses (and friendships) fail.
• Having “the talk” early saves you from future awkwardness and ensures transparency.

5. Not Having a Clear Exit Strategy

I get it, nobody wants to talk about what happens when it doesn’t work out. It’s like asking your partner about a prenup on the first date. But in business, an exit plan isn’t a “nice-to-have,” it’s a must.

What happens if one of you wants out?

If you don’t have this conversation early, you’ll be staring down a breakup that makes high school drama look like child’s play. You don’t want to be the person wondering, “How do we get out of this without losing both the business and the friendship?”

• What happens if one of you wants to leave? Without a plan, things can get messy fast.
• An exit strategy ensures the business can continue smoothly, even if someone steps away.
• Lacking a defined exit plan leads to bitter fights over ownership, responsibility, and assets.
• Knowing how and when to part ways can save your friendship from ending in disaster.

6. Treating It Too Casually

The temptation to treat your business like your friendship—laid-back, go-with-the-flow—is real, but also dangerous. It’s easy to be casual when you’re starting out, working out of each other’s apartments, brainstorming over pizza. But if you don’t treat the business with the seriousness it demands, you’ll find yourself slipping into bad habits.

Suddenly, deadlines get missed, meetings get rescheduled (or ignored altogether), and before you know it, your “chill” vibe has turned into “we’re in way over our heads, and nobody knows what’s going on.”

A business needs structure, and if you’re too casual, your friendship and your bottom line will both suffer.

• Not taking the business seriously because you’re working with friends can lead to poor decisions.
• Deadlines get missed, and priorities become blurred when there’s no professional structure.
• Without accountability, important tasks may be neglected or forgotten altogether.
• Casual attitudes breed unprofessionalism, which can lead to failure faster than you think.

7. Overestimating the “Fun” Factor

Starting a business with friends sounds like fun, doesn’t it? You’ll brainstorm over coffee, laugh through strategy meetings, and crack jokes while closing deals. But in reality, usiness is not all sunshine and Instagram-worthy moments.

It’s sleepless nights, stress-induced headaches, and arguing over why the printer stopped working when you really needed it.

That “fun factor” dissolves quickly once the grind kicks in. If you’re expecting the entire process to feel like an endless sleepover with profit margins, you’re in for a rude awakening. It’s not that it can’t be enjoyable—it can be.

But fun won’t keep the lights on, and overestimating how long that excitement will last is a rookie mistake.

• Expecting constant fun sets you up for disappointment once the real grind begins.
• Fun fades fast when the reality of hard work, financial stress, and deadlines sets in.
• You’ll need resilience to push through the inevitable rough patches, and “fun” won’t get you there.
• Don’t forget: it’s a business, not a never-ending hangout session.

8. Not Setting Boundaries Between Work and Friendship

Business hours shouldn’t bleed into your happy hour. One of the biggest mistakes people make when starting a business with friends is letting the lines between “work friend” and “regular friend” blur into one big mess. Before you know it, you’re discussing quarterly profits at the bar or ranting about that one terrible client in the middle of a Sunday barbecue.

It’s very important to set boundaries early on. Decide what’s “work talk” and what’s “friend time.” Trust me, your friendship will need that space to breathe.

Without clear separation, it’s too easy to turn every hangout into a work meeting (and no one wants to talk about budget reports while they’re eating wings).

• Without boundaries, every hangout can turn into a business meeting—burnout follows.
• It’s hard to separate professional criticism from personal feelings without clear work-friend lines.
• Business issues spill into personal time, affecting your relationship outside of work.
• Defining “friend time” versus “business time” helps maintain a healthy balance.

9. Ignoring Each Other’s Weaknesses

We love our friends, right? But if we’re honest, we also know what they suck at. You wouldn’t trust your friend who can’t organize their sock drawer to manage your inventory system, would you? Or the one who “forgets” to pay for lunch to handle your finances?

Ignoring these weaknesses for the sake of friendship is a common mistake. You might feel bad pointing out someone’s flaws, but trust me, it’s a lot better than dealing with a friendship-ending disaster because you let them handle something they were woefully underqualified for.

Be honest about each other’s strengths and weaknesses. If someone isn’t suited for a role, don’t let friendship blind you—assign roles accordingly.

• Turning a blind eye to your friend’s shortcomings can cripple the business.
• Assigning roles based on friendship, not ability, can lead to mistakes and inefficiency.
• Avoiding honest conversations about each other’s strengths and weaknesses is a recipe for failure.
• Honesty about limitations early on prevents bigger issues down the road.

10. Failing to Communicate Honestly

I hate to break it to you, but you’re not a mind reader, and neither is your friend. One of the biggest mistakes in any partnership—business or otherwise—is assuming the other person just gets it.

Maybe you assume they know you’re feeling overwhelmed or that they should realize they’re overstepping. Maybe you’re hoping they’ll just pick up on that passive-aggressive tone in your last email. They probably won’t.

Communication is key in any business, but even more so when there’s a friendship on the line. You need to have the tough conversations, even when it feels uncomfortable. Speak up when something’s bothering you. Don’t just assume they’ll magically figure it out. That never ends well.

• Poor communication leads to misunderstandings that can erode trust and harm the business.
• Bottling up frustrations because “they’re your friend” causes resentment to fester.
• Misaligned expectations grow when there’s no open dialogue about goals and progress.
• Honest, clear communication is key to addressing problems before they get out of control.

11. Not Having Written Agreements

I get it—writing up formal agreements feels weird when it’s your best friend. “We trust each other, we don’t need contracts,” you say. But let me ask you this: what happens when your verbal agreements get fuzzy, or someone “remembers things differently”?

Without written agreements in place, you’re setting yourself up for a world of hurt. Contracts protect both of you. They’re not about mistrust; they’re about clarity.

Make sure everything—ownership percentages, responsibilities, what happens if one of you leaves—is in writing. Future you (and your friendship) will be beyond grateful you saved them a ton of unnecessary issues.

• “Handshake deals” don’t hold up when things get complicated—contracts do.
• Friendships don’t prevent misunderstandings over responsibilities, profit shares, or ownership.
• A lack of formal agreements leaves both of you vulnerable if disagreements arise.
• Written contracts provide clarity and help maintain fairness in the long run.

12. Letting Ego Get in the Way

Just because you’re friends doesn’t mean ego won’t rear its ugly head. In fact, sometimes it makes it worse. You’re both trying to prove yourselves, maybe to each other, maybe to the world. And before you know it, ego takes the wheel.

When egos clash, it’s a recipe for disaster. One person feels like they’re doing more than the other, or someone feels slighted because their ideas aren’t getting enough credit. The best way to handle this? Check your ego at the door. This is a business, not a competition. If you can’t put the business first, your friendship and your business will suffer.

• Friends may clash when both try to take the lead, creating unnecessary power struggles.
• Ego-driven decisions often lead to poor outcomes and hurt feelings on both sides.
• Failing to compromise out of pride can push the business off course.
• Checking your ego helps maintain focus on what’s best for the business, not just yourself.

13. Underestimating the Legal Stuff

One of the biggest mistakes new business owners (especially friends) make is ignoring the legal side of things. Filing the right paperwork, getting the right permits, setting up the business structure—all that grown-up stuff that no one wants to deal with.

But you have to. And if you and your friend gloss over these details, you could end up in legal hot water down the road. Make sure you consult with a lawyer, figure out your business structure (LLC, partnership, etc.), and have the necessary protections in place. It’s not the fun part of business, but it’s absolutely necessary.

• Skipping legal advice to “save money” can cost you big in the long run.
• Missteps in legal structure (like not choosing the right business entity) can haunt you later.
• Failing to get licenses, permits, or trademarks leaves you exposed to legal consequences.
• Ignoring legal details can lead to conflicts with regulators, customers, or even each other.

14. Not Planning for the Worst-Case Scenario

I know, it’s not fun to think about what happens if things go wrong. But if you don’t plan for worst-case scenarios, you’re basically asking for chaos when things do go sideways. And in business, things always go sideways at some point.

What happens if the business fails? What if one of you wants to leave? What if you get into a huge fight? Having contingency plans in place doesn’t mean you’re pessimistic; it means you’re prepared.

And when you’re dealing with both business and friendship, preparation is everything.

• Optimism is great, but failing to plan for worst-case scenarios is naive.
• Unexpected events, from illness to financial troubles, can derail your business if you’re unprepared.
• Having contingency plans in place protects the business (and your friendship) from disaster.
• Don’t wait for the worst to happen—prepare for it, and you’ll weather the storm together.

15. Letting Emotions Drive Decisions

Starting your business requires clear, strategic thinking. Emotions? They tend to mess all that up. When you’re in business with friends, emotions can take over in ways they wouldn’t in a purely professional setting. 

Maybe you’re scared to hurt their feelings, so you avoid difficult decisions. Maybe you’re too emotionally invested in their ideas, even when they’re bad ones.

At the end of the day, business decisions need to be driven by logic, not emotion. If you let your feelings dictate your choices, you’ll end up with poor decisions that could harm the business and the friendship.

• Making business decisions based on feelings instead of facts can hurt your bottom line.
• Emotional decisions can lead to irrational moves, like taking on bad deals or avoiding tough conversations.
• When emotions are unchecked, they can cause tension and cloud judgment in critical moments.
• The best decisions come from rational thought, not emotional impulses.

16. Underestimating How Much Time it Takes

Starting a new business is a huge time commitment. And no matter how much you love your friends, you might not love seeing them every single day, working late nights, and tackling endless to-do lists together.

When you go into business with friends, you’re committing to spending a lot of time together—way more than you did before.

Don’t underestimate how draining this can be, especially if you’re not prepared for it. You’ll need to figure out how to balance work time with downtime, and more importantly, how to protect your friendship when work gets overwhelming.

• Starting a business demands more time than most people realize—it’s not a 9-to-5 job.
• Spending too much time together on business can strain your friendship.
• Failing to manage time effectively results in burnout and frustration.
• The time commitment can be overwhelming—make sure both of you are ready to give it 100%.

Conclusion: Can Business and Friendship Coexist?

Starting a business with friends sounds like a dream—a fun, collaborative adventure with people you already trust. But it’s easy to underestimate just how complicated that mix can get.

The common mistakes we’ve covered—avoiding tough conversations, failing to define roles, letting ego and emotions take the wheel—can all slowly unravel both your business and your friendship.

The key to success? Be brutally honest with yourselves. Plan ahead, communicate openly, and don’t let friendship blind you to the realities of running a business.

When done right, it’s very possible to thrive as both business partners and friends. But if you ignore these mistakes, you might end up losing more than just a failed business—you might lose the people who mattered most.

So, before you take that leap, ask yourselves: are we ready to handle the rocky road ahead, both as business partners and as friends? If the answer is yes, then you’re already one step ahead of most.

Ready to take it a step further and better prepare yourself for your future ventures?

I highly recommend checking out Skillshare. They offer a ton of great courses that cover everything from business strategy to communication skills that can help you and your business thrive. [Explore Skillshare’s business courses here].

Also, for those of you who love diving deep into practical advice and insights from industry experts, take a look at our book recommendations [link here]. These books can serve as valuable resources to face the ups and downs of business partnerships and entrepreneurial success.

FAQs

1. What are some mistakes to avoid when starting a business with friends?

Some of the biggest mistakes to avoid include not defining clear roles, avoiding money conversations, letting personal issues bleed into the business, and skipping out on legal agreements. It’s crucial to stay professional and plan for worst-case scenarios to maintain a successful business.

2. What are common mistakes to avoid when starting a business with friends?

Many entrepreneurs overlook having a clear business plan, fail to communicate honestly, or assume that things will work themselves out. These mistakes often lead to mismanagement and conflict, making it hard to grow your business effectively.

3. How can entrepreneurs avoid making common mistakes when starting a business with friends?

Clear communication, setting boundaries, and defining each person’s role in the business are essential steps. Having a well-thought-out business plan and not letting ego drive decisions are crucial in creating a successful business together.

4. What role does having a business plan play in avoiding mistakes when starting a business with friends?

A business plan is critical in aligning expectations and ensuring each partner knows their responsibilities. It acts as a roadmap for the product or service you’re offering and helps avoid common missteps by keeping everyone on the same page.

5. Why is it important to plan for an exit strategy in a business partnership with friends?

Not having a clear exit strategy is one of the biggest mistakes to avoid. If the business doesn’t work out or one person wants to leave, a plan protects the friendship and ensures the business can continue smoothly without major disruptions.

6. What are the best ways to grow your business with friends without making common mistakes?

To grow your business successfully with friends, ensure open communication, set clear expectations, avoid letting personal emotions interfere with business decisions, and regularly evaluate what’s working (and what’s not) in your product or service.

7. What legal mistakes should be avoided when starting a business with friends?

Many partners overlook the legal aspects, such as contracts and defining ownership stakes. Not handling the legal stuff early on can lead to conflicts and legal trouble later, making it difficult to build a successful business.