Co-investing with a Friend in a New Restaurant: Is It Worth It?

Do you know what they say? A friend in need is a friend indeed. A college buddy reaches out to you with an exciting opportunity: co-investing in a new restaurant. The catch? You're each throwing in roughly $750k, and if all goes well, you'll be on the hook for an additional $1.5 million. While the money isn't the issue, is it worth partnering with your best friend from college?

Assessing the Viability of the Business

The first and foremost question to ask is whether this business is viable. How well do you think it will perform, and what risks are involved? Engaging in due diligence and understanding the potential hurdles is crucial. If both of you can accept these risks and are committed to mitigating them, you have a solid foundation for your venture.

Make sure you carefully consider the following point - know what you're getting into regardless of whom it's with first.

Besides Business, It's a Test of Friendship

Working with a friend can be exciting and rewarding, but it's also a significant test of your friendship. If things don't go as planned and the business takes a downturn, the blame game can severely strain the relationship. It's essential to be fully prepared for the challenges that lie ahead. No business gets off easy, and the ones that do are rare.

Prepare yourself for the inevitable ups and downs. Be accountable for your actions and ensure you do your part. This is no time for excuses or finger-pointing. Weigh the potential risks and be willing to fail together as much as you are willing to succeed.

Be fully prepared for a test of your friendship and/or partnership.

Get to Know Your Partner's Abilities

Before finalizing the partnership, take the time to assess your friend's ability to deliver. If they're a master-delegator, it might be a red flag. On the other hand, if they're capable of getting things done, it doesn't matter whether they are a friend or not, you want them on your team. Your partner's consistency and performance are critical.

A friend of ours, referred to as Partner B, provided a vivid example. B would always talk about his plans but showed very little action. We learned the hard way that his expertise in sales was a figment of his imagination. This experience taught us the importance of due diligence and having trust in our partners.

Ensure your partner can consistently ensure that their energy is poured into the business. Your partnership will only thrive if you both are fully committed and willing to take action.

Define and Stick to Roles

Another crucial aspect of a successful business partnership is defining and sticking to roles. Designate one partner as the decision-maker, and ensure that no one waits for things to change. If you're not comfortable with your friend being in charge, it may be best to reconsider the partnership.

Follow your gut and ask yourself if you can trust this partner to run the business alone.

For our venture, we assigned decision-making roles, but our experience with Partner B taught us valuable lessons. He was in sales, but his lack of action and poor decision-making led to significant setbacks. This was a costly decision with both financial and personal consequences.

Reflect on your experience, and ask yourself if you can trust your partner to fulfill their roles diligently. It's better to address these concerns upfront rather than later when the business is fully operational.

Key Takeaways

Co-investing with a friend can be incredibly rewarding, but it's essential to be well-prepared and consider the potential pitfalls. By addressing these issues upfront, you can ensure a smoother and more successful venture.

Remember, a dream business is only as good as the partnership that backs it. So, before you get too excited, take a step back and ask yourself if you're ready for the long haul. This is your life now, day and night. Will it be a life you love and a partnership that stands the test of time?