Today's youth are extremely resourceful and have the latest technology as well as vast knowledge available at their fingertips, and it is for exactly this reason that entrepreneurship is on the rise amongst this generation.
This is according to Gerrie van Biljon, executive director of BUSINESS/PARTNERS, who says that although he believes entrepreneurship as a chosen career path is on the rise amongst the youth, they often don't have the funding or experience available to start a business, and it is exactly for this reason that many choose to enter a business venture with a friend or family member for financial support, business acumen and experience.
He points to the recently released GEM State of Global Youth Entrepreneurship report, which highlights that in sub-Saharan Africa 77.7% of youth new or nascent businesses are primarily reliant on personal/family or friends for funding to start a business. "Although passion, drive, creativity and resourcefulness are extremely positive attributes for an entrepreneur to possess, experience and funding also play a large role in the success of a business.
"To go into business with friends / family or not is an age old question which has been answered in many different ways over the years, with many experts still deliberating on the topic. There are many reasons to support each response. My advice is to proceed, but with much caution. As with any business partnership, it is important to have certain ground rules in place from the beginning."
Van Biljon provides some guidelines for young entrepreneurs to consider when entering a business partnership with friends or family members:
Establish trust: Do you trust your friend or the family member? If yes, then proceed and start discussions about going into business together. If not, then don't consider going into business with this individual, as trust is one the most important factors in a business partnership.
Identify complementary skills: As business partners, you will both possess different skills, and it is ideal to go into business with someone that possesses skills that complement yours. Before deciding to go into business, review what type of skills are required for the business, and then take time to review your own skills and allocate roles accordingly.
Plan for the worst and best case scenario: As partners you should plan ahead on how to deal with disagreements that may occur in the future. As such, you should define roles within the business and agree who is the leader, as even with a 50/50 partnership, only one person can have the final say when a decision has to be made. Appointing an external board can also assist with this process.
Document everything: If the business is ever extremely successful, how will profits be shared? If the business fails and doesn't survive, how will its debts be paid off? These are some of the tough questions that need to be addressed before going into business together. Once all aspects of the partnership have been evaluated and the terms agreed on, protect each other by signing relevant agreements which should include an exit clause.
Will your personal relationship survive a business failure? All entrepreneurs should plan for the worst case scenario, and part of this is to determine whether the relationship can survive a business failure. If the relationship is valued and cannot survive a business failure, it is probably not wise to pursue the venture together.