It’s a no brainer: don’t mix business and personal relationships. Most people know that friends shouldn’t do business together. Yet, people ignore this rule all the time.
In a story for Advisor’s Edge, Gabrielle Bauer cautions against taking on a friend as a client.
Bauer spoke to Leona Tranter, standards enforcement director at the Financial Planning Standards Council, who says it can be tricky to keep the line drawn between business life and personal life if you get involved with a friend.
“Some clients are less able to compartmentalize than others,” says Tranter. “They may be tempted to talk shop at a family function. It is important to articulate the rules of engagement up front.”
This advice isn’t just for advisors. In any type of business, taking a friend on as a client–or partnering with a friend–can be a disaster.
In a recent column, Andy Buyting named “the congenial buddy” as the number one type of advisor who can cripple your company.
“You want advisors who aren’t afraid to challenge you, disagree with you and/or tell you your idea is ridiculous,” writes Buyting. “Your easygoing pal from way back when may not be too timid to provide anything other than platitudes, and those won’t help your business. If you want someone to smile, pat you on the back and tell you how wonderful you are, visit a grandparent. If you want someone who will poke holes in your theory, warn you of your blind spots and challenge you to greatness, then find an advisor who is willing to stand up to you.”
There’s a third, even thornier scenario than the client friend or the advisor friend: the employee friend. A lot of small business owners do employ friends or family. It’s not out of the question like, say, an office romance, but it can be a mess.
The NFIB offers 5 tips for working with family and friends. Among them: differentiate business discussions. This goes back to Tranter’s point. The NFIB’s advice? Check the tone of your interactions. When you’re talking to your friend/cousin/brother-in-law about business or work performance, that should be the only focus of your conversation. And set those boundaries early. Once you set the precedent that it’s okay to talk business at brunch, it’s hard to stop.
Go ahead and hire that loved one, but make sure you’ve put a clear set of boundaries and rules in place.
The NFIB’s 5 Tips Are:
1. Hire based on merit
2. Set boundaries early
3. Be open about the relationship
4. Consider using a mediator
5. Differentiate business discussions