Business By Hormozi #245: Business with Friends – The Right Way to Do It

The Risk of Business with Friends

Friendship and business—two things that seem like they should go together, yet often lead to disaster. Many friendships have been ruined over money, contracts, and unmet expectations. But what if there was a way to ensure that business with friends strengthens relationships instead of destroying them?

Ethan and Leo were lifelong friends with a shared passion for coffee. One day, they had an idea—why not open a café together? It seemed perfect. They trusted each other, enjoyed working together, and had the same vision.

But trust alone wasn’t enough.

The Wrong Way to Do Business with Friends

Excited by their idea, Ethan and Leo rushed into opening their café. They didn’t draft a formal agreement. They split responsibilities vaguely—Ethan handled finances, Leo managed operations—but nothing was written down.

At first, everything seemed fine. The café gained popularity, customers loved it, and money started coming in. But soon, cracks began to form.

Leo felt he was doing more work while Ethan controlled the money. Ethan thought Leo was spending too much. Resentment grew, but neither addressed it—after all, they were friends.

The tension exploded when Ethan suggested cutting costs, and Leo accused him of being greedy. Arguments turned into silence. The café struggled, and worse, their friendship was falling apart.

The Right Way to Do Business with Friends

Across town, another pair of friends, Daniel and Chris, also started a business. But before they made a single dollar, they followed a simple rule:

"Do the deal as though you aren’t friends, so you stay friends."

They treated their partnership like a business deal with a stranger. They wrote contracts, defined roles clearly, and made sure everything was in writing.

Whenever disagreements arose, they referred to their agreement. Instead of personal conflicts, they made professional decisions. The result? A thriving business and an unbreakable friendship.

A Simple Rule to Keep Friendships Intact

Ethan and Leo eventually realized their mistake. They sat down, wrote a formal agreement, and set boundaries. It wasn’t easy, but it saved both their café and their friendship.

The lesson? If you wouldn’t do the deal with a stranger under those terms, don’t do it with a friend. If you would, then doing business with friends is only upside.

Conclusion

Business with friends can be a great opportunity, but only if handled correctly. Treat it professionally, define expectations clearly, and make sure the friendship is never at risk. Because a true friend is worth more than any deal.

Moral: "If you do a deal with a friend: Do the deal as though you aren’t friends, so you stay friends. If you’d do the deal with a stranger under those terms, then doing it with a friend is only upside."