What Are Friends For? Not Free Services and Products

As our organizations get started and grow, our circle of friends grows. As business relationships evolve to include personal friendships, the line between what is business and what is personal can blur. This seems to be particularly true for professional service firms (Web site developers, public relations, marketing advisors, accountants, lawyers, and other consultants). Initially it may be a quick call to ask for “the voice of experience” on a matter. Next it might be a lunch conversation that evolves into a business consulting session.

Where does the line get drawn? It depends upon the relationship involved. As a client/friend, it is always important to remember that the professional service firm makes a living and generates revenues from giving advice. As the professional services firm, it is always important to remember that it is your job to draw the line.

Of course a service provider may choose to give away some amount of his/her time. However, there should never be an expectation that, due to “friendship,” the services you would previously have paid for or would pay for from another service provider today are suddenly “complimentary.” Do you expect a friend who sells cars to give you a car based on friendship? Do you expect your banker to increase the interest rate you receive on your accounts due to friendship? Of course not. Then why would you expect friends who are professional service firms to give away their product?

Now a barter or exchange of expertise between professionals is another matter. This can be and often is beneficial for many reasons:

In an exchange of talents, be sure the exchange is also balanced. Whether it is hour for hour or proportionate based upon hourly rates, always seeking an equitable balance between what is being given and what is being received is important to maintaining both a personal and professional relationship long term.

Another type of exchange, equity for services, is often agreed to between professional service firms and clients. While this type of agreement isn’t necessarily based upon a personal relationship (although it can be) the relationships established through these agreements can mirror certain elements in the personal/professional arena.

One similarity that comes to mind when equity relationships arise is how the exchange is valued. How many options, shares, warrants, etc. get traded for each hour of service? Another issue is how objective the professional advice will be once the advisory has a stake in the outcome of the business. Some may say that the equity stake means the advisor will work that much harder, and that may be true. But the real question will be how independent or objective the advisor will be in judgment on what “should” be done versus what will improve the outcomes of the business.

Whenever self-interests become tangled with business relationships (those interests beyond a fee-based relationship) the relationship shifts. The perspective and expectations between the parties change. Some individuals and organizations may be able to perpetuate a healthy working relationship which balances self-interests. Many, however, will not be able to achieve that. The attitude, interests, and perspectives can and often do shift to wanting or expecting more from the relationship. Any change, disagreement, or imbalance becomes magnified.

For example, an entrepreneur has an idea for a product, service, or technology, but doesn’t have the business or legal expertise necessary to execute and go to market. The entrepreneur also doesn’t have the cash. So a deal is struck between an experienced business person, a lawyer, and the entrepreneur to work together and share the ownership of the business in return for the services. The executive and the lawyer make the commitment to the business exclusively. While the entrepreneur works on developing the “product,” the executive and the lawyer work to form the business, establish operations, develop the business contacts, prospect for alliances and customers, and pursue investors.

The executive and the lawyer put in 80-hour weeks helping to refine and define the product, develop the distribution and other needed internal structures, and begin negotiations on the first commercial customer, getting that deal to within days of being signed. Then a surprising phone call from the entrepreneur: “I’m not going to finish this. I’ve decided to go get a job.” Now the executive and the lawyer are left with a company and no product. The entrepreneur not only doesn’t make his capital contribution, s/he also walks away from finishing the intellectual property. The executive and the lawyer are left with an empty company, no income, and no possibility of completing the intellectual property. The belief in the entrepreneur and the potential “payoff” of being owners may have clouded their judgment just enough to not see the warning signs that an independent advisor may have seen.

In this example there are a lot of blanks to fill in. Not every detail of the situation has been spelled out, but no doubt you can read between the lines and fill in the blanks. Perhaps you have even experienced this type of situation.

Not every relationship that is a blend of personal and professional will have issues and become one-sided. However, many professionals and experienced business people will tend to avoid getting involved in investing in a business, working with a business, or promoting a business which has a significant relationship that is a blend of personal and professional. Investors tend to shy away from businesses that can be made or broken on the personal relationships; divorce, inheritance, family disputes, and friendships all add an additional complicating factor to business: emotions. While we all have them and they are important to every aspect of our lives including business, we all have to acknowledge that they can and often do complicate our interactions and decision-making.

Be passionate about your business. Be professional in your relationships. Learn to distinguish between when you are expecting something from a relationship because of the personal connection that you wouldn’t expect from a business relationship. Also distinguish between “friendships” which are strictly business-oriented and true friendships which arise out of shared values, beliefs, and experiences. Understanding the differences and respecting the parameters of each will ultimately enable you to preserve your relationships and keep things in perspective.