From the October 2005 issue of Entrepreneur

So you're thinking of starting a business with one of your very smart, very cool college friends. Maybe he's your roommate, or perhaps you met her in a business class. It might even be a group of your fraternity brothers or sorority sisters who all want to start a business together. While it sounds like the perfect kind of partnership, is going into business with a college buddy (or buddies) really a good idea?

For the co-founders of Chili Willy's, a quick-serve Mexican restaurant in Hamilton, New York, their friendship proved to be a perfect recipe for entrepreneurship. Chris Nordsiek, Preston Burnes and Matt Brown, all 21-year-old students at Colgate University in Hamilton, became friends during their freshman year. The three initially came up with the restaurant idea for a business plan competition during their sophomore year. Because Nordsiek, Burnes and Brown have different strengths and skills, going into business together seemed natural for the friends. "For the three of us, our strengths are very different," says Nordsiek. "We all have a different perspective, and between the three of us, we can [identify] any hole or problem [in the business]." Being in the same fraternity for a full year before starting the business also helped the team really get to know each other.

But partnering with your college friends isn't always a smart idea. Two pitfalls of the strategy are ruining friendships and giving friends with shaky credentials key positions in your company. According to Graham Mitchell, director of the Program in Entrepreneurship at Lehigh University in Bethlehem, Pennsylvania, "Clearly, there has to be a good sort of chemistry with people on a personal level, and it helps if there's a natural division of capabilities and talents."

Working with someone on a class project is one way to get to know a potential partner better; you'll get a good idea of his or her strengths, weaknesses and ability to commit to a real-world business. Choosing someone only because she's your friend isn't wise, so always consider someone's knowledge and business skills as honestly as possible.

Mitchell also suggests studying the partnership dynamics of other successful entrepreneurs: "Students and young teams need to experience that and be exposed to the ways teams work from a theoretical point of view."

Learning to deal with conflict is key to making any partnership work--especially if you're roommates in addition to being co-founders, like Nordsiek and Burnes. "If two of us are disagreeing about something, we'll bring in the third guy, and he'll be the one to make the call or [arbitrate] what's going on," says Nordsiek. "We're not going to stick to our guns and be wrong. We're all rational human beings, and if we sit down and discuss it, we can come up with a solution." Putting ego aside when solving problems is imperative. As Nordsiek says, "We put the success of the restaurant before everything else."

Fine-tuning that communication style took the better part of a year for the Chili Willy's team. But since opening their doors in February 2005, the trio has clearly managed to make friendship and entrepreneurship work hand in hand: First-year sales are projected to hit $200,000.