Buddies In Business What it's really like to start a company with your best friend.

One of Rachel Bell's first memories of Sara Sutton is of herlip-synching to Duran Duran at a friend's bar mitzvah.

Sutton recalls Bell's star turn as Plum Blossom in theschool play.

The two are best friends, and have been since the fifth grade.But it wasn't until 1995, when they were 21, that they decidedto go into business together. Bell recalls, "My father told methat summer, `Rachel, you don't have to go into corporateAmerica. There are so many great opportunities to start your ownbusiness.' "

So Bell teamed up with Sutton to create JobDirect.com, anInternet enterprise that connects college and graduate studentswith employers. Today they have annual revenues of $3 million; 24employees in their Stamford, Connecticut, offices; and more than110,000 resumes filtering through their database each year.

These two make for quite a success story. But for every Suttonand Bell, there are plenty of partnerships that turn life into aliving hell.

Just ask Greg Gorder, an attorney with Perkins Coie LLP inSeattle who's given legal counsel to plenty ofallies-turned-enemies. On the upside, Gorder says, going intobusiness with a friend means working with "somebody [withwhom] you have high degrees of trust and compatibility. On thedownside, start-ups are hard on relationships, and you may, throughachieving business success, lose something more important thanmoney: a best friend."

Working It Out

The first time Alex Andrade saw Liz Davidson, she was rollerskating in her New York City apartment. Davidson's roommate hadinvited Andrade over to do his laundry. As Davidson whizzed pasthim, "I really had no idea what to think," admitsAndrade. "I definitely didn't think I'd be managingmoney with her six years later."

That was in 1993, and the two soon linked up like two Legos.(Before you ask-theirs has always been a platonic friendship.)"She was doing investment banking; I was doing brokerage. Shewas definitely the more serious, motivated worker," saysAndrade, 27. "[But I] liked that we could really talk aboutpolitics, other people, serious stuff. We really got alongwell."

Three years later, Andrade was at law school in Texas andDavidson had moved to Los Angeles. When she decided to take theentrepreneurial plunge, she knew who she wanted to jump withher.

"I am very risk-averse about people," admits Davidson,who had no qualms about her best friend. "I'm a bit of acynic. But I knew he was honest and decent and could commit-andthat I could work with him."

It was a good call, for the investment firm of Davidson AndradeLLC is doing well. Although it's still a two-personstaff, with the help of the office building's secretarial pool,the firm manages more than $30 million in assets. Davidson, 27, isCEO and runs day-to-day operations; Andrade is the firm'sportfolio manager. Each has the final say on their respectiveduties.

The two could be a case study of why friendships and business doand don't mix.

• Why their business almost didn't work: Deciding howto divide a company is messy, and at first, Davidson and Andradesplit theirs evenly. But months later, Davidson was financing a lotof the company (Andrade was still in law school), and most of theirequity had been brought in by her contacts. Uh, oh-rumblingsof resentment arose.

While Andrade wanted to move back to New York City, Davidson waskeen on Los Angeles. They compromised on San Francisco and soonrealized their work styles were
as similar as, say, South Park and Gorky Park. Andrade islaid-back; Davidson, no-nonsense. She says what's on her mind;he doesn't. Even the trust factor was still in a primordialstage. When Davidson hired
a lawyer, Andrade telephoned the attorney "to make sure he wasrepresenting both our interests-[but I did it] without consultingher. That caused a problem."

• Why their business has worked: Well, they arefriends. Says Davidson, "I think we care about eachother's happiness as much as our own."

Andrade agrees: "When she structured my [salary and]incentives, it was really detailed and well-thought-out-almost morethan I would have done for myself." And one time, whenDavidson telephoned Andrade in Texas and revealed she felt he had adisproportionate share of the company's worth, it started anargument. But just as she decided to bury her bitterness, shereceived an "amazing letter," in which Andrade agreedwith her.

"He gave up more than half his equity," marvelsDavidson. "I will never forget that. It showed me again howcommitted he was and how much he cared about fairness."

But despite their mutual respect, Davidson knew of best-friendbusinesses that had bombed, and she insisted Andrade participate inlengthy phone sessions with a Virginia-based business counselorbefore moving into their Frisco digs.

"So many people wait until they're ready to kill eachother, and then they're like `Well, we'll go intotherapy,' " observes Davidson.

Paying for therapy, Andrade maintains, was "more importantthan a new computer or great office space. If we can't getalong, this will not work."

And if it doesn't? Gorder recommends best friends inbusiness plan an exit strategy. After all, what if one partnerwants to go do something else?

Calling It Splits

Jeff Duke is doing something else. He's skiing inColorado.

Duke, 34, met Jeff Strunk when the two were bellhops in theearly 1980s in Colorado Springs, Colorado. They didn't getalong at first, recalls Strunk, "but several months later, wewere at a party, got drunk together and have been best friends eversince."

In 1986, the two Jeffs wound up in Maine, working as weekend skiinstructors. In the summers, they sold T-shirts, jewelry and othergifts, and by 1989, Strunk had created a bar game that wouldeventually be called Stack-now one of eight games produced byStrunk Games, a Kingfield, Maine, corporation with three full-timeemployees, eight part-timers and 1998 sales of $650,000.

In 1996, Duke wanted out. In part, he was uneasy with corporatefashions. (Duke now never has to wear a suit; he owns Tidal TransitCo., a seasonal business in Maine that specializes in guided kayaktours.) But both partners concede differing management styles werea factor.

How so? Duke is reluctant to reply, not wanting to hurtStrunk's feelings. (The two are still friends; they go rockclimbing together.) Finally, Duke offers an example: "Therewas a time when Jeff really thought Stack was going to do betterthan it did. It looked like Waldenbooks was going to pick up anorder, and-well, he ordered too many dice." Pause."Two million dice. Four years later, I think he stillhas some in the basement. It was just an example of his goingoverboard."

There were arguments-uncomfortable for the nonconfrontationalStrunk, whose stepfather eventually bought Duke's shares of thecompany. Would Strunk advise going into business with a bud? Hehesitates, then: "I'd say, Do it. But make sure it's asolid business. Then you don't have to struggle with it, andyou won't have to struggle with your best friend."

Forever Friends?

During their first year of business, Strunk surmises, he andDuke logged some 30,000 miles in road trips across North America,selling their game and having a blast: "Experiences like thatlast for a lifetime," he says. And Bell believes she likelywouldn't be in business today if it weren't for Sutton."People doubted us in the beginning, saying `You guys are 21;you haven't graduated from college-what are youdoing?' " recalls Bell. "If I didn't haveSara on my side, and if she didn't have me on her side, itwould have been a lot easier to give up."

Giving up is not a concept familiar to Davidson or Andrade."I will invest almost anything to make this work," saysDavidson. "People always think you invest in the product orthe equipment, but the biggest investment is in the partnership-ineach other."

Friends Don't Let Friends Hire Friends

In 1997, Adam Portnoy started Surfree.com, a San FranciscoInternet provider. When a staff was needed, Portnoy sought out hisfriends. He hired Sarah Wright.

Their friendship was firm . . . untilnonfriends were hired. Explains Portnoy, 28: "Sarah was usedto having a casual rapport with me. But I was the one enforcing theidea: `No, it can't be casual anymore.' She could walk intomy office and talk about things while other people couldn't,and it [created] an imbalance within the office. That's when wehit some rough waters."

Portnoy and Wright bickered constantly, until they had aheart-to-heart on a business trip in the heart of New York City.Now their work relationship is stronger than ever.

"We still spend time together, but not nearly asmuch," admits Portnoy. "Because, you know, all of asudden, outside the workplace, you're hanging with yourboss." Right. Who wants that?

Make It Legal

No matter how well you think you know your pal, protect yourselfwith a partnership agreement that specifies:

• How authority will be shared
• How ownership interest will be shared
• How decisions will be made
• How the purchase price of the business will be determined ifone partner wants out
• How the money will be paid

  It's a good idea to consult a lawyer for help.

Would You Rather . . . Have A Biz Or A Bud?

Randy Horn has a message for best friends thinking about goinginto business: Don't. In October 1997, Horn, now 31, and hisclosest pal did. The two met in business school at UCLA and did theusual studying, quaffing beers and talking about women. "Wewere very close," says Horn, who doesn't want hisex-friend's name in print for fear of further riling him.

Shortly before graduating, they presented a business plan toinvestors for a board game called Zobmondo (based on the conceptof, "Would you rather . . . ?" Sample question:"Would you rather get kicked in the head--or a papercut in your eyeball?"). Investors were intrigued, but Horn andhis co-honcho couldn't concur on how to co-run their newlyfounded company. "Because we had people interested ininvesting, we had to present ourselves as a `happycouple,' " explains Horn. "Determining whetherwe could work together went on the back burner."

They couldn't. They had differences on splitting equity,communication styles and levels of commitment. Finally, thepartnership unraveled. "I think the moment I realized we wouldnever, ever again be friends was when lawyers got involved,"says Horn, who is now sole owner of Zobmondo Entertainment LLC.

It's Not Who You Know, It's What You Know (About Your Friend)

What makes your friend a hoot during the weekends doesn'tnecessarily make him a hit during the week. Just ask Azriela Jaffe,a Lancaster, Pennsylvania, business author who did scores ofinterviews for her recent book, Let's Go Into BusinessTogether: Eight Secrets for Successful Business Partnering(Avon Books, $12.50, 800-236-7323). One entrepreneur she talked towent into business with his best friend--a closet alcoholic whocame out of the closet.

"[The alcoholic] was showing up late, leaving early, takingdays off," Jaffe recalls. "The breaking point was when heshowed up drunk with a client. The business failed; the friendshipfailed, too."

Most friends don't question each other's potentialproblems when starting a business, says Jaffe. She asked herinterviewee if he had ever seen any warning signs of hisfriend's alcoholism. "In hindsight, yes," the manreplied. "The guy drank all the time-whenever I was withhim."

Geoff Williams (gwilli2181@aol.com) is a freelancewriter in Cincinnati and part-time features reporter for TheCincinnati Post. He's still smarting over a failedpeanut-butter-and-jelly sandwich business he ran with a best friendin elementary school.

Contact Sources

Davidson Andrade LLC, ldavidson@davidsonandrade.com, http://www.davidsonandrade.com

Jeff Duke, P.O. Box 3384, Crested Butte, CO 81224, (970)349-0314

JobDirect.com, rachel@jobdirect.com , http://www.jobdirect.com

Perkins Coie LLP, gordg@perkinscoie.com , http://www.perkinscoie.com

Surfree.com, (888) 678-7373, http://www.surfree.com

Zobmondo Entertainment LLC, (800) 417-0017, http://www.zobmondo.com