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Why You Should Never Accept Business Favors From Personal Friends Your buddy may be offering just what you need, but don't succumb to temptation when offered a deal.

By Adam Callinan Edited by Jason Fell

Opinions expressed by Entrepreneur contributors are their own.


It's no secret that the world is built on relationships. So it makes sense that you would want to leverage those relationships to get better deals, preferred pricing or just straight up favors. Sounds pretty straightforward, at least until a relationship exists that extends beyond business, creating situations that are ripe for disaster.

Related: Advice From 9 Entrepreneurs Who Made Partnering or Hiring Friends Work

If you're considering doing a deal with a friend's company, the fact that there are personal connections should send up a red flag. It typically doesn't, though, until you build up a little scar tissue from being burned. It's just far too easy to overlook the potential pitfalls, largely based on what is perceived as comfort and trust in the potential opportunity -- you already know this person and think you know how he or she operates. But you don't, at least in this setting.

You'll never be a priority in his or her business.

It usually starts like this (at least this is how it started for me when I earned my scar tissue): you own or work for a startup that sells a product or service and are looking to contract out some work instead of hiring inside staff because, well, you're strapped for cash -- things such as fulfillment, public relations and web design are all common applicants. Based on the fact that your friend owns the potential company, he or she offers in good faith to give you half off said services. Sweet, right?

You have an agreement created with all the "who's responsible for what" and you're on your way. Then a month into it you find that he or she is not exactly holding up to his or her end of the bargain, delaying email communications and not following through. You're clearly not a priority, and guess what, you're not going to be because you're paying half of what others clients are for the same set of services.

Mentally, the other person thinks you can't fire them -- and you probably won't.

It gets worse. Because you have a personal relationship, your buddy thinks that he or she can always come back and give you some laundry list of excuses as to why he or she is falling behind. And you're highly likely to accept it, something that you would never do if you didn't have a personal connection.

Related: 4 Steps to Keep Family Loans From Escalating Into Fisticuffs

Your buddy is going to leverage this benefit, not likely on purpose, and you're going to succumb to it, again, not likely on purpose. The emotional aspect of the personal relationship clouds both of your judgments and you're the one that's going to pay.

You get what you pay for.

The old adage is absolutely true, particularly in this case: you get what you pay for.

If you decide to work with a personal friend, you need to remain in a position where you owe him or her nothing. There are no deals, no personal favors and, therefore, considerably less opportunity for performance issues to develop.

Instead of accepting a discount on the potential services rendered, pay full price. I know that this may seem crazy but you will both be considerably better off when you are on a level playing field and you can point at a written agreement and say, "you agreed to x, y and z and you're not doing it" -- should such a situation occur. Then it's not you being an ungrateful jerk to your friend, which may be perceived if you got a deal, but your friend not holding up his or her end of the agreement.

You get what you pay for.

Related: How to Hire Friends Without Destroying Relationships

Adam Callinan

Entrepreneur and Venture Investor

Adam Callinan is a founder at BottleKeeper, the fast-paced and sarcasm-infused solution to the warm beer and broken bottle epidemics that have plagued the world for centuries. Callinan is also a founding partner at Beachwood Ventures, a Los Angeles-based early-stage and non-traditional venture-capital firm at the intersection of technology and entertainment. As an entrepreneur, Callinan has spent over a decade building small businesses in and around technology, medical devices and consumer products, which most recently includes an exit in 2013. Callinan lives in Manhattan Beach with his wife Katie.

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