Can you buy friendship?

If you examine the question “Can you buy friendship” from an investment point-of-view, the answer is “Yes.”

Putting trust (investing in their product or business) into a friend or loved one’s business can easily make friendships. It can show the person on the receiving end how much you care about their quest for success, their dreams, and for them as a person. It shows them that you trust in them so much that you are willing to take a financial risk with them in their journey. This can truly make an ordinary relationship turn extraordinary.

So that’s all settled, right? Always trust your friend or family member in their business ventures?

Wrong. In fact, many financial and investment experts say that investing in a family or friend is one of the most risky forms of investing. This is due to the extreme emotional attachment that comes along with most relationships, whether they are friend or family related. Many aspects of a potential joint venture need to be examined:

• Catalog all events and transactions that occur- Get your financial and verbal transactions in writing. Surprisingly, many people fail to do this when involved in a deal with a friend or family member, deeming it “uncomfortable business” and a hassle dealing with all of the “optional” paperwork. Even though your partner may be your friend, friendships do end, and trust between people can come to a sudden halt. While it is wishful thinking that your friend would never wrong you, and that he will use your money only under his strict financial plan, it is still best to get all forms of communication in writing… just in case something were to occur. Plan on using a lawyer to review the deal and to advise you on your financial security, as well as someone to play the middle-man when drafting new plans.
• Check out other investors investing in their company. If a lot of people have already invested time and money in the company, then have faith and help out your peer, the odds are with you . Also, be sure that your friend has a significant amount of money invested in his/her own company and not just mooching off others. With his/her money tied up in the company, he/she will most likely tend to appreciate time and monetary investments more, as well as closely reviewing any potential “risky” business transactions. “The more, the merrier “
• Research the companie’s potential clientele, competitors, profit earnings, contacts, and employees. Knowing these valuable pieces of information can help you decide whether or not you should invest in the company, as well as make you feel more secure about your investment if you do in fact decide to invest.

And although your friend’s business may fall through, be sure not to let that affect your friendship with that person. Money comes and goes, but friendships are forever.

– Benjamin Cass, BenjaminCass.com, Copyright 2007

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