Business Law: Inside Secrets to Having Friends as Clients

By Nina L. Kaufman, Esq

When we're growing our business, friends can serve as a great source of referrals. They know us well, trust us, and have no hesitation about recommending us to others.

But what happens when a friend makes a referral . . . and the referral is the friend herself? The dynamics of your friendship can change radically, and often not for the better. [I know -- I've "been there, done that," and got the tatters of a couple of friendships to show for it] Here are some inside secrets to making sure that both your business and your personal relationship with this friend stay happy and healthy:

1. Set business expectations. One of the reasons that having friends as clients becomes a disaster is that friends may expect you to handle their work the same way as you handle their friendship. Let's say that "Janine" is used to your dropping everything to help her in a crisis. She may get upset when you don't handle her web design project with the same urgency (even if it's really not urgent). Before you take her on as a client, have a good long talk about your company's standard procedure for working with its clients. Let Janine decide whether your S.O.P meets her needs, rather than convoluting your company's policies to meet hers.

2. Be clear about what you'll charge. You're not doing a friend a favor by not charging him (or deeply discounting) the products or services you provide, and you'll end up in an unprofitable situation you later resent. Natalie ran into a situation where she agreed to help Michael, a friend from church, with IT services. She had agreed to install and configure a particular computer program for Michael - she'd only charge the out-of-pocket expenses for the program itself. She bought the computer program at her preferred partner rate (so Michael got the benefit of her discount). The company sent the wrong program, so Natalie had to spend valuable time straightening that out. It then turned out that Michael had misunderstood his computer capacity, so when Natalie tried to install the program, all sorts of other programs wouldn't work with it. Ultimately, Natalie spent many more hours than she had intended, earned no money on the deal, and Michael was upset with the whole process taking as long as it did, so never referred any further business to Natalie. A lose-lose situation all around.

3. Get it in writing. David had this very issue with Gary, a college buddy. Gary needed help with PR services, and David agreed to help his long-time friend with a particular project . . . on a handshake. But Gary kept expanding the scope of what he wanted David to do, and once embroiled in the middle of it, David couldn't easily pull out. Had David had a written agreement, he could have set out the scope of his services more clearly so that Gary would better understand when David needed to charge additional fees.

4. Have someone else say "no." You know from the moment you pick up the phone and hear from the friend on the other end that he has a need whether this could become a problem situation for your business. I feel a knot in the pit of my stomach. Other people feel their chest tighten. Still others get a headache. Don't disregard those warning signs. If you know you really can't meet your friend's needs, but don't have the heart to deny them personally, find a "bad cop" to bring to your client meeting. Your "bad cop" could be a business partner, division manager, or other work associate who will be the one to deliver the hard news about what the company charges, when payment is expected, and whether any exceptions will be made. It's not the best of all worlds, but gives everyone a way to save face - and to save the friendship.

Doing business with friends becomes awkward because it inverts your natural rules of relating. Business needs to come first, not the friendship. That's a hard boundary to set. Sometimes, the best thing you can do for a friend is to refer her to someone else to meet her needs. That way, you can help your friend while still keeping the friendship intact.

© 2004-2009 The Legal Edge LLC. Nina L. Kaufman, Esq. is an award-winning business attorney, author, and speaker. Under her Ask The Business Lawyer umbrella, Nina offers easy-to-understand business law resources that protect small businesses and save them money. To learn more, and receive our FREE "LexAppeal" ezine, visit http://www.GreatBusinessLawTips.com  or contact Contact Us. This article is for your general information only. Be sure to consult with an attorney regarding your particular situation to make sure you get the specific advice you need.

Nina Kaufman, Esq. Award Winning Business Lawyer, Author & Speaker