What You Need To Know Before You Go Into Business With Your Best Friend

If your business doesn’t last, your friendship might not either. Take this advice from two BFFs who have weathered the storm.

What You Need To Know Before You Go Into Business With Your Best Friend
[Photo: Flickr user Suzette - www.suzette.nu]

It’s the stuff that childhood fantasies are made of.

Friends since they were 9 years old, Lenore Estrada and Anna Derivi-Castellanos spent their grade school days together, baking pies and daydreaming about co-owning a business. Two decades later, their pie business is fast becoming a San Francisco success story, with glowing write-ups in publications like Food & Wine magazine.

Anna Derivi-Castellanos and Lenore EstradaPhoto: via Three Babes Bakeshop

“It’s been an amazing growth experience to have together–to grow something from zero dollars to getting international attention,” said Estrada. “Even when we’re working all night or we’ve dropped a bucket of eggs and have to clean them up, we still get to spend every day with our best friend.”

But it was hardly a foregone conclusion that the pair would test their mettle in entrepreneurship–or that they’d become demigoddesses of the dessert world.

Pursuing The pipe dream

After college, the friends chose very different paths. Derivi-Castellanos went to culinary school and then worked in a natural foods store, while Estrada tried her hand at varying professions, from working at Google, to luxury wedding planning in Manhattan, to hedge fund operations.

After being diagnosed with cancer and undergoing chemotherapy and radiation treatment, Estrada was intent on building a successful career, but was discouraged by the lack of meaning she was finding in her work. Her marriage was also falling apart, and in 2011, Estrada started to actively plot her next step. When Derivi-Castellanos threw out the option of pursuing their long-held dream of co-owning a business, Estrada seized on it. Within months, Three Babes Bakeshop was formed.

At first, they admitted, they didn’t really know what the product was going to be–all they knew was that it had to be homegrown, handmade, and sustainable. Born and raised in Stockton, California, both women felt a deep connection to the agricultural community of the Central Valley and wanted their business to celebrate local values.

They quickly realized that baking pies was the natural choice. Not only did it give them a chance to highlight the environmental and agricultural issues in their area, it honored their shared childhood experiences and family history.

Pies As A Platform

“We wanted to have our products be a platform for speaking to lots of different issues and, because the filling changes with the seasons, it gives us a great opportunity to talk about [topics like] drought and water issues, organics and supporting the local economy,” said Derivi-Castellanos, whose great-grandfather came to the U.S. from Italy as a pastry chef on J.P. Morgan’s yacht, and whose son, Anna’s grandfather, later opened a pastry shop and grill in downtown Stockton.

In their debut weekend, they sold out within hours each morning. They pulled four all-nighters in a row to produce enough goods for the next day. Since then, as they’ve expanded into major farmers’ markets and added a subscription business, their business has continued to grow.

Photo: Flickr user Daniel Zemans

But they emphasize that it certainly hasn’t been easy. Along the way they’ve had to shoulder all the stresses of a fledgling business, from making payroll and managing their books to tackling difficult conversations about equity and losing a partner early on (hence just two “babes,” not three). On top of it all, they’ve endured personal loss–both of Estrada’s parents passed away in the first two years Three Babes was in business.

Navigating those challenges has been hard on their friendship and on their business, but they said it’s also enabled them to grow personally and professionally.

“When you have a small business, the weight of the responsibility and the fear that even though you work so hard and it may amount to nothing–it’s so much stress–it’s been scary for both of us,” said Estrada. “But everything we’ve built, we’ve built together.”

Here are a few of their tips for building a business with your best friend:

Treat your relationship the way you would a marriage.
Best friendships are sacred. And when a business goes south, relationships often follow. “If it doesn’t work out, it’s like getting divorced,” said Estrada. Weigh the decision to go into business together extremely carefully and, if you decide to move forward, be prepared to prioritize your partnership above most others in your life.

Create accountability through external relationships.
“The hardest part of it all is keeping each other accountable,” said Derivi-Castellanos. You want to be as understanding as possible for your friend, but sometimes that means productivity can suffer. Estrada said her solution has been to create weekly check-ins with peers outside the business, as well as a “friend board,” to help her stay on track.

Make sure you’re working toward the same goal.
Derivi-Castellanos and Estrada made the decision to prioritize their friendship and grow the business more slowly, but they acknowledge that other partners, in other circumstances, may have made a different call. What’s important is that both partners are realistic and honest about what they want from the business and make sure that they’re aligned.

Have the money talk early and often.
Going Dutch on dinner or even splitting rooming expenses isn’t the same as making daily decisions that impact your short- and long-term financial position. Talking about money can be fraught with anxiety and insecurity but, especially for best friends taking the leap into business, it’s a crucial skill to develop.

Understand your partner’s role.
The best partners have complementary skills and strengths, so one partner, for example, can bring in investment and new clients, while the other focuses internally on building the product. But that can mean partners don’t always know or fully understand what the other is doing. Overwhelmed by the stress of your own role, it can sometimes be difficult to appreciate your partner’s contributions. But Estrada said one of the most important lessons they’ve learned is how to put themselves in each other’s shoes.

Amy Vetter is the global vice president of education and head of accounting at Xero.

Video