Originally published in the Henry County Local, a Landmark Newspaper.
I was talking to my wife the other day about a situation that is becoming increasingly common in our informal era of Facebook “friends”. We were driving into Shelbyville to begin moving my office from one end of Main Street to the other, and it brought to mind an opportunity I thought had opened for me a year or so ago. I talk to professionals in businesses related to my own all the time, looking for synergy and ways to offer value to both of our customers, and in this particular case I had thought everything was going very well to partner on some space and offer some services to each other’s clients. The deal fell through, with really no word of explanation from the other party, and I was conjecturing to my wife on the whys. I flippantly said that someone there must have decided they had a friend that “could do the same thing”, or that they didn’t like me personally enough. And while it was an offhand remark, I have been unable to get the discussion out of my head, as that is exactly what happens in business far too often.
Everyone likes to do business with people they like. It is natural and right. Yet that instinct we have as individuals is exactly the wrong one when applied business to business. In fact, there are very strict rules against using friends in some circumstances. For business people who are fiduciaries- that is they have a duty to do the best thing for others, not themselves, in a transaction, such as approving new vendors for their customers or as a trustee of a 401k plan- the consequences can be severe. There is a whole body of law devoted to such “parties in interest” cases, where a senior official of a company chooses their buddy to sell or service their plan rather than properly seeking the best qualified entity to do so. This is considered a conflict of interest, and in the same category as nepotism. And this is the point. We don’t have to be friends with the people we do business with.
This is not a radical concept. However in this day and age, to the detriment of much business, it has become the norm to stay within a small circle of friends. Now, there is absolutely nothing wrong with doing business with people you network or socialize with. In fact, I strongly encourage it, once you have also determined that they are the most qualified to offer the service you seek. There is a distinction between people you are friendly with, and friends, and friendship absolutely cannot be your deciding factor when choosing a new business relationship. In fact, friendship can get in the way of doing the right thing, as the friendship makes it difficult to make changes as necessary. Don’t misunderstand me: doing business with friends is great, IF that fact is incidental to their competence and relevance to your business. The deciding factors in making new relationships should always be professional- the quality of goods or services, business reputation, professionalism, credentials, experience, etc. – and not how much you like them. You will need to cast a wide net. There is a big world out there, perfect solutions to every need, so why choose a square peg for a round hole? Be open to others that approach you as well. Just because they are not in your “friend’s list” and they approached you doesn’t mean they may not be the best solution for your need. And then evaluate that relationship on an ongoing basis. If a better provider comes along, make the switch. In this way, you protect yourself and your customers, and are sure of providing the absolute best and most relevant services to clients, employees, and customers.
Lance Minnis is Vice President of Commonwealth Financial Advisors, LLC, a Registered Investment Advisor. All opinions are his own, and do not constitute financial or investment advice.