Ten years ago, three best friends — Jason Sayre, Mike Panichi and Ken Williams — started Platinum Pest Control in Chicago with a used van, enough material for one bed bug job and a whole lot of grit. In the years that followed, the company thrived and in 2021 ranked No. 86 on the PCT Top 100 list.
But not long ago, the $8 million business and decades-long friendships nearly came crashing down. The stresses of a company experiencing growing pains, exacerbated by the dynamics of friendship, had pushed the three shareholders to the edge.
“We got to the point where it was just real scary that we, ourselves, were going to destroy this company based on how we viewed things,” said Sayre, the company’s president.
Starting a business is a risky venture. Less than half — 48.9 percent — of startups exist after five years, according to the U.S. Small Business Administration.
Starting a business with your friends has a potentially greater chance of failure. A 2012 study of 10,000 technology and life sciences startups by former Harvard Business School professor Noam Wasserman, now dean of Yeshiva University’s Sy Syms School of Business, found that each friendship in a founding team increased the rate of founder turnover by 28.6 percent.
Even so, working with people you know can provide an edge.
“Typically, by the time you’ve been friends for a while, you already know their work ethic; you know their expertise; you know their personality and how they communicate, and you’ve figured out a way already to work with that as a friend,” said Susan Steffan, executive director of the Center for Entrepreneurial Leadership at the State University of New York at Buffalo. “The fact that you have somebody you can trust is huge. I think that is probably the biggest advantage of starting a business with a friend.”
Just look at Airbnb, eyeglass maker Warby Parker and Ben & Jerry’s ice cream: These companies were all started by friends and are widely successful. So, too, are some companies founded by best friends who happen to be spouses or family members.
“The biggest danger, clearly, is what happens when things go wrong and how does that impact the friendship,” said Steffan.
THE NO. 1 THING. The single biggest thing that helped Platinum Pest Solutions navigate challenging times was having the right legal documents in place from the start.
The trio “definitely” would not have created shareholder and operating agreements if Panichi’s father wasn’t a contract attorney, recalled Sayre. “We wouldn’t have known” these were important; “we would have just started and as [the company] got successful, we would have broken up” without the guidance and framework the documents provided, he said.
Agreements like these generally identify who owns how much of the business and how owners will work together. They outline roles and responsibilities, how major decisions will be made and how owners will recoup their initial investment and get paid. Plus they outline options for exiting the business.
“When I advise people, they don’t like to think about the exit strategy in the beginning,” said Patti Williams, who mentors small business owners through the SCORE Association, a free resource of the U.S. Small Business Administration. “But things happen in life, so it needs — at least at a high level — to be discussed and you need to put something in place.”
But exit clauses were exactly why Travis Bottoms and Erick Estrada, co-founders and equal partners of Polite Pest Control in Mesa, Ariz., chose not to sign an operating agreement. The two friends have known each other since elementary school and became best friends six years ago when Bottoms moved into Estrada’s neighborhood. They worked for a time at the same pest management company, leaving to launch their own in March 2020.
Neither wanted an “easy out” for when things get difficult. “We felt it was a manifestation of [the business] going sideways, and so we don’t have a second option for this to succeed,” said Bottoms. “It has to [succeed] at all costs, and I think that is what has made us successful.”
Nor do they want it easy to be bought out by an investor. “I didn’t go into business with Erick to become a millionaire with anybody else. I went into business with Erick to become a millionaire with Erick and to see our families thrive together,” said Bottoms.
Business experts don’t recommend handshake deals. “I know it’s kind of unorthodox and we get it all the time: What the heck are you guys doing? But we’ve also had success in areas where other people haven’t had success and it works for us,” said Bottoms. At present, Polite Pest Control has six employees and 1,600 customers.
The duo does have other agreements in place governing who can and cannot actively work in the business. They are developing an agreement to address what happens should one of them die, and other agreements may come into play as the company grows, said Bottoms.
HARD CONVERSATIONS. For Bottoms and Estrada, sharing the same values, passion, work ethic and business philosophy, and being honest and transparent with one another, have been key to their success.
“For us, it was more about having direct conversations and being able to have very hard conversations when needed — but knowing that it doesn’t come out of a place like jealousy,” said Bottoms. As friends, he and Estrada are not overly emotional and have always talked straight to one another, traits they figured would make for a good partner relationship.
Having hard conversations early can uncover surprises that may hurt the business. “Most of us don’t know everything about our friends,” said small business mentor Williams. “When it comes down to business, it’s almost like a marriage. You need to know some other things because you’re going to be entangled in a lot of ways that you never have been [before].”
This includes talking about money, an uncomfortable subject to broach with friends. However, you need to know each other’s credit score, financial priorities and solvency, which can impact the startup’s ability to get a loan or line of credit.
“If you are apprehensive, yourself, with giving up your information, that may be something that needs to be looked at because it’s going to be an intimate relationship as you go forward,” said small business mentor Williams.
Developing a business plan together, before signing any legal agreements, is a good catalyst for hard conversations. The business plan establishes a company’s goals, operations, marketing objectives and financial projections, and it requires the partners to build consensus.
“As you force yourself to go through those exercises, you learn a lot about each other,” said Endrit Kosta. He and Chris Wallace launched Cleveland, Ohio-based SMART Exterminators as equal partners in April 2022.
Childhood friends, the two reconnected a few years ago. Kosta needed pest control service and reached out on Facebook to Wallace, who worked for a midsize pest management company. Kosta was impressed by the service he received and the industry in general and suggested they go into business together. Wallace eventually agreed. But while their early friendship formed the foundation of their mutual trust, they didn’t know much about each other’s adult lives. Developing a business plan together helped them do this.
“The more time we spent together, the more comfortable we felt with each other, and I think that really helped us out,” said Kosta, who has experience working with startup companies. He advised: “Have the difficult conversations up front so down the road there’s no guessing where you stand with each other.”
Maintaining a culture of open dialogue lets the partners “hold each other accountable without feeling like you can’t say certain things to that person because it might hurt their feelings,” added Kosta.
BALANCING ACT. Complementary skill sets and experiences helped Sayre, Panichi and Williams of Platinum Pest Solutions forge a successful partnership 10 years ago.
They came from different professions and had different strengths: Sayre had his applicator’s license and loved sales, “Ken is all ops” and worked for a moving company, according to Panichi, a former probation officer who excelled at the administrative side of the business. “We don’t think we could have done this without each other,” said Panichi.
Likewise, Bottoms and Estrada of bring different skills to the table. Bottoms excels at marketing and social media; Estrada is more methodical and numbers oriented, which benefits operations. “We work together harmoniously,” said Bottoms. “We have a common goal, and it’s our job to bring ourselves to it.”
Kosta and Wallace share a similar story. Kosta has no pest management experience but knows how to run a business and excels at digital marketing. Wallace is a licensed applicator; he has the technical expertise and understands the intricacies of providing service.
Just as important, partners need to clearly understand who will handle specific tasks. “The job description piece is something that I think people really overlook, and it can really help to resolve a lot of issues or keep them from coming up when it’s clearly defined,” said mentor Williams.
Partners shouldn’t expect to know how to do everything. That’s why early on Sayre, Panichi and Williams met with a business consultant, who told them to immediately hire a payroll service, get an accountant, build a relationship with a banker, buy proper insurance and pay taxes weekly. The advice was “very beneficial,” and they found hiring outside service providers was both affordable and “worth every penny,” said Sayre.
Steffan suggested getting to know an attorney, who you can call — and don’t have to start looking for — in a crisis. As well, get a mentor through SCORE, a local chamber of commerce, university entrepreneurship program or other business group. “It’s good to have other sets of eyes on your business,” said Steffan.
It’s not a sign of weakness if you don’t know every aspect of running a business. “The reality is, nobody knows everything, so you have to surround yourself with trusted advisers,” she said.
DECISION DILEMMAS. Decision making can be particularly challenging for partners. While each may have authority to make day-to-day decisions specific to their roles, all partners typically need to weigh in on major issues. While Platinum Pest Solutions had the legal structure and a clear shareholder hierarchy defined on paper, disagreements among owners still occurred and got particularly heated when the company began experiencing growing pains.
The three partners didn’t agree on how to move the company forward, even though Sayre, as majority partner, held the deciding vote. “It did not make it any easier because when you’re dealing with friends, it’s very difficult to separate business from personal,” said Panichi.
With the company’s very existence and friendships at stake, “we had to make some big boy decisions,” he said. They eventually agreed to bring in a new chief operating officer. Panichi and Williams now report directly to her instead of Sayre. “It’s tough” when friends report to friends; “it’s easy when you’re a small business but when you’re doing $8 million,” it’s different, Panichi explained.
The new COO also shuffled partner roles and responsibilities; decisions hard to make when they involve your friends. “We’re in our better seats,” said Panichi of the moves. He now heads human resources and Williams is director of fleet and inventory. They have roles that suit them better and they’re happier. Employees sense this. “I can already tell the culture is so much better,” he said.
The three, who became friends playing sports in their 20s, are proud and relieved to have made it through a difficult time. “We did it together,” said Panichi. They credit actively living the principles of honesty, open-mindedness, and a willingness to change with helping them do this, as well as taking time away from the business to simply hang out as friends.
“Now we’re kind of mending our friendships slowly over time,” said Sayre. “It’s starting to get back to where it was.”