Would it be lame or wrong to copy my friend's business idea?

December 28, 2010 9:14 AM

I want to start a copycat business based on an old friend's new startup. Would this be totally lame?

Recently, an old friend of mine has just gotten a new business off the ground that looks really promising. I'm thinking of starting a similar one in a different city.

His business produces a craft product that is designed to appeal only to a local market. I live in a city quite far away from the one he is in, so there is no chance we would be competitors anytime soon.

I am certainly going to tell him about it first, but if he doesn't like it I'm not sure that would be enough to stop me from doing it. We used to be much closer friends in the past, but we've grown more distant from years of living far away from each other.

I'd also really like it if he would consult for me on getting the business off the ground. I would probably compensate him with a small equity stake.

How would you feel if a good friend of yours did something like this?

posted by fairlysober to work & money (8 answers total)

Flattered.
posted by flabdablet at 9:16 AM on December 28, 2010

Same as flabdablet, flattered. If it's that great that you want to copy it, partner with him and work towards a franchise style company. Makes branding easier, and lets you have two markets where you can experiment and share knowledge.
posted by pyro979 at 9:28 AM on December 28, 2010 [1 favorite]

Sometimes these arrangements work well, as together your two firms might be able to secure raw materials in greater volume and thus cheaper. There is also the effect of growing the market by having multiple suppliers in different cities.

Just be careful about offering up equity, even small amounts early on as once its gone its gone forever (unless you dilute a minority shareholder). The best approach would be for you to directly and in cash or trade compensate him for any consulting carried out, that way once the bill is paid it is paid. By contrast, equity is forever.

If you can swing it I'd also suggest running this past a Solicitor as there is no sense creating a problem for yourself some time down the road. People get weird around money sometimes and a small amount spent now might help you avoid problems in the future.
posted by Mutant at 9:35 AM on December 28, 2010

pyro979,

Would a franchise relationship make sense when it makes no sense to share brands? His branding and marketing is designed to appeal solely to his local market, and that would be my approach too.
posted by fairlysober at 9:37 AM on December 28, 2010

Mutant,

You might be right about the equity stake. I guess I'm also worried about him thinking I'm totally ripping off his idea; I don't want to lose the friendship. But I doubt I'll have enough cash to pay him upfront right away. I'm also leery of getting in any direct business relationship with him, because I've heard that kind of thing can put a big strain on friendships.

Also, I'm way ahead of you on the legal stuff, seeing as I'm a lawyer myself. In fact, my friend is currently running things a bit fast and loose with his business, which makes me nervous for him.
posted by fairlysober at 9:46 AM on December 28, 2010

Be careful with craft products - they tend to be liable to hurt feelings for some reason.
posted by divabat at 10:07 AM on December 28, 2010

I have a small business, and I have a small niche that I carved out for myself in my industry. There is a part of me that would find this flattering but up to a point. For example, if you copied everything that I did, including lifting the words from my web page and slapping it onto your own, etc., then I would be a bit bothered by it.

I do think there is a way that you could approach this if you want to save the friendship, too. Tell your friend how impressed you are that he did this and that he is doing well. Ask him if he would be opposed to you starting a similar business (and could you offer to tweak it just a little bit so you don’t appear as if you are copying it in its entirety)? The consulting offer is flattering, too. Also, in exchange, what if you offered him legal services (you state that you are a lawyer). You can help him pick a business model, and get things lined up to be a bit more legal. In addition, you could suggest the idea of franchise to him (if this did well, could he help others?)
posted by Wolfster at 11:12 AM on December 28, 2010 [1 favorite]

Is he MAKING something that you would essentially copy, like an innovative way of producing a product, or is he just getting into a service business or buying a product for which there is a wholesale supplier out there?

If I created a better mousetrap and decided to start small by making and selling them locally, I would feel pretty annoyed that you noticed how I made them and started copying them.

If, on the other hand, I opened up a tire store in my hometown and you lived 100 miles away, I'd tell you to go for it. There are no secrets in the tire selling and installing business that I'm aware of.

I would NOT become involved in each other's businesses to the extent of joint ownership, equity stakes, etc. Most business partnerships become lead weights around the neck and shoulders. If he's a good friend and is five minutes ahead of you on starting this business, he'll probably just give you some advice and not expect much out of it - if there is some compensation needed, pay for his time and/or expenses in consulting to you.
posted by randomkeystrike at 12:08 PM on December 28, 2010