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September 28, 2026

Should You Invest in a Friend’s Business? Key Steps for Retirement Planning

Author: Vanessa Stoykov
Category: Manage Finances

Retirement planning in Australia isn’t just about superannuation and savings accounts, it’s about making the right decisions with the money you’ve worked hard to build. When a close friend offers you an investment opportunity, the stakes can feel even higher. If you’re in your 50s or 60s and thinking about putting a large sum into a friend’s private business, it’s essential to step back, take a breath, and ask the right questions before moving forward.

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1. Separate Friendship from Financial Decisions

It’s natural to trust someone you’ve known for decades. But good friends aren’t always good business partners. If you wouldn’t invest this amount with a complete stranger, it’s worth asking why you’d do it for a friend. Emotions can cloud judgment, especially when large sums and personal relationships are involved.

Ask yourself: Would this opportunity be as appealing if it came from someone you didn’t know?
Remember, a strong friendship doesn’t guarantee business success; or protect you from risk.

2. Understand the Risks of Private Business Investments

Unlike bank savings or listed shares, private business equity is illiquid. There’s often no quick way to sell your stake or get your money back if you need it. On paper, your investment might look valuable, but it could be locked away for years; or lost entirely if the business struggles.

Clarify: How is the business valued, and what percentage of ownership will your investment buy?
Know your exit: How (and when) can you sell your shares? Are there any buy-back arrangements?
Get the facts: Ask for recent financial statements, cash flow reports, and future forecasts.

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3. Protect Your Own Financial Security First

When you’re in your late 50s, every dollar counts for retirement, emergencies, or paying off the mortgage. Committing 40% of your savings to a single, high-risk investment could put your future at risk. Money you might need for your own security should never be put at risk lightly.

Ensure you have enough set aside for emergencies, retirement, and ongoing commitments before investing.
Ask yourself: Can you afford to lose this money without impacting your lifestyle or peace of mind?

4. Get Independent Professional Advice

Even if your friend is trustworthy, it’s critical to have an accountant and a lawyer, who have no connection to the business, review the deal. They can help you understand your rights, tax implications, and any red flags. Independent advice helps you see the facts beyond the friendship.

Request that all agreements and valuations are reviewed before signing anything.
Discuss potential scenarios: What if the business needs more money later? What if profits aren’t paid out?

Resources to explore:

Find a trusted financial planner through Vanessa’s network: https://vanessastoykov.com.au/financial-advice/
Review business basics and risks at https://moneysmart.gov.au/
Access more personal finance resources: https://vanessastoykov.com.au/resources/

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5. Prepare for the Impact on Your Relationship

Money changes relationships. Once you become a shareholder, your friend becomes a business partner. Disagreements over dividends, salaries, or business direction can strain even the closest bonds. If things go wrong, the fallout can affect not just your finances, but your social life and family too.

Talk openly about expectations and boundaries before investing.
Consider whether you can both live with the possibility of losing the investment; and the friendship dynamic shifting.

The Bottom Line

Investing in a friend’s business can be rewarding, but only if you protect your own financial wellbeing first. Ask hard questions, get independent advice, and be honest about what you can afford to risk. The right decision is one you can both live with, no matter the outcome.

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Authors

Vanessa Stoykov

Vanessa has been passionate about writing and storytelling since her days of hiding under the doona with her torch to read after bedtime.
Kathy Skantzos

Kathy is a yoga-loving world traveller who also happens to moonlight as a business journalist and writer. She was the finance editor of news.com.au and the Managing Editor of CEO Magazine (Asia) before joining Vanessa and the evo squad.
Shayne Sommer

Shayne is second dan black belt in karate, and a budding romance writer with a difference. Why? Because she writes romance stories that always have a money lesson.
Antoinette Colbran

Specialising in stories for 50+ women, Antoinette draws from her own experiences to help other women avoid the pitfalls and see the benefits of understanding their money situation.
Michael Crooks

Michael Crooks is a more than 20 year writer and documentary maker who has worked with Time Inc and the BBC, who wants to expose the truth from real victims of financial crime to help others avoid their mistakes.
Kim Payne

Kim Payne has spent the past three decades as a speaker, trainer, business coach, and consultant in financial services. She has worked with and transformed hundreds of brilliant, educated, high achievers who are chronically under-living.
Rebecca Pritchard

Rebecca Pritchard is on a mission to help men and women achieve equality when growing a family.
Antony Perring

Ant is a writer, designer and business builder with a love of food, design and good living. He writes on food and money in an easy to do way.
Julie Hyde

Julie Hyde is a leader of leaders. A disruptor and a powerful people enabler who empowers leaders to make big things happen.
Joshua Pennell

As a Dad to four kids and a business owner, Josh is passionate about family and finances and is known as The Family Finance Guy.
Sid Lal

Sid is a serial entrepreneur who set up his first business when he was still in University. Since 2009 he has been heading Bruce Clay, first in India & more recently in Australia.
Lou Johnson

Lou Johnson believes in the power of sharing stories to build empathy, understanding and connection. Growing up surrounded by books and storytelling, alongside her drive to make a difference led her to a highly successful career in book publishing.
David Rae

Dave is a CERTIFIED FINANCIAL PLANNER® professional and has been a financial adviser since 2003. He works with a range of clients and has a strong focus on ethical and sustainable investing.
Natallia Smith

Natallia specializes in assisting pre-retiree single women—whether they are never married, widowed, separated, or divorced—understanding deeply the importance of financial stability during life's pivotal moments such as separation, divorce, retirement, and the loss of a loved one.
Mark Hoy

With over 15 years of experience in financial services, Mark established Wollemi Wealth Management in 2013. His business is built almost entirely on referrals and word of mouth — a testament to the trust, integrity, and long-term relationships he forms with his clients.
Derek Gascoigne

Derek Gascoigne is the State Manager for UniSuper Advice in Victoria and Tasmania. Derek has been with UniSuper for over 15 years, and his career in superannuation and financial services spans 27 years and counting.
Annika Bradley

Annika Bradley is Head of Advice Strategy, Research & Technical at UniSuper. She brings over 20 years of experience across investments and wealth management in both the public and private sectors.
Wayne Leggett

Wayne has been a recipient of numerous industry awards and was one of the first to qualify as a Certified Financial Planner (CFP). He has been heavily involved in industry affairs at the highest level, including serving as national president of the Association of Financial Advisers (now FAAA).
Conrad Francis

Conrad Francis is the Founding Director of Inspired Money, a Perth-based financial coaching and financial planning, mortgage broking and money coaching firm he established in 2011.
Andrew Beks

Andrew Beks is a Chartered Accountant and the founder of Simplified Business and Accounting.