I’m certainly no stranger to mixing friends with business. I started my company with a friend, raised money from friends, have hired friends, and will continue to hire my friends. I’ve fired some friends, too.

People who want to work at startups usually crave that informal social environment. And friendships are an integral part of the environment startup founders want to cultivate in the workplace. But we’re still doing business, and your friends need to know that business always comes before the friendship in the context of work.

I’ve arrived at three initial ground rules for mixing friends with business:

Assume leadership
I’m straightforward about the fact that the friendship is about to change. I’m now the boss. I always have a deep, candid conversation with my friends before I hire them. Our friendship precedes the work relationship, but the work relationship now takes precedence over the friendship. Sure, startups are informal, collegial environments. But every business still needs leaders to make decisions, evaluate performance, and, if necessary, terminate. If you can hire a friend, you’ve got to be prepared to fire a friend. And your friends must know the risks that come with inserting business into the friendship.

See also: More Entrepreneurs Should Consider Hiring Their Friends

Prepare for change
All relationships change over time, but the friendship can experience rapid change as a result of the business environment. I recently experienced this when a close childhood friend of mine enthusiastically sought a position at OurPlan, and we decided to hire him. As the demands of the business grew, I came to realize that my friend simply lacked the qualifications for the new roles and responsibilities of the position. Given our background, I knew I had to manage this situation differently than a normal termination. I took my friend to lunch, talked to him about his skill set, and provided an honest review of his inability to meet our needs at that time. He thanked me for my time and the opportunity, and today we are even closer than we were before. Our relationship rapidly progressed through several stages as a result of mixing friendship with business, but we overcame the challenges as we both embraced the inevitable nature of change.

Establish a meritocracy
Let’s be frank. Friends who ask you for a job are leveraging their relationship with you to get a job. There’s nothing wrong with that. We all use social networking to promote our careers. But a problem emerges when friends attempt to leverage the relationship to protect their job or advance their position—regardless of their performance. Your friend must know that your firm operates as a meritocracy. Performance is paramount—no playing favorites. Your friends must know that their ability to leverage the relationship ended once they got the job. Now they’ve got to perform.

In my experience working with friends, I’ve found that the unique nature of the friendship can add value to the business relationship. My insight into their personalities, strengths, and weaknesses is much greater given our friendship. This interpersonal foundation can be the basis for a productive business relationship as both parties bring out the best in each other. By assuming leadership, preparing for change, and establishing a meritocracy, I’m more likely to ensure that mixing business with friendships overcomes the risks and maximizes the rewards.