If you’re reading this page, you might have a problem with your business partner. Or perhaps you are starting a new business and you’re not sure if you can trust your partner.
This is a common obstacle all entrepreneurs and investors face. After all, we’ve all heard the horror stories of how partnerships can go wrong. Whether it’s a useless partner, or even worse, someone that steals money from the business.
How to spot a bad business partner
1. The Big Talkers
If your partner is making grand promises and everything seems too good to be true, it probably is. Make sure you dig deeper into their claims. Ask for very specific examples and pay close attention to vague claims.
2. Poor or No Reputation
A business partner should bring value to your business. If they claim to be an expert manager, they should have a history of being a proper manager. Ask for references from their previous work.
3. How they Treat Others
Take your business partner to lunch. Pay attention to how they treat others. This will give you real-time data on how you or your employees will be treated.
4. Work Ethic
Get down to the nitty gritty. Yes, the boring stuff. Pay attention if your business partner get distracted or exhausted quickly. Do they get distracted or distract you? This could be a result of poor work ethic.
5. Other Ventures
Ask about their other business ventures. This will be a good indicator of how much experience they have. It will also reveal how much time they can dedicate to your project. Someone that has 5 other projects going won’t physically have enough time to dedicate to yours.
Questions to ask a potential business partner
1. What’s your experience
This may seem obvious at first. The key is to get get into the details. Ask the difficult questions like “can you walk me through your day at the previous company you work?” Look for vague or confusing answers. Now is also a great time to ask for a resume and case studies of their work.
2. What are your work expectations?
Set the ground rules for work expectations. Decide if you want a partner that will work only Monday through Friday, between 9am-5pm, or if you want someone that will work at any hour to deliver results.
3. What is your vision?
Make sure your vision aligns with your partner. Ask where they see the business in five years. See if they are willing to adjust their perspective to meet yours.
4. What is your risk tolerance?
Decide if you want a partner that is a high-risk, high-reward type of person. Or if you prefer someone that is conservative and wants slow, steady growth.
5. Can you invest capital?
Now it a perfect time to discuss capital allocation. If you need someone that can invest capital into the business, now is a good time to start. It’s always recommended that your partner puts in at least some capital. This gives them skin in the game and typically motivates people to work harder.
How to background check your business partner.
1. Online Public Records Service
An online public records service can search your business partner’s history. This means other companies they started, possible criminal and civil cases, and more. If you find something suspicious on the report, discuss it with your partner.
Search your business partner on LinkedIn. You can see reviews left by co-workers or associates.
3. Better Business Bureau
Search them on the Better Business Bureau website. You may uncover suspicious businesses they operated in the past.
4. Go Old Fashion
Ask around in person. Try to get to the heart of the matter. Is the person credible, experienced, trustworthy, a good communicator?
5. Professional Licenses
If you’re hiring someone with a professional license, like a contractor, you can check their license number with the government agencies. Be sure to look for complaints on their record.
6. Secretary of State Search
Find your Secretary of State (SOS) website and navigate to the business lookup section. Most States allow you to search someone by name. Enter their name to see what other business associations they may have.
Congratulations! You have now successfully vetted your business partner. If you’re happy with your choice, it’s time to draft a business partnership. Remember to always get an attorney to solely represent you (not both you and your partner).
NOTE: If you suspect that your partner is stealing or doing something illegal, start documenting everything immediately. You may want to hire an attorney before you confront your partner.