Going into business with a partner or partners is a great way to pool resources, complement skillsets, and manage the enormous workload that comes with business ownership. That is, if you partner with the right people.
Do your due diligence before you get in too deep with the wrong people.
The decision to enter into a business partnership with someone new is a lot like entering into a marriage. You will be merging assets and finances, building relationships with vendors, clients, and employees together, you will share legal liability, and you will inevitably have disagreements that need to be resolved.
They begin with enthusiasm and high hopes, and they can end in bitterness and drawn-out lawsuits.
While strong business partnerships can build a solid foundation for a successful business, nearly 70% of all business partnerships end in failure. That’s higher than the national divorce rate.
The key to a strong business partnership is doing your due diligence – or better yet, have your private investigator do your due diligence. Even amongst friends, business failures and personal financial issues can be very private topics. It is vital to know what you’re getting into with potential business partners – be they new to you or someone you’ve known for years – BEFORE you seal the deal.
Beyond looking into the individual, you need to get a big picture understanding of their entrepreneurial past. What other businesses or projects have they been involved in? What do past partners, clients, vendors, and employees have to say about working with them? What was the reputation of previous businesses and projects? Was the individual or any businesses they had ownership or leadership in involved with any lawsuits, liens, or judgments? Did any of the businesses – or the individual in question – ever file for bankruptcy? What about credit ratings and tax issues? Sometimes, it takes a deeper dig to unearth what you really need to know.
Will this person pull their own weight in the partnership? Is this a trustworthy individual? Does this person have solid work ethic? All of these questions are essential to answer before embarking on a business venture, and all can be answered by turning over the right rocks, and asking the right questions to the right people.