6 Ways To Spot A Bad Business Partner—Before Things Start To Go Wrong
By: Nicolas Cole
Tags: Company Culture, Cofounders, Business Strategy, Trust, Business

The mentors I have had in the business world have this phrase they use when dealing with partnerships, acquisitions, mergers, or even just standard clients:

How about we go on a few “dates” before we “jump into bed” with each other?

Simply put, before you go running to grab the whiteboard and write big fancy titles above everyone’s names and before you start brainstorming a name for your company-in-the-making, take a step back.

How much do you really know about the person you are about to do business with? What is he or she truly bringing to the table? And most importantly, will you feel the same way you feel right now in five years?

Here are six ways to spot a bad business partner from the beginning — and how you can potentially make more educated decisions about how you want to move forward.

1. If it’s too good to be true, it probably is.

Somebody told me this a long, long time ago, but of course it took me learning it the hard way (several times) before I understood what it meant.

If it sounds too good to be true, there’s a good chance it’s not what you think. The best story I have of this is from when I was in college.

I started a “music production company” (really it was just me in my dorm room making beats) and I advertised my services all over campus. A few weeks later, this guy calls me up saying that he’s an agent for R. Kelly and wants to hear some of my stuff. I send him a few beats, and he calls me back saying he’s amazed. Astounded. I’m the next Scott Storch. He said he wanted to represent me and pitch my stuff to R. Kelly that night — and he would do so for the low, low price of $300, as a “management fee.” Being the naive 19-year-old kid that I was, I promptly ran to the ATM and emptied all my savings. I met him at a nearby train stop that night, paid him in cash, and never heard from him again.

If it was as painful to read that as it was for me to write that, then you can only imagine how I felt as a college sophomore with an empty bank account.

This was a tough lesson, but it laid the groundwork for a lot — and I mean a lot — of much better decisions down the road.

If it’s too good to be true, it probably is.

Don’t be afraid to walk away and stick to your plan. Trust yourself.

2. They have ulterior motives.

Everybody has his or her own agenda.

That’s not a bad thing, it’s just the truth — and it’s worth being aware of. Before you dive into business with someone, you should be aware of their portfolio.

What do they have their hands in? What other venture could this partnership with you potentially be for?

In some cases, this ends up being a very positive thing.

People start adjacent companies or partnerships with the intention of furthering another one of their ventures — or vice versa. Great. But where you should be concerned is whether or not this partnership on the table will come second, or third, or last on their priority list. Or maybe you want to build it into an empire and they want to build it for a quit exit.

It’s important that you survey the landscape — not just of the industry but of the things your potential partners have going on ancillary to this pursuit.

What they have their hands in will give you a lot of insight into where they may potentially be looking to head.

3. Expertise and effort are not equal.

Business partners, like marital partners, tend to be opposites (in some way).

People look for people who fill their gaps — that’s sort of the point of finding a “partner.” You want someone who is going to do what you cannot or would rather not do. But most of the time, it comes down to expertise. One person is an expert in one thing, the other is an expert is another thing — and the value is in their combination.

However, if your potential partner isn’t an expert, you need to be aware of that.

There is a difference between someone who “really wants to be involved” and someone who knows their shit.

That’s just the truth.

Effort and work ethic should never be discounted, however, you can measure and justify hours much more easily than you can expert level knowledge — or, even more difficult to quantify, “creative vision.”

Especially if you are dealing with a 50–50 partnership, make sure that the person you are working with is, in some way, bringing a level of “expertise” to the table. It might not be the easiest thing to admit, but skill, time, manpower, these things are all replaceable by other resources.

But what is far more valuable (and potentially “irreplaceable”) is expertise.

4. The work is unbalanced.

The flip side to the above is that you need to be aware of who is doing what work — and how much work.

If one person is “the strategy guy,” and that entails showing up for a Monday morning meeting with a cup of coffee and spouting off a bunch of ideas, and the other guy is the executor, putting in 15 hour days bringing the thing to life, that’s not really a partnership.

Especially when you’re first starting out, you both need to be pulling your weight — and both parties need to be aware of that. “Mr. Strategy” over there is going to have to do some accounting, the executor is going to have to respond to client emails, both parties are going to have to hire interns, and both are going to need to schedule new business meetings, etc.

It needs to be established from the get-go who is responsible for what, and partners should constantly check in with each other to make sure both of them are contributing to the growth of the company.

If not, it’s going to become lopsided — and that’s when disagreements start happening.

5. They hide the truth.

Here’s the nitty-gritty: You never want to do business with someone who can’t even be honest with him or herself.

These are the people who try to mask even the smallest of things — a profit margin, a project mistake, etc. The people you want to work with are the ones who are willing to be open and honest, because that’s the fastest and most effective path of growth.

If you have a gut feeling that you can’t trust the person you are thinking about working with, you seriously need to think about the cons as much as the pros. It might be small, and it might seem insignificant at the time, but remember: Money is an amplifier. As dollar signs come waltzing through the door, who is seated in front of you will become amplified.

And if that person lies about the small stuff now, the lies will only grow with his or her bank account.

6. You can’t see yourself going on vacation with them.

This is, in my opinion, the real test — and something I have learned from the mentors in my life who have shared their “hard lessons learned.”

At the end of the day, you’re not looking for a “business partner.” You’re looking for a family member, a brother, a sister, a best friend. You want someone who is going to be there for you, night and day. Someone who is going to be able to hype you up when you’re down, and slap you in the face with reality when you’re too high on your own horse. You want to work with someone you could see yourself spending a week in the mountains with, just relaxing, having a good time, enjoying each other’s company as human beings — not just cogs in a big piece of machinery.

If you can’t see yourself going on vacation with this person, then don’t do it.

Remember: You are going to end up spending more time together than you will with your own families.

Business, and especially entrepreneurship, is a round-the-clock job.

It’s a lifestyle. It’s part of who you are. Do business with people you enjoy being around.

Otherwise it won’t be much fun. It’ll be “work.”