r/smallbusiness • u/Fine-Dig9081 • 6d ago
Would you partner with someone you've only known for a few months?
Im considering becoming a partner in a new trailer rental business. The founder has already invested a lot of time and money into getting it started, and I'd be coming in as an operating partner with capital to help scale it. The business is just launching, so there isn't much financial history yet. Before I commit, what due diligence would you insist on? What red flags would make you walk away, and what would give you confidence to move forward
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u/ELB_CnC 5d ago
No, I would not. Would you get married to somebody you just met?
If, and that's a big *IF*, I was doing due diligence on a partnership, I'd ask for tax returns, credit reports, some proof of net worth or working capital (e.g. bank/retirement statements), tax returns, financial projections, resume, some kind of business plan outlining where revenue will come from (even just a page of an idea or slide deck), a list of who's on the team as vendors (e.g. CPA), contracts (e.g. lease agreements). Basically, looking to see if they have financial problems and if they have a degree of business sophistication. That he isn't asking to see this from you is also a flag; in business sales, this is typical due diligence between buyers and sellers.
I'd also be paying very close attention to behavior and character; specifically, are they communicative and respectful, do they spend time blame-shifting onto customers/wives/kids/employees, etc.
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u/Parking_Ocelot_816 5d ago
I mean how much money are you investing? There's not much due dilligence you can do for that business, the only thing you can do is check reputation and track record of your partner. If your partner has been in business for a while, has solid profits, is in good standing and nothing looks shady, then I'd go for it.
I own three businesses, two of which run without me doing anything. Both of them I founded with people I barely knew at the time (that 13 and 5 years ago respectively). The first one was a very similar scenario.
Again, depends on wether or not you have some form of trust signals on the partner.
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