Why You Should Run a Background Check on Your New Business Partner
Your new business partnership could be a blessing or a curse. Here’s how to to make sure it isn’t the latter.
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You met Keith at a networking event three months ago and hit it off. Since then, you've developed a great idea together and are thinking of opening a business. You've got a product, a plan and visions of future glory.
But hold your horses. The only thing you know for sure when you start a business is that it's going to be hard as hell. You'll face a million problems you can't possibly predict.
Three months may be enough time to put together a kick-ass business plan, but it leaves something to be desired insofar as getting to know another human being is concerned.
Which brings us to Keith. How well do you really know him? You're about to begin a partnership second only to marriage in its implications for your future--for better or worse. Here's why a background and credit check might be in order.
Why a Credit Check Matters
When two people are starting a business together, both should be able to contribute equally. A big part of that contribution is your individual ability to float yourselves financially, including having access to credit and capital.
The fact is, you're going to have to get a loan at some point. If you're splitting the business 50/50, Keith's going to have to be on the loan application. If Keith has crappy personal credit, chances are good you'll be turned down.
That's bad. You don't want to be held back because of what Keith has done outside of your business life together. This isn't a judgment about Keith--it's a judgment about your own future, and the speed bumps and roadblocks you'll encounter on your path to success.
Why a Background Check Matters
I once had a business partner who'd been sued by a federal agency for tax fraud. I didn't find out about it until the evening before an important meeting with investors.
This was all on the public record, but it was news to me and our other partners. We moved ahead with the meeting, but the business partner in question was later bumped out of the company by one of our investors.
I looked into the issue, and am personally convinced that my ex-partner was innocent. Problem was, he'd settled the lawsuit just to end the nightmare of being involved in a legal battle with the government.
That made him look guilty, and it was enough to put our business in jeopardy. Trust me, you don't want to go through that. What if Keith's in the middle of a violent lawsuit? What if he's been convicted or even accused multiple times of sexual harassment?
These aren't matters that Keith is necessarily going to be upfront about, but that a background check will reveal. They are matters that might prove a heavy distraction to Keith right when you're trying to get your new business up and running.
Problems are going to come to new entrepreneurs regardless. There's no reason to invite more of them by starting out with a business partner who has background or credit challenges.
It doesn't have to be awkward. Just make it a matter of form, and ask that Keith run background and credit checks on you, too. Search those closets for skeletons. That way you can both sleep easier.
Because trust me--there's nothing scarier than a skeleton popping out of some cozy-looking closet when you're least expecting it.