How Not to Buy a Business or Enter a Partnership

[Vic]

It was late 2005 and I had about $30k saved up that I wanted to invest in a business. Although I had done a few things online, I was frustrated with how that was going and opted to go offline into a field I was very familiar with.

It so happens that my dad was in that same line of business and so I asked him if he knew of any opportunities. The actual line of business is irrelevant -basically a local distributor of certain products.

My Dad at the time was moving out of the country and said to me, "I know this guy who is looking for a partner, If I weren't leaving, I would partner up with him".

I went to visit the warehouse, got a look around, talked to the guy, and got a general feel for it all.

The first red flag should have been when this person looking for a partner said he needed an answer before x date otherwise he would need to move locations, because the lease, etc.. it was some excuse I don't remember too clearly but it was basically a pressure tactic.

Anyway, long story short, I jumped in on my dad's recommendation and within a few days had the sinking feeling that I had made an extremely bad mistake. Essentially the guy was a complete idiot, no wonder he had gone through a few partners and none of them hung around.

Next, I did an inventory unbeknownst to him and caught him stealing.

Oh did I mention that I came to find out after the fact that one of the employees was an illegal?

On a Sunday morning I remember going in and sitting in his messy office and opening his drawers- I guess at that point I wanted to see what else I would find. I found drawers full of IRS letters unopened.

At this point I was already looking for an exit and basically confronted him with the stealing, he denied it of course, but the numbers don’t lie. And I later came to find out even more history on him that confirmed everything.

In the end, we sold, I lost about $15k in the sale plus three months of pure stress but I just wanted the hell out of there. However, I learned some valuable lessons. Ironically, that failure led me back to online marketing where I did succeed for some time.. until the big push from Google in 2009 to remove affiliates from adwords.

Why didn’t I do my due diligence you ask?
I guess I trusted my dad and his recommending this opportunity for me.

Did I even look at the books?
No I did not, this business deals heavily in cash and we all know how that goes.

I hope this story helps anyone thinking about buying into a partnership or business…even if it is highly recommended by your dad or anyone else that you may trust.

 

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