A successful business partnership speeds up cash flow, increases revenue, and reduces costs for everyone involved. If you want your partnership to excel, build it on these principles.
Partner for the Right Reasons
An effective partnership can produce great results. These include
- faster entry into a new geographic area or market segment
- additional channels of distribution
- new product development
- cost reduction
These are the right reasons, because they improve your financial forecast. Don’t to it to silence critics, or just because everyone else is doing it.
Each company should need each other to increase revenue.
Define Deliverables and Objectives
After you’ve decided to partner for the right reasons, the next step is to specifically define what you want as a result of the partnership. Good outcomes include
- more revenue
- lower costs
- new products, services, or customers
- new geographic markets
- training and marketing programs
- What will each company deliver?
- When will they deliver it?
- Where will they deliver it?
- What milestones must each company meet?
Find Internal Champions
Both companies need an internal champion to keep the partnership running like a well-oiled machine. When selecting this person, keep these points in mind.
- Identify a Single Point Person in Each Company – This person should truly believe in the relationship. Success will be difficult if multiple departments each contribute some of their time.
- Make Success of the Partnership the Only Goal of the Champion – An executive is a poor choice for this role, because she always has something else to do.
- Empower the Champion – This person will need to cut across internal departments and priorities. At times he may step on people’s toes and ask them to do things they don’t want to do. Because of this, having the people understand that he’s been empowered will make his job – and thus the success of the partnership – a lot easier.
Don’t form an alliance just to cover up each other’s weaknesses. It’s more effective to accentuate the strengths of each partner.
If you do something really well, they should help you do it even better. If they do something really well, you should also help them do it even better.
Create Win-Win Deals
To make the increase in products, services, customers, and money truly work, both partners must win. If one company is much larger than the other, there’s often temptation to create a win-lose deal.
Just because the larger company can force the smaller one into a poor deal, doing so is a bad idea. Win-lose deals are not sustainable.
Discuss, then Draft
Many businesspeople hurry to send a legal document to get the partnership discussion rolling. You may think that if you draft the document first, the other party must begin negotiating from your starting point rather than theirs.
This could potentially hinder the partnership process. For instance, it could be forwarded to an executive or lawyer who wasn’t aware that this was just a starting point for your thinking.
A better way is to go through the following five steps.
- Get face to face to discuss the deal points.
- When you come to an agreement, write it down on a whiteboard.
- Follow up with an email outlining the framework for the partnership.
- Get closure on all details via email, phone calls, and follow-up meetings.
- Draft the legal document.
Remember that a document should always follow a discussion, never lead it.
Wait For Legal Advice
If you ask for advice too early in the process, you’ll find that the number of reasons not to do a deal always exceed the reasons to do it.
You want to agree on business terms before bringing in lawyers.
Since many lawyers have the mindset that a deal is bad until proven good, find one who views her role as a problem solver rather than a problem finder. To illustrate this point, here are two perspectives a partner can have.
Bad Perspective – “Can I do this?”
Better Perspective – “This is what I want to do. Keep me out of jail.”
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