Business partnerships and marriages are often compared to one another because they can sometimes produce tumultuous relationships. But just as marriages require commitment to succeed so do business partnerships. On the other hand, business partnering doesn’t require a lifetime commitment. You can partner-up for a specific project, contract or job. Partnering for a reason also allows you to test the waters to determine if something more enduring can be established.
BUSINESS PARTNERSHIPS REQUIRE BALANCE
Don’t slam the door on partnerships when one business partner doesn’t work out—just as most people don’t slam the door on marriage when a marriage goes sour. Business partnerships also hold a distinct advantage over marriages in that good business partnerships are based on logical rather than emotional reasons. Good business relationships have a good skill-set balance as well as a personality balance.
A partnership can be an excellent way to gain more business resources, manpower, funds and complementary skill-sets while reducing workload and pressure. One of the keys to having a strong partnership is a good partnership agreement, related company vision and strategy before starting. When you bring these key ingredients together, you have a much better chance of having a successful partnership.
REASONS FOR A BUSINESS PARTNERSHIP
The process of partnering for finding a business partner is much more of an art than a science. Knowing and understanding what you bring to the table along with what the potential partner brings is the first step to deciding who to partner with. Construction contractors pursue partnering agreements for a number of reasons. Some companies pursue partnerships or partnering agreements because they are too small to win or perform larger contracts alone. Partnering agreements for government contracts become an integral part of the bidding process. The need for funding, specialized expertise, staffing, geographic coverage, as well as customer presence can also lead to partnerships.
Partnering arrangements are especially beneficial to a company with little or no experience in government contracts. It also may be the only practical way a small company can enter into the government contracting market. A successful prime/subcontractor relationship can be as lucrative as a successful contractor/government relationship.
Oftentimes the biggest company becomes the prime contractor but sometimes a small contractor can be the prime. How is this possible? Suppose you have the relationship with the end-user and it’s your unique capabilities the end-user needs and wants as well as other services you can’t fulfill. You would then partner with the larger company to bring the full suite of services to the end-user. In this situation it may make sense for you, the smaller company, to be the prime. Of course, it’s up to you to convince the larger company the importance of your relationship with the end-user, the special skill sets you bring and how vital they are to winning the contract.
Do not underestimate the need for a partnership agreement! You need to cover at the very least the fundamentals listed below:
•Define the purpose of the business partnership
•Outline the goals of the partners and the partnership with agreed upon measurements.
•Detail the financial contributions of each partner
•Detail how the profits and losses will be distributed
•The provisions for continuing the business in the event of a partner’s death, illness, disability, or desire to leave
•Note the skill-sets each partner brings to the partnership and detail the work responsibilities of each partner
•The provision for determining the value of a departing partner’s interest and method of payment
•Determine how disagreements will be settled.
DETERMINE THE BENEFITS OF YOUR PARTNERSHIP
Below are some important questions to ask before deciding to enter into a partnership agreement or partnering relationship. The questions are necessary to ascertain the benefits or potential demises of the business partnership.
1.How important to the company is this partnership? Do the partners need each other to succeed?
2.What can go wrong will go wrong. What incentives can you use to help maintain the partnership?
3.Does this require a permanent partnership or is it a partnership until a project or program is completed?
4.Are there opportunity costs you’ve neglected to consider that would be encountered if the partnership is established?
5.Can each of the partners go it alone and still be successful?
6.How do the partners complement each other personally and professionally?
7.Are the partner’s contributions in proportion to the rewards of the partnership?
8.Is there a need for a non-compete or exclusivity agreement as part of this partnership?
9.How much funding is needed? Who will contribute what? If outside funding is needed, how will it be acquired?
10.What will determine the success of the partnership? How will it be measured?
Find business partners at Partners In Demand.