Partner With Other Companies
Profit from Partnering
Are you seeking resources and/or funding for your business? Does your business possess assets, either tangible or intangible that, when leveraged with another company, can create greater profits for each business? Are there potential alliances that, when created, mitigate risk, encourage cost reductions and greater productivity? Are you looking to invest in a business opportunity? If you answer yes to any of these questions, you will want to register at Partners In Demand.
See below descriptions and partnering examples of the different types of partnering alliances. When reading through them, think about what your company brings to the table and how you can create the benefits of a win/win proposition with another business.
A joint venture is a contractual arrangement whereby a separate entity is created to carry on a trade or business on its own, separate from the core business of the participating companies. Businesses often come together to share knowledge, markets, funds and profits. In some cases, a larger company can decide to form a joint venture with a smaller business in order to quickly acquire critical intellectual property, technology or resources otherwise hard to obtain. Companies with identical products and services can also join forces to penetrate markets they wouldn't or couldn't consider without investing a tremendous amount of resources. Separation is often inevitable because JVs generally have a limited life and purpose.
Feelgoodz, founded by Kyle Berner, sells 100% natural rubber, eco-friendly flip flops. Berner discovered the flip flops while on a trip to Asia. The flip flops are now sold in 20 retail locations between New Orleans and Hawaii, sixteen Whole Foods stores, Japan and online.
Big Easy Blends’ Cordina mar-Go-rita is a ready-to-drink frozen cocktail in an environmentally friendly pouch. The product was introduced in 2009 by two brothers, Sal and Antonio LaMarina and Craig Cordes. The product, which began selling in Louisiana, Florida, Texas and California in April 2009, has opportunities to export to Canada, Brazil, South Korea and the Caribbean.
What makes these two small businesses uniquely creative is the win/win business alliance formed between the two. The companies formed a joint venture which allows Feelgoodz’s flip flops to be packaged in Big Easy Blends' large warehouse. Two entirely different products owned and operated by two entirely different companies joined together to create a win/win for both companies. “Shipping out margaritas anyway, so why not add flip flops to the mix? And sure enough a joint venture was formed and we’re now shipping out Feelgoodz flip flops,” said Craig Cordes. (The segment was aired in May 2010 on MSNBC “Your Business” with JJ Ramberg.)
James Johnson and Mike Smith "teamed" together to establish a joint venture to take on a federal construction project. Johnson, a real estate developer, had a small construction company with fifty-five employees. Smith, a certified Master Electrician, was an electrical contractor with fifty employees. The joint venture was formed because both parties were interested in sharing and spreading the risk associated with the larger and more complex project. They also sought to tap one another’s unique skills and assets (employees, equipment) as well as to maximize their surety capacity. The joint venture allowed them to strengthen their financial structure and prequalification validation. Before signing the joint venture, each consulted with its attorney, insurance agent and accountant due to legal obligations, insurance issues and potential tax consequences.
A strategic alliance is generally an arrangement whereby a separate entity is not created. Participants engage in joint activities but do not create an entity that would carry on trade or business on its own. The strategic alliance partners may provide resources such as products, distribution channels, manufacturing capabilities, capital, equipment, knowledge, expertise or intellectual property. Each party in the alliance maintains autonomy.
A business management consultant wants to expand his services. He currently offers coaching, marketing, financial and operational consulting. He has noticed an increased demand for HR and diversity consulting from his clientele. He currently has no desire to hire additional personnel with the degrees and certifications required to offer these services. He seeks a strategic alliance with an HR and diversity consulting firm. The firms both agree to work with each other when opportunities arise for their services. A percentage of the revenue generated from the services provided will be returned to each of the firms.
An inventor has created a product that requires thermosetting plastic materials. Because the components have to be manufactured by a highly specialized custom piece of equipment, the fees to acquire the equipment and produce the components are above and beyond what the inventor can afford. He approaches several injection molded plastic manufacturers about his product. One of the manufacturers buys into his idea and they develop a strategic alliance. In exchange for not paying for the customized equipment upfront, the inventor agrees to pay the manufacturer royalties on every sale of the product for a specific period of time. Both win. The inventor saves cash flow and the manufacturer acquires an additional revenue stream.
A partnership is a legal agreement between two parties wherein both the parties agree to share profits and losses of a common business with no anticipated end date.
A marketing company, whose primary function is to sell ads and produce unique coupon circulars, had a substantial monthly printing bill. The company sought a partnership with a small printing company. The printing company had the expertise but limited printing volume. It required purchasing equipment that the printer didn't have but could use. A contract was signed establishing the new company; cost of the equipment was split between the two entities. The coupon circular producer sent all its business to the new venture at a substantial discount. The profits from the new venture were divided among the coupon circular company and the printing company. Each kept their original businesses separate from the new business.
An experienced dealer of used cars uses several different auctions to obtain his inventory. He purchases the inventory using the money of small business investors. The latter, seeking to diversify their investments, are promised a 50/50 share in the profits from selling the used cars to the public. This creates a win for both parties-the dealer has his inventory financed at no interest and the small business investors have their investment fully secured by the autos. The deal is very appealing due to the relative low risk and potential profit.
A marketing alliance is an agreement involving two or more companies to share cost and resources to promote each of the companies within the group. The target markets of the companies within the alliance usually share similar characteristics. The alliance can be a formal or an informal agreement.
A creative marketing alliance is created between a gourmet restaurant and a health club. Both businesses target young professionals and business executives in the same area. The restaurant's menu includes several special dishes recommended by the nutritionist at the health club. The restaurant distributes discount membership coupons for the club and both advertise their affiliation with each other.
A joint social media marketing promotion among several small complementary businesses with similar target audiences is implemented. The goal is to increase the pool of potential customers and expand the reach for all participants, while reducing individual costs for implementation. In this example, each participant gains added value along its value chain as a result of entering into the marketing alliance.
A collaboration is when two or more businesses come together to share resources to create greater efficiencies such as the sharing of employees, equipment, shipping costs, rent, products, etc. Collaborations are generally for specific time periods and resources.
As a small business owner, you may have a difficult time throwing a first class holiday party for your employees. You want to show them just how much they are appreciated but the economy is tight and company funds are even tighter. Pooling your resources to have a party with a complementary company saves money for both companies and could potentially pay off in new business opportunities and networking.
A florist, who provided flowers for a number of businesses such as funeral homes, wedding organizers, and so on had a flourishing business. As the business grew, she needed a second cool-storage unit to accommodate the extra demand from her growing customer base. She tried to get a bank loan but the bank but the bank wouldn’t agree to finance the needed equipment. Knowing she needed the equipment to keep her business growing, the florist began to think outside the box. She offered her larger current customers, as well as a very select group of prospective customers, a discount to give her advanced purchase orders for the floral arrangements they were going to need in the future. They agreed. Once she had the purchase orders, she took them to a finance company that allowed her to purchase the cool-storage unit.