How Business Partnerships Work
Strategic alliances are an integral part of business these days. Companies that thrive use strategic partnerships to achieve their goals.
Strategic alliances come in many forms, from partnering with another company for services or products to merging into each other or investing in each other’s growth.
These collaborations can be short-term or long term, depending on what both parties want out of the relationship.
It is very common to find companies that play well together and create synergistic benefits for the partners. These win-win situations are made possible through effective collaboration strategies.
Steps to start a partnership
The first step in starting a business partnership is deciding how you will be partners. This can be as simple as agreeing to work together on projects or sharing profits or both!
Business partnerships come in many forms, so it’s important to understand what kind of relationship you want to have before diving into the pool.
There are two main types of business partnerships: one being equal partner relationships and the other being more unequal partner relationships.
In an equal partner relationship, each party brings their own money to invest in the company, and shares in the income and losses of the company equally.
This type of partnership is great if you’re both able to contribute the same amount of capital to begin with, but may not work well when one person has much more invested than the other.
For example, if your friend who knows very little about marketing starts her own marketing firm, that company could fail because she didn’t put enough investment into it. You would also lose all of your investments if the failed.
Businesses with unequal partner relationships usually don’t last long- most people feel like they get less credit for their contributions even though they made just as big (if not bigger) impacts at the company.
That can cause resentment and feelings of undervaluing yourself, which only end up hurting the relationship.
Identify your partners
The second important part of creating business partnerships is finding partners that are aligned with your mission and who can bring value to you. You will have to do some research, but don’t worry! There are many ways to gain access to great people and resources.
Your first step should be to determine if there are already successful businesses in your area or areas where your business could be more competitive.
By looking at past performance, you can get an idea of whether this company has what it takes to succeed. You can also check out their social media profiles to see how engaged they seem.
Once you’ve made contact, you’ll want to learn as much as possible about them. Does their profile make them look like someone who cares about others? That’s a good sign.
You can also find out if they hold any positions in organizations or associations related to yours. This would show that they’re invested in the community and that can only help your partnership.
Understand the agreement
As with any relationship, understanding how business partnerships work is the first step to staying in them. Just like romantic relationships, not every friendship will survive without conflict or arguments. This can be very difficult when you have a lot of invested money or time into a project.
That’s why it’s important to understand what rights each party has within the partnership. These rights vary from partner to partner, but some common ones are as follows:
To manage internal resources (jobs, projects, etc.) To make decisions about significant parts of the company (business strategies, products, etc.) To contribute financially To keep private information confidential
All these things help create strong working relationships. Make sure that both you and your partners know what their rights are!
If one of you violates this rule, then what? You could possibly get kicked out of the partnership, which would hurt the project tremendously. Or, you may need to look for new partners, which could be quite hard.
Business partnerships can also contain clauses that protect either party from outside influence. For example, if someone close to you gets involved in bad behavior, you might want to consider breaking up because of them. Similar to before, you would need to search for new partners.
Share financial information
When you start your business, it is important to recognize that there are going to be other people involved in it. People who will contribute money or resources towards it, and who will expect to be paid for their contributions.
Financial information includes income statements, cash flow analyses, balance sheets, and shareholder reports. All of these documents are very detailed, so it is helpful to have someone with experience review them before you do.
This person could be an accountant, bookkeeper, or finance professional. They should be able to take what they learn from you and apply it to make sure your numbers make sense.
By sharing this information early on, you’ll help prevent any awkward conversations later.
Share your vision
As we mentioned before, business partnerships are typically built upon an exchange of value. This can be done through marketing or advertising services, sharing profits, offering investment opportunities, etc.
Typically, one partner will contribute more than the other party to help promote the company’s image and get attention for their own personal success.
It is important to remember that no matter what you give away, it must feel like it was worth it! If you don’t feel this way then it wasn’t a good partnership.
Also note that even though they gave you money, companies often need advertisements to keep moving forward so buying a soda or two isn’t going to hurt them too much. Beverages always make great incentives! 😉
Business partners come together with different levels of experience so there should not be any jealousy or feeling that someone else got ahead without doing as much work as you. It is each person’s job to learn something new from the others and take advantage of these lessons while also supporting each other’s successes.
Establish a company structure
After you have identified your business idea, it is time to establish yourself as an entrepreneur! This means establishing a company structure that is legal and efficient in operating under the laws and regulations.
You will need to determine how many employees your business will likely have, so make sure to factor this into the company structure.
Next, you will want to pick your industry. By understanding what industries are similar to yours, it can help you create your business model and position yourself within the market.
And of course, you will want to pick your niche – or at least know the ins and outs about each major area of your field.
That’s why it is important to be familiar with everything around you, from competitors to trends. Take some time to do research and figure out who else is talking about building their business and see what works for them. You don’t necessarily have to look like them, but you should understand their strategies.
Registration with the government
As mentioned before, business partners need to register their partnership with the appropriate governmental agencies in order to ensure that your personal assets are protected in case of bankruptcy or death.
Mostly, these agencies require you to put up one percent of your company as collateral until you reach certain revenues where it is lower (like 0.5%). This way, your money is still protected while you grow your business!
In addition to protecting your financial security, this also gives you an opportunity to use the resources of the agency for help running your business. You can ask them advice about marketing strategies, finding new clients, etc.
Your accountant may be able to advise you on how best to structure your companies and protect yourself legally, too.
Select your team
Now that you have done some research, determined what type of business partner you want to be, and gathered all of the necessary materials, it is time to choose who will help you achieve your goals!
Finding the right people to work with you can be tricky, but most likely comes down to their strengths and weaknesses as individuals and professionals.
Your colleagues or partners should feel comfortable working with you and around you, and they should believe in the same things – not only about the business, but also yourself.
You must believe in the same thing at least once, if not twice. This could be self-confidence, an idea that cannot miss, or a vision for success.
It’s important to know when to push people away and how to motivate them when needed. While it may sound cliché, true teamwork takes work and effort from everyone involved.
But don’t worry, there are ways to make this happen. You will probably need to do something different with the people you already have, but creating new teams is much easier than changing the chemistry of an existing one.
