Partnerships have long been recognized as a key process for consolidating current operations, driving growth, or creating new directions for your business. It works – and often it’s the most effective way to capitalize on your strengths quickly.
It’s all about creating win-win relationships based on mutual trust and teamwork. When you do that, then some great outcomes can be achieved for all parties.
The two most common partnering options are:
Strategic Alliance: This is an agreement between two or more groups to collaborate on a project (e.g. marketing of a product, joint bids, etc) which delivers a positive outcome for all parties.
Joint Ventures (JV’s): The establishment of a new / separate company where both parties make a financial and / or resources commitment to achieve a specific outcome. In recent times, many have been incorrectly using the term to describe strategic alliances on projects such as joint marketing promotions etc.
Now partnering can also be a disastrous move for your business if not handled correctly and can lead to grief for many years into the future, maybe even bring down your business.
More than 50% of JV’s fail and quite often end up in the courts … whilst many strategic alliances end as quickly as they are agreed as there is no financial commitment on behalf of the participating parties and hence it is easy for any of the parties to walk away when a more exciting opportunity arises.
However, when you do it right, you not only achieve terrific outcomes but also develop relationships which can last for years.
I’ve been establishing / managing strategic alliances and JV’s since the 1980’s using the following parameters:
- All parties must bring something to the table: This particularly applies to strategic alliances where there is generally no financial commitment. It may be a list, a product, marketing expertise, product development facilities, etc. If you feel that you bring more to the table than the other party, then negotiate a commensurate split to reflect this (i.e. you do not have to work on a 50:50 split). Be prepared to do the same in return if your partner is the one who is bringing more than you to the table.
- Document everything: If your partner is not strong on documentation, then YOU prepare the required documentation and make sure it is agreed to BEFORE you invest any further time on the exercise. Financial elements – including each persons contribution, shareholding, revenue sharing arrangements, etc – must be detailed fully.
- Walk-the Walk: Too many partnerships are negotiated by slick sales people who “use smoke and mirrors” to camouflage their personal or organizations true abilities. If you say you can or will do something, then be prepared to deliver!
- Put everything on the table: Don’t hide important / relevant information from your partners. Create a totally open relationship so that the relationship can blossom. Many strategic alliances and JV’s don’t deliver the outcome people expect. However, if you are up-front about everything and build a good working relationship, then a failed promotion / project may lead to another project which works.
- Finalize relationships quickly: Don’t get too excited by JV’s or strategic alliances which take forever to be finalized. Chances are they never will. The best people to partner with are normally go-getters who act quickly on matters. Those who drag everything on forever are generally non-performers. You want to deal with people who take action, not talk!
- Stick to best practice: Avoid jumping into any joint activity which is illegal, not in keeping with accepted business practice, or your company’s code of conduct. They say people have short memories, and that is true to a point. However, there is always someone in your client base, competition, or industry with a long memory and they can do you damage for many years. Stay clean and you will prosper in the long term!
- Understand who you’re dealing with: This particularly applies to sales and marketing agents who come knocking on your door with promises of delivering a result you seek for your business. In today’s wired world, almost every professional has their own website or, as a very minimum, a Linkedin profile which details their credentials and track record. If they have no online profile / calling card, then keep away as they will more than likely deliver nothing. If their involvement is all about up-front fees, then it’s not a partnership but a consultancy and you need to view it in that light.
- Do reference checks: Specifically, look at who your prospective partners have done JV’s / strategic alliances with before and whether or not any resultant failures were their fault or the other parties. It is generally very hard to get a clear picture on this but you must endeavor to learn as much as you can BEFORE you jump into bed with one another. What you want to find out is whether failure was caused by the individual or company you are dealing with due to ego, self interest, or poor business practice. (I have great respect for those who tried and failed so failure for the right reasons is not a negative in my mind.)
- Use JV Brokers : These specialists can be a very valuable asset to have on your side when seeking to establish strategic alliances or JV’s as most already have relationships with a select group of potential partners. They can move fast on your behalf and its a perfect way to get going, particularly if you seek only a handful of strategic alliances. If you want dozens or hundreds, then they may not deliver everything you want as most tend to work within their base of established contacts. In this case, start with an agreement relating to their existing contacts and only extend that once results have been delivered and they have a desire to pursue new options / targets on your behalf.
- Be prepared to invest Even if it is only a strategic alliance, there may be a need for some special requirements such as new marketing collateral to make things happen and these cost money. Therefore, be prepared to spend what is required … but do so only when you can see some results happening in other areas. Example: I regularly get NEW affiliates – people who have yet to deliver any results at all – asking me to create custom sites etc for them. The answer is NO … until I see some consistent results. apply the same principle to your JV’s and strategic alliances – i.e. invest time and money only when you can see things are real.
- Be willing to walk away: There’s a ton of opportunities out there and so, if someone approaches you regarding a JV or strategic alliance, then only proceed if you feel the fit is right. You do not have to grab every opportunity which comes your way.
- Don’t confuse personal relationships with business relationships: Just because you get on well with someone, that doesn’t mean they will be good business partners or indeed can deliver anything at all. If you do business with friends, then do so in way where everything is understood in advance as the last thing you want to do is destroy your friendship.
In today’s economic climate, you need to be open at all times to strategic alliances and joint ventures as they can and do work if you structure them properly using the points detailed above plus others specific to your business, industry and particularly environment.
For example: In the Philippines where we have an operations center, I only deal with Expats who can demonstrate a commitment to their business – i.e. are locally registered, have an infrastructure in place, and / or can demonstrate what they do (e.g. have a detailed website). Experience has taught me NOT to do business with Expats who are not family oriented or do business in a bar.
Do you have any specific or additional parameters you use when selecting JV / strategic alliance partners?