From building out your data to determining mutual benefits, here are the 11 answers to the question, “What are some important steps a small business should take before starting a business partnership?”
- Build Out Your Data
- Find Your Tribe
- Run a Credit Check on Your Partner
- Ask Yourself, Is the Juice Worth the Squeeze?
- Think About How the Deal Will Impact Your Brand
- Know All Parties’ Strengths and Weaknesses
- Clearly Outline the Roles and Responsibilities
- Understand Your Partner’s Beliefs
- Establish Ground Rules for Collaboration
- Consult With Professionals
- Determine if It’s a Win-Win-Win for All Parties
Build Out Your Data
There is an old saying that failing to prepare is preparing to fail, and this applies to small business marketing and is the reason building out your marketing and sales collateral is one step that businesses should take before forming a partnership. All partnerships should begin with the idea of fully educating the other party quickly and efficiently.
Therefore, having documentation, analytics, marketing information, and all other pertinent data available and ready to share in an easily understandable format is essential, not only to inform a potential partner but also for their clients as well.
By having your marketing and sales collateral prepared and ready to disseminate, you can share proof of why your business makes a great potential partner.
Find Your Tribe
When exploring options for strategic partnerships, it is best to start with synergy. Look to opportunities with people and organizations that share a similar ethos and culture.
Shared values and mindset can more easily lead to greater success, as these core strengths define much more about an organization. Within most industries, there are a plethora of options to choose from when collaborating.
By selecting partners that align with integral social responsibility efforts, you’ll find more than a partner but also an ally.
Run a Credit Check on Your Partner
Before starting a business partnership, always run a credit check on your partner. It allows you to avoid unexpected problems and get to know your partner better.
For example, if your business partner pays their debts on time, it’ll show professionalism as they have their affairs in order. But if your partner is constantly missing payments, they’ll always miss business deadlines, making it almost impossible to work together.
You’ll also have to pay more interest when taking out business loans, as the lender will look at both your credit scores.
Ask Yourself, Is the Juice Worth the Squeeze?
Building a business partnership with another business can be a significant change in growing a small business. You can get benefits like access to new markets, offering more to your customers, sharing expenses, and working with like-minded people.
Meeting a new potential partner is exciting, and you focus on all the potential upsides. But you should stop and ask yourself, is the juice worth the squeeze? Yes, there are benefits, tangible and intangible.
But there are also costs—the squeeze required to establish a partnership, get the proper legal paperwork in place, and then work with another entity. And, the highest cost of all, it can distract you from what you should be focused on, growing your own business. So, before you head down that road, ensure that the realistic benefits outweigh those costs.
Think About How the Deal Will Impact Your Brand
Ask yourself if the partnership meshes with your brand identity. As a small business, it’s important to stay consistent with your values, quality, and identity.
For example, a small business that’s focused on environmental concerns should probably avoid partnering with a company that’s known to be a heavy polluter, regardless of whether it’s a good business deal.
Before you start any partnerships, ask yourself if it will enhance your business without contradicting your identity.
Know All Parties’ Strengths and Weaknesses
Each business has its own weaknesses and strengths depending on its connection, audience interaction, niche, budget, and so on. Discussing and optimizing the best is crucial in a business partnership.
Know your partner’s skills and compare them to yours. This will help you make the best plan for the future. Also, this relieves any pressure and gives results with less effort since you’re putting your best foot forward in all areas.
The best part is that it reduces future problems in collaboration. Since both parties are taking an equal part and are happy with what they are contributing, this creates fewer opportunities for argument and more of a secure and positive environment for business growth.
Clearly Outline the Roles and Responsibilities
It can be difficult for a new small business to survive if a business partnership goes wrong. In the USA, 18.4% of private-sector businesses fail within the first year. There are various reasons for business failure. Some of them are money running out, the wrong market, and bad partnerships.
One of the most important reasons for bad partnerships is not clearly outlining the roles and responsibilities. It will keep the partnership dispute at bay, and your small business would be less likely to fail. You can mention everything like the contribution of each partner, the percentage of ownership each partner shares, a procedure for a new partner, and others in the agreement.
If you set new priorities, mention them as well. So that you will not have to explain your actions in the business. I hope defining roles and responsibilities would be a wise step for a small business.
Understand Your Partner’s Beliefs
Ethos should always be at the center of your consideration for business partnerships because above the benefits the other company can actually bring to the partnership, their ethos is something that could quickly tarnish your long-built and hard-won positive reputation.
We all know that it only takes one tweet for a company’s reputation to be ruined, and if you are partnered with that business, it is likely you could also feel the burn and see some consequences just for being linked professionally—even if you did not know their unpopular views.
Therefore, research into your potential partner is absolutely paramount. Only agree to the benefits if you know you both believe in the same things.
Establish Ground Rules for Collaboration
In order to maintain a successful partnership, clear communication is key. So, talk with your partner about how they make decisions, prioritize tasks, and set deadlines.
This way, you can ensure that everyone agrees from the beginning and will avoid any potential conflict down the road. It will also be helpful to inquire about potential conflicts that could arise and if there are areas where both parties may need to compromise.
By agreeing from the start, you can prevent negative issues in your business relationship down the road.
Consult With Professionals
It’s always wise to seek professional advice before starting a business partnership. This could be a business lawyer, an accountant, or a consultant.
A business lawyer will guide you on the legal aspects of the partnership, such as tax laws and other regulations. An accountant will address the financial aspects of the venture, such as capital contribution and sharing of profit and losses.
A consultant provides an in-depth analysis of the situation and helps prepare checklists on what the two of you need to do before, during, and after setting up the business. They may advise you to postpone the partnership if they think the venture is not workable or provide ideas to make it a success.
Determine if It’s a Win-Win-Win for All Parties
Partnerships have to be beneficial to 3 parties for them to win: both companies involved, but also customers of both companies. Evaluating a partnership and intending to make it a one-way path will lead to failure.
If both partners can be upfront about what good looks like for them, they can mutually benefit the companies and also their customers by building a stronger relationship.
Brett Farmiloe is the founder of Terkel, a Q&A platform that connects brands with expert insights.