There is a strong and, perhaps, natural temptation for entrepreneurs to want to go it alone and not involve other businesses in what they do. There is always the thought that creating an alliance with others may undermine your own business and profits. Why, then, do some business owners form business partnerships with other companies?
Anita Campbell of Small Business Trends asked the question, “What did the most good for your profitability?” Scott Belsky of Behance answered, “The most important ‘move’ we made related to profitability was the realization that ‘we can’t do it alone.’” He explains:
Businesses are often obsessed with protecting margins and trying to
cut out middle-men — and for good reason. However, small businesses
gain credibility when they have deal flow – regardless of whether or
not some of the deal is being shared with a source. Whether it is
selling subscriptions, filling ad inventory, or distributing products,
it often pays to involve (and incentivize) others to help you generate
revenues and, more importantly, examples. The most valuable testimonial
in an early stage business is a happy customer and a recognizable
customer — or better yet, both!
We decided early on that we would give up some margin on our
products and services in order to involve other partners. As a result,
we have a number of thought partners that are committed to growing our
business. Nothing beats the value of committed partners that are
generating early revenues and opportunities for your business.
As a small business, you can’t cover all the market opportunities out there, and frankly it exhausts your resources to try. If you can engage another business that competes with you only in an abstract sense, you can potentially expand your market and your profitability. Find someone that is in a similar business in another geographic area, or a related business that serves a different slice of the market, and explore the pros and cons of a business partnership. If the pros outweigh the cons, work with a good attorney to put together a partnering agreement that works for both of you.
(NOTE: When I say “partner” here, I’m not talking about a partner who shares ownership in your business; I’m talking about a separate business entity that forms an agreement with you to conduct business cooperatively with you under clearly defined terms.)