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Hi Taylor
- I work for a small home design company and there's been a lot of
discussion recently about partnering with another business that would
help us get cheaper supplies in exchange for a percentage of profits.
Based on your experiences, do you think these types of partnerships
are good or bad? - Blair
Hi Blair - Based on my experience, I think a lot of these joint
ventures go well, and some of them end terribly. By and large, I think
you can gain a lot from the right partnership, but I can't emphasize
strongly enough how important it is that you work with the right partner.
In your case, it sounds like this is the type of business relationship
where both companies benefit and no one has to wait too long to see
their cut. It's obvious that these relationships have to address the
needs of both parties; even with that understanding, it's common that
these agreements are structured in a way that favors one company too
much in the early going. More often than not, this causes the partnership
to sour quickly.
With regard to how the agreement is reached and a commitment is guaranteed,
different companies take different approaches. You're free to bring
in lawyers and sign lengthy contracts. You can jump through a bunch
of hoops to form a new business entity that ensures all your bases
are covered. Based on the size of your business and the scope of your
projects, I'm guessing you don't want to deal with all those shenanigans,
and I'd support that decision.
You can form a partnership without a written agreement, and if the
benefits really are mutual, this makes the most sense. You'll save
money on supplies, take on more projects and hopefully get some added
promotions from your new associate. The percentage you offer in exchange
shouldn't hurt your bottom line, and your partner will get capital
and advertising in return. As long as everyone works hard, that relationship
doesn't require an obnoxiously detailed contract.
Avoiding too many stipulations helps you adjust the terms as necessary
and keeps you from committing to something that might not end up working.
As long as each party acts in good faith, you'll likely want to update
protocol for the new alliance as things progress. Drawing from personal
experience again, the strongest partnerships are the ones where everyone
stays open to changes as they find the best way to move forward.
If you feel good about the other company and your own provisions,
I see no reason why you should be nervous about working out a deal.
Make sure you keep an open, honest dialogue throughout and you should
be able to work out a deal that makes everyone happy. Good luck, Blair!
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© Taylor
Kovar November 16, 2018
More "Go Far With Kovar"
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Investments involve risk and, unless otherwise stated, are not guaranteed.
Be sure to first consult with a qualified financial adviser and/or
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Past performance is not indicative of future performance. To submit
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