People turn to partnership issues at the stage of choosing a business. This is a serious issue that must be addressed when building a business plan and developing a strategy. Partnerships are a type of interaction between market entities in order to obtain certain benefits and advantages. Details about this concept will be described below.
General definition
Partnerships are a special type of interaction in which the subjects of market relations seek certain benefits. This allows both parties to gain an advantage over other market participants. Partners can bring money, ideas, solutions to specific problems and more to a common cause.
Do not assume that such relationships arise only between the owners of one company. This is just one type of partnership. Such entities are called companions. A partnership can exist between equal partners. They have certain features that can compensate for the shortcomings of their ally.
You have to spend a lot of time with business partners. Sometimes it is required more than for communication with the family. Therefore, when choosing partners, you need to consider a number of nuances.
Partnerships are a way to combine the characteristics of two different entities that they own in different areas and which are required to manage the company. The partner must strengthen the position of the business, he must bring his connections, information, resources, etc. into it for the success of the common cause. Only in this case, such cooperation is appropriate.
Each owner of a business cannot perform all the functions equally well. In some areas, he needs support. In this case, he will be able to direct his forces to what he is doing better. The partner will deal with other issues that he can solve better. This reduces financial risks, reduces the additional costs of the organization. It also allows you to distribute responsibility in accordance with the competence of each participant in such relationships.
What do partners bring to the common cause?
The concept of partnerships should be considered from the perspective that they can bring such relationships into a common cause. This contribution may be different. On this basis, partners are divided into three groups:
- Invest in the development of the organization and take part in management.
- Invest intellectual property.
- They contribute capital for the development of the organization, but do not manage it.
One of the interesting types of cooperation can be partnerships between entities that contribute their money to the development of the company, as well as take part in management decisions. They can also bring not only material resources, but also intellectual property, their own experience.
This, for example, may be partners who do not understand the intricacies of a particular business, but have knowledge in the field of marketing, finance, etc. They can be useful in their experience. Their work allows us to develop a common business. The knowledge they bring enhances the company's potential.
Formation of partnerships on this principle is not without drawbacks. Freedom to make decisions will be limited. If an ally takes part in managing a business, he is its co-owner. In this case, he also takes risks. Therefore, when making complex, important decisions, all opinions will need to be taken into account. In this case it is impossible to bear sole responsibility.
Intellectual Property Investments
Long-term partnerships can be built on investments in the form of intellectual property. This concept includes certain knowledge necessary to enhance competitiveness, experience, business relations and general work aimed at the development of the company.
Such a partner does not bring money. However, it opens up new opportunities for increasing company profits. Such unions are especially important in those areas in which the company owner does not have sufficient competence. Without specialists who bring intellectual property, a business cannot develop harmoniously.
For example, outdated technology is used in the production process. There is a demand for such products, but it is becoming less and less. The partner has knowledge on how to establish a line that can produce modern products that the buyer needs. He does not finance the development of this area. But on the other hand, his knowledge can increase revenue from product sales.
Partnership marketing of this type is the special motivation of an ally. He is interested in increasing the profit of the company, since from it compensation is paid to him for cooperation. Therefore, such an ally will do everything to ensure that the business is successful through the use of new technology or other types of intellectual resources.
The disadvantage of such cooperation is the dependence on the work of the partner. It needs to be constantly motivated to increase the profitability of production. At the same time, the financial risks completely fall on the shoulders of the owner of the company, who contributed his money to it. Such partners should not be confused with employees. They carry out their activities for wages. They do not participate in making decisions important to the organization.
Non-management equity participation
The essence of partnerships based on common capital injections does not always lie in the possibility of equal decision making. An ally who has contributed to the development of the company may not be able to manage it.
This type of cooperation is necessary for those industries that require significant financial investments. Development money is provided by a partner. However, he simply acts as a third-party investor. He does not take part in the adoption of certain decisions.
Such partners provide their temporarily available funds for an indefinite or specific time. However, they see a benefit in such actions. The company pays them income for using their capital in its turnover. Its size and terms of payment depend on the contract. Before providing the organization with the required capital, the investor evaluates the company in terms of its stability and profitability. The investor’s reward depends on the risks associated with the investment.
Such injections make it easy to start a business, in which decisions will be made only by the owner of the company. However, the investor may impose his vision of the situation. He is able to motivate this by the fact that he can withdraw his investment. Therefore, at the conclusion of the contract, this moment must be specified immediately. This will avoid troubles.
Marketing partnerships in this category involves the selection of investors who can provide significant investment. If necessary, their size can be increased. If the prospective partner is not able to provide a sufficient amount of funds, and is also not inclined to increase its financing in the future, such cooperation is not a priority.
Partnership positives
Different forms of partnerships have positive and negative sides. Before entering into such a relationship, it is necessary to weigh all the advantages and disadvantages of such a solution.
The positive aspects of business cooperation include the distribution of financial burdens, which it is rather difficult for one participant to bear. This allows you to reduce the cost of equity of the founder of the company, which he will incur when creating the organization, to reduce risks, as well as the discomfort that the owner may feel.
Another positive quality of cooperation is the opportunity to consider a certain situation from two sides. The owner of the company can see the problem from only one point of view. A partner, who has a certain competence, knowledge, will help to look at the situation from the side. This will allow you to choose the best solution. At the same time, each other's knowledge is supplemented, which increases the chances of success.
Partners will have more new ideas than the sole owner. This allows you to build an optimal concept for the development of the company. Such a result is practically impossible to achieve on your own.
A business partner will be responsible for a specific area of the organization. This allows you to quickly solve any problems, to be in two places at the same time. This makes it possible to solve organizational issues faster and better.
Negative Partnerships
The basics of partnerships suggest the presence of negative trends. They must be taken into account when choosing an ally. This will avoid errors. First of all, it should be noted that there may be ideological differences between partners. This is a dangerous trend that can ruin a business. Therefore, at the initial stage, it is necessary to discuss with the future partner all the nuances of cooperation, to expose to him his own views and ideas regarding doing business. Conflict introduces disharmony into the management of the organization.
It is also worth considering that partners are more or less dependent on each other. The effectiveness of their common cause depends on the efforts of both parties. If one partner does not fulfill the functions assigned to him, the actions of the other ally will not yield the expected results, his work will be wasted. In your partner you need to be sure that he will not give up the common cause, will not leave him halfway.
Another negative side of cooperation is the fact that over time, the organization will begin to pay dividends. They will need to be divided. It is on this basis that serious disagreements and conflicts most often occur. Therefore, it is necessary to stipulate the procedure for the distribution of profits in the cooperation agreement. This will not allow disagreements to arise.
It is also worth considering that each partner will long for power. This fact sometimes destroys even strong friendships. The ambitions of each participant can be high. This confronts partners, turning their relationship into a rivalry, which completely deprives such an alliance of all the advantages. Teamwork in this case becomes impossible.
Knowing such negative facts, you can secure yourself in advance. All the nuances of future cooperation should be clearly specified. This will not allow disagreements to arise.
Main mistakes
Partnerships in business fail. This is fraught with a loss of economic benefits, a decrease in the company's profitability or its collapse. You need to know what mistakes are most often made by participants in such relationships.
One of the common mistakes is the unwillingness of the company owner to partner. He feels his power, which he does not intend to share. In this case, it is better to forget about such relationships. Partners make important decisions together. At the same time, the business will not manage to conduct as before.
Another mistake is the lack of a clear understanding of what features a partner should have. It is necessary to clearly state your requirements. You need to know what a particular business needs, what weaknesses the owner of the company has, what he lacks to increase the profitability of his organization. Attracting a partner should give more profit than without his participation in the company.
It is important to clearly set the goals for such cooperation. This will determine which profile should characterize the ally. It may require capital, intellectual property, etc.
It is recommended that a future cooperation strategy be developed. The level that is planned to be achieved as a result of attracting certain resources, knowledge that the partner possesses is determined. All organizational nuances are also considered, detailed contracts are drawn up. They need to provide for all the basic situations that may accompany such an alliance.
Partnership agreement
Partnerships require careful consideration of all the details. In order to prevent fatal errors, you need to know the main components of the agreement that is concluded between the allies.
The contract must determine the decision-making process, as well as the control that both parties will exercise. The spheres of competence of partners, their powers and the features of reaching agreements on contentious issues are established. The question of division of responsibility is discussed.
Further, it is stipulated how property will be divided, the profit that will appear during joint activities. An assessment of the contribution of each party to the common cause is also carried out. With financial investments, problems usually do not arise. However, when making its share of property, intellectual property, an adequate assessment of such resources is required.
The procedure for resolving conflicts, as well as the procedure for leaving the partnership, is discussed.
How to avoid problems?
The development of partnerships requires certain efforts on both sides. To avoid unpleasant situations, you need to follow simple rules of behavior in tandem.
With a partner you need to stipulate all the important points of doing business. It should highlight the strategic goals and objectives that are planned to be addressed in the process of promoting the company. The business concept is formulated in detail so that the partner can embrace and realize it. At the same time, the boundaries of responsibility are clearly specified. They are determined in accordance with the strengths and weaknesses of the participants in the relationship.
You should never agree on important aspects of the organization’s work verbally. All the nuances must be prescribed in the contract, to approve them legally. Even if the partner is a close friend, relative, all details of cooperation should be documented.
For the partnership to be productive, you need to be able to listen to each other. You must be able to understand your ally. If opinions differ, it is necessary to give arguments why it is necessary to do just that, and not otherwise. It is very important to respect the person with whom the tandem is built. Without this, it is impossible to achieve high results.
When is partnership impractical?
Do not seek the support of a business partner in some cases. Collaboration will not be effective if people are not confident in each other. Trust is an important factor in a productive relationship. Also, partnerships just for the sake of money is a bad idea. This will quickly lead to disagreement.
A tandem is not possible if the partner sees only moral or physical assistance. In this case, it is better to simply create an appropriate position. The assistant will work for the bet. His dismissal will not affect the state of the company.
Having considered the features and definition of business cooperation, we can say that partnerships are a special type of interaction between business entities. It is necessary to compensate for their weaknesses and increase company profits. By properly organizing such an alliance, significant results can be achieved.