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Partnerships: The Small Business Secret Weapon

Written by: Sarah Gerdes

Article Overview: Partnerships – Why do You Need Them? By Sarah Gerdes, Business Marketing Group, Inc. Whether you are a two-person firm or part of a global 50 organization, creating the right partnership is vital to successfully growing a business. This article is the first in a series of 5 articles that will walk you through the partnering specifics: Partnerships – Why do You Need Them?; Identifying and Validating the Right Partner; Creating the Partnership; Negotiating and Close the Agreement and Ending the Partnership.

Partnerships: The Small Business Secret Weapon

If you are an entrepreneur thinking about starting a business, or lead a small business, you need to know that partnerships were, are and will be an important element of a corporate strategy. And if you are devising high-growth strategies, you are probably already turning to potential partners for investments, joint development, co-marketing and distribution agreements.

• Why partnerships fail? According Booz, Allen & Hamilton, 75% of unsuccessful partnerships fail due to cultural differences and 63% fail to meet revenue projections. The result? 55% of all partnerships last less than 3.5 years.

• Partnering needs depend on stage of your company. Early stage companies require product validation to gain investment monies, while mid-stage firms desire distribution channels to drive revenue and late-stage firms seek branding and awareness to drive demand through the channel. Throughout this partner development lifecycle, a partnership with the right firm can dramatically accelerate these activities at the fraction of the cost. It is a rare that "one partnership fits all", since companies mature and can "grow out" of a partnership.

• Possible outcomes. Based on the objectives of the company (regardless of the size) it could include: joint development, co-marketing, licensing and distribution agreements and, last but not least, joint venture. Investments and acquisitions, one of the most desirable outcomes of the partnership, can happen any time.

Let me share with you two success stories: Ekit.com and Convergence. Ekit.com provided travel services for the business and recreational traveler and wanted to capture market leadership through distribution agreements. Several partner categories were evaluated and narrowed down to the highest producing partners based on revenue impact. In forty days Ekit signed a global exclusive agreement with Amtrak, yielding licensing and marketing agreements. Soon, every Amtrak counter had an eKit.com stand-up brochure highlighting its travelers package.

Convergence developed a wireless product based on Bluetooth technology and was looking for funding and product distribution deals. Based on several criteria, it selected Intel as a top partner candidate. As a result, Intel made an equity investment and signed a licensing agreement. This led to a introduction to Amazon.com, and forty-five days after the first meeting, Amazon.com acquired Convergence. All told, it was less than six months from the first strategic partner conversation to an acquisition. That is the power of a smart partnership.

Companies of all sizes and under any economic conditions always will be looking for partners for a simple reason: its hard to survive without them. Developing a product, bringing it to market, raising brand awareness and many other aspects of a company’s life is depends on its ability to create a strategic partnership in the appropriate market at the appropriate time. In my second article, I will talk about how to identify and validate the right partner for your organization.

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