Should You Partner with Another Company? Four Questions to Ask First

kathryn by Kathryn Hawkins on January 28, 2011
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Once your business has picked up a bit of press and is generating buzz, you’re bound to start getting calls from other businesses asking if they can partner with you. Maybe all they want to do is exchange website links. Other times, they may want to combine resources to get a better deal on supplies or services, or they might request that you promote their products in exchange for a commission.

It’s always flattering to be asked and can be hard to turn down the possibility of extra business or decreased costs, but in many cases, it’s not worth the time and effort to get involved in these types of alliances. Before you say yes or sign on the dotted line, here are four questions to ask yourself.

1) Do I stand to gain as much as they do? Most times, a company will try to create an alliance that weighs heavily in its own favor. It’s your job to see if there’s any real benefit to your own bottom line. For instance, it may sound appealing if a photographer offers you a 50 percent commission to advertise her photos on your gallery site, but if she never makes any sales, you’re simply providing her with permanent free advertising… and taking up space you could use for something more productive.

2) Do their services truly complement yours? If you run a hair salon, it may be a natural fit to create a discount package with a formal dress boutique — after all, women buying dresses for formal events are likely to get their hair professionally styled as well. But if, say, an exterminator offers to cross-promote his services with your salon, you’re probably better off avoiding the association.

3) Have they carefully thought the plan through with your business in mind? Some companies will try to build alliances with any company that will have them. You probably want no part of that: If a partnership is going to work, you want to know that the other business owner has put time and effort into planning it out. Before agreeing to even talk by phone, David Ciccarelli, CEO of voice talent marketplace Voices.com, insists that the potential partner sends him a written plan discussing the partnership idea. Many of them don’t even bother doing that — and if they can’t even follow through on a simple request, it’s unlikely they’ll serve you well in a partnership.

4) Can I get out of it easily? Say the partnership really does look like an ideal match. Nonetheless, you could still find that you don’t get along with the other business owner, or that the alliance isn’t helping you nearly as much as you thought it would. If you decide to form a partnership, always draw up a contract, start out with a trial period, and give yourself an easy escape route.

For more tips on what to consider when setting up a joint venture or strategic alliance, check out this article in BusinessWeek.

kathryn

Kathryn Hawkins is a business writer for Intuit and is passionate about solving small business problems.

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