Manage Your Partnership So It Doesn’t Destroy You
Most new startups are scared to jump into partnerships. And they should be. Essentially, you’re teaching a gorilla, a.k.a. a big company, how to be you — how to make your product, distribute it and earn money from it. If something goes wrong and the partnership fails, you just created a major competitor. The big company can now do what you’ve been doing, only better and with farther reach. You can be crushed and bankrupt before you even have time to come up with a back up plan. That’s the worst that can happen from a partnership, so why get into one in the first place? Because partnerships are absolutely essential to growth. A good partnership can take your company from a million dollar valuation to a billion dollars exit in some scenarios. You need partnerships to expand, to grow and to find new customers. So, how can you lock a partnership and steer the course for success? Here are four ways to help you manage your partnerships and prevent things from going terribly wrong.
1) Draft a win-win contract. The first thing you want to do when you form a partnership is to make sure your partner makes money. They – as much you – have to feel happy with the profits and margins that the partnership brings. If they don’t feel happy, they’ll go elsewhere, and that’s not what you want to happen. That means, the contract must include benefits to both parties. This could take a lot of back and forth, but it will be time well spent. In the case of Uber’s partnership with Google GOOGL +3.92%, the contract is solid and both companies are profiting from it. When Uber won Google’s investment and the two synced up strategically, both gained significant monetary value. This value has continued to today, despite the news of a growing rivalry.
2) Forge a personal relationship with the decision makers on the other side. Strong relationships allow you to resolve any problems as they arise and also, seize more opportunities. In every company I’ve been involved with, I build strong relationships with my partners. At Movaz, my second company, my primary partners were Motorola and Lucent. I got to know their leadership on a personal level. We met on a regular basis in the office and outside of work. This helps keep the lines of communication open – a valuable asset to working through problems. We once had an issue with product quality because the supplier was underperforming. The product wasn’t working well and caused major network outages. Our partners were unhappy, but because of the personal relationship between us, we were able to collaborate and resolve the issue quickly. And in hindsight, I would say that these experiences actually made the relationship better. This approach to the partnering kept us moving forward smoothly and allowed our teams to work together. The result? We were able to double Movaz’s revenue from $50 million to $100 million in less than one year.
3) Conduct weekly performance meetings. Your job as a business leader is to mitigate risks. And the best way to do this is through weekly internal operations meetings. These meetings allow your engineering team the time they need to give priority to the partner’s product requirements. To ensure that your sales team works well with their sales team and to avoid overlaps, these performance meetings are critical. Operations and customer service will work smoother and your team will be more dedicated to support the partner if everyone is performing highly.
4) Co-plan new products and services together. It’s so important for startups to treat their new partners like team members. Instead of thinking of a partner as the “gorilla” or the enemy, you must think of the partner as a part of your company. Box is doing a fantastic job of this in their new partnership with IBM IBM +1.3%. Their re-sell agreement — where IBM will be selling Box’s product alongside IBM’s products – requires the two teams to execute in tandem. Box is also starting to explore creating new products and services with IBM, which allows this startup’s team to not only capture more market share but also enter new markets. To be successful, both must go through the process of product planning, product development, sales and customer support as a team. In turn, the partnership will work well and have potential to grow.
Box’s partnership with IBM has them both winning. Photographer: David Paul Morris/Bloomberg *** Local Caption *** Aaron Levie
When you manage your relationship with your partner wisely, the benefits can be exponential. A partner can help you build your product, launch it into the market quicker and reach more paying customers. Essentially, a partnership helps you grow and in business, growth is the only model for success. If you go above and beyond in your relationship, making it headache-free and with continual benefits, the big company may even want to buy you. And, this could be a very good thing. If you haven’t formed partnerships yet, start the process now. And if you’re already in a partnership, manage the relationship well and you will reap the benefits.
