13 Things You Must Know Before Forming A Strategic Alliance

Two smaller companies coming together can increase clientele, market share and revenue

(Image: Thinkstock)
(Image: Thinkstock)

To compete and thrive today you must make your business scalable. One way to do this for two smaller entities forming a partnership or joint venture can combine resources and go after business that would be accessible separately. By developing the right strategic alliances or joint ventures, your company can, in many cases, increase market share, as well as gain additional financial and human resources to meet client demands.

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Keep in mind that the major reason large companies grow while small firms often fail—according to the Small Business Administration, more than 50% in the first five years—is that big businesses have deep pockets and powerful relationships that bring opportunities, contacts, and support. Forming a partnership has such privileges in many cases.

BlackEnterprise.com contacted members of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. We asked them to name one “Do” or “Don’t” when forming a strategic alliance or partnership with another business. Here are their answers:

1. Do: Understand Your Partner’s Limitations

Every business has strengths and weaknesses. If you are teaming up with a strategic partner, you need to get to know their weaknesses. The reason being that, at some point, you will have to set clear expectations with your customers and trust that anything that can happen, will happen.

Justin Boggs, ZeeBerry.com

2. Do: Form an LLC

Partnerships are risky, and it rarely makes sense to form one with another business. Consider forming an LLC for your entity so the officers can protect their assets in the event of a bitter break up, and so you can take advantage of the startup tax breaks that are common in today’s economies.

Jon Cline, Rokit SEO

3. Don’t: Move Fast

Don’t move faster than a lawyer would move. You want to make sure that the relationship happens and builds up over time. All real relationships take time. A relationship that doesn’t take time will fall apart just as fast as it started.

Peter Daisyme, Hosting

4. Do: Stay on The Same Page

If you’re two independent businesses looking to tap into each other’s markets, it’s good to articulate to each other exactly what you’re hoping to get out of the partnership. And once the terms of your alliance have been agreed upon, keep in touch to prevent one of you from developing a mistrust of the other.

Cody McLain, SupportNinja

5. Do: Be Mindful of The Downside

With business relationships, it’s very easy to plan for everything being sunshine and roses. Play through worst-case scenarios and make sure there is a plan in place that is fair and reasonable for both parties in the types of scenarios nobody thinks will ever happen. More often than not, it doesn’t all go according to plan.

Anthony Scherba, Yeti

6. Don’t: Assume

Assumptions are a good way to have everyone disappointed and potentially end a good relationship. Articulate all expectations up front so everyone is clear. If someone doesn’t seem to be holding up to their end of the deal, ask them about it and reference the initial expectation. Or, determine if you/they are acting on an assumption that wasn’t articulated initially and talk about it.

Angela Harless, AcrobatAnt

7.  Do: Offer to Fill a Void

In every business, there are gaps, voids and areas needed for improvement. The best type of relationships and partnerships we’ve formed are finding the gaps in their business and offering to help them fill the void. For example, one partner we found provided lots of blog content, but never hosted any webinar content. We created a webinar and helped them drive sales through this unused channel.

Chris Brisson, Call Loop

8. Don’t: Lead With an NDA

Do not start off the conversation with, “I need you to sign an NDA.” Again, it really makes you look like you don’t know what you are doing or can’t have a casual conversation about the potential partnership.

Kevin Henrikson, Acompli (now Outlook iOS/Android @ Microsoft)

9. Do: Assess Values

Make sure to assess the values of the partner organization. It is critical that the partner firm have the same core values, so you can better work together and support each other.

Randy Rayess, VenturePact

10. Do: Define Your Role

Make sure you define what company is going to do what in the partnership. I like to split tasks up because working with a company you’re unfamiliar with can be a daunting thing. Some businesses are slow with approving things. Splitting tasks up makes sure everything can progress in a timely manner. This also cuts down on the need to communicate, which can be hard to organize sometimes.

Kumar Arora, Aroridex, Ltd.

11. Do: Start Small

Test out the effectiveness, benefit and success of a partnership by coming together in a smaller, less formal format. Bring another business in as a sponsor of an event you are creating, or work on a series of smaller projects with them to get a feel for how well you both work together, and if this is the right partnership to get into. Wouldn’t want to find out it’s a flop during a $1M project.

Miles Jennings, Recruiter.com

12. Do: Share Your Selfish Wants

Often, people don’t express their true wants. Instead, they position their wants to be better received by the other party, and therefore increase the likelihood that the partnership is formed. This can be disastrous. A partnership is based on specific wants that jive in a way to create mutual benefit while minimizing risk. Both parties must be honest upfront to prevent issues later.

Adam Roozen, Echidna, Inc.

13. Do: Know the End Game

While it may be premature, start thinking about what success will look like and how the alliance will progress. Employees will immediately start thinking about this, as will your potential client base, so being able to effectively communicate a vision for where this is going will help alleviate fears and promote collaboration.

Tommy Golczynski, Assured Flow Solutions, LLC