This is not the first time I’ve advocated such arrangements as a means of growth, especially for black entrepreneurs. Such advice, however, has often been met with resistance. For example, a founder of a black-owned investment bank–one of the sharpest business minds I’ve ever come across–could not bring himself to merge with another black financial services firm for well over a decade, even though the union would have brought new market opportunities, executive talent, lucrative contracts, and increased profitability. The reason was simple: ego. Now that company is fighting for its life in an industry in which even the biggest players join forces. Conversely, two black tech companies merged a few years ago and the result was eventually bought out by a major competitor. Its CEO used the proceeds to start an even larger business.
I’m not saying one should enter into such partnerships lightly. You must establish whether the collaboration presents a stronger value proposition than your company as a solo act. For example, will such a partnership provide cost savings through eliminating duplication of resources? If orchestrated correctly, these partnerships offer myriad benefits: financial stability, scalability and longevity.
I urge us all to adapt, take calculated risks, and, most importantly, check our egos at the negotiation table. It’s far better to own 50% of a $50 million juggernaut than 100% of a $500,000 mom-and-pop. Forging such alliances is a matter of simple arithmetic.