Entrepreneur Beginners Guide

“Seek Partnerships for the Right Reasons”

For entrepreneurs looking to build a new business or expand an existing one, a strong partner can be key.

—Barry Horwitz, president, Horwitz & Co.

We had hit a grand slam with one particular partnership. We could hardly contain our excitement. After six months of determining each company’s deliverables and getting legal departments to sign off on the agreement, our partnership with a global company with billions of dollars in assets was on the verge of becoming reality.

We could now accelerate our growth, using our partner’s many global channels. We felt as if we hit the jackpot and were just waiting to receive our bags of money. Then things suddenly grew complicated.

After the company’s sales director signed off on the deal and encouraged us to post a press release on our website with a quotation that he provided, I received the following message in an e-mail: “This email is to confirm there is no national partnership agreement with our company- and the press release you have currently posted on your national web site is wrong and misleading. Please remove it from your web site today.” 1 also received a threatening phone call from the senior vice president of the company, asking me to call her immediately. When I called, she demanded that we remove our press release and disregard any agreements made by her colleagues; otherwise we would face their legal department.

I knew we had a major problem, but whatever the problem was, it wasn’t with my company. We had made sure to get permission in writing for everything we wanted to do. My best guess was that something had happened internally at the other company to cause the partnership to fall apart. Despite the collapse of the deal, a part of me was happy that it occurred before we were too involved. After the incident, we had no desire to work with the company. So, the result was no world denomination for us or trips to the bank for our money bags—at least not with this shoddy partner.

I later found out that the pernicious partner wasn’t really able to open doors that we thought it could. The company had several affiliates that had tremendous power over headquarters. In other words, because individual owners had the final say of working with my company, there was no value in partnering with the parent company. Even with the endorsement of the potential partner’s headquarters, we would still have to convince affiliate owners of the value of working with us. Moreover, the partner’s endorsement would strain its relationships with unwilling owners. We didn’t anticipate this scenario, especially since the true relationship between the parent company and affiliates wasn’t clear. Regardless, our intentions and proceedings Were transparent. If the partner had operated the same way, everything would have gone smoothly.

If put together properly, partnerships can significantly boost your business. The key to establishing an effective partnership is best described by start-up guru Guy Kawasaki: “The gist of good partnering is that it should accelerate cash flow, increase revenue, and reduce costs. Partnerships built on solid business principles like these have a much greater likelihood of succeeding.”

However, a partnership built improperly wastes your time and hurts your business. As Kawasaki suggests, some reasons not to form a partnership include covering your weaknesses and generating press coverage. These arc two sure ways to start off on the wrong foot, but several entrepreneurs believe that these are perfectly tenable reasons to pursue a partnership. Partnerships should be built on strengths, not weaknesses. Each company’s goal should be to enhance something the other company does well. Furthermore, partnerships established to impress or placate the press inevitably backfire. Sooner or later, the true intentions of the partnership surface, especially if it’s yielded no tangible results.

In short, partnerships should not be taken lightly or rushed, and they should be pursued for the right reasons. If you follow the suggested guidelines, you will be less likely to enter into a partnership that does more harm than good. As for the botched partnership I mentioned earlier, we found another partner with a global presence. This relationship has worked out great, and revenues have increased over 700 percent.