In the past week alone I have had two start-up founders come to me seeking advice on how to get the right strategic partner for their promising enterprises. Everyone wants to be part of a success story and when you the founder have put together a scalable business plan; there will be many suitors who want to make hay while the sun shines before it is too late to get in. Alternatively, you might have grown your business to a level whereby the daily operations are overwhelming; hence you want to bring in a business partner to whom you will delegate some of the tactical responsibilities as you focus on curving out the strategic vision of your start-up.
Whatever reason drives you into wanting to get a business partner notwithstanding, it is prudent to keep in mind that you are getting into a marriage kind of relationship; hence the need to ensure you choose the right partner. Am no married man yet, but from what I gather from the wise men of old, a relationship is built on basic fundamentals of trust, communication and mutual understanding & agreement between the parties involved. When scouting for a potential business partner, these fundamental attributes must be present from the word go in order to avoid being tied onto an unhappy relationship where both your emotions and money are involved!
Besides the general bonding and mutual trust between you and your potential partner, you need to consider at least five other factors when window shopping for potential business partners. Your potential strategic business partner must be bringing on board one of the following value adds for them to be considered worthy suitors: strategic partnerships, market linkages, technical skills, managerial skills or cold hard cash!
A business partner who is well connected with stakeholders within your industry will be an asset when you want to grow your business and you want to move things fast. If they are well connected with suppliers, you will be able to get betters deals much faster; if connected to logistics companies, your transportation nightmare will be sorted much faster when they come on board. Essentially, you want someone who will smoothen your efforts when it comes to connecting with relevant stakeholders within your business environment.
With all the right linkages but no buyers for your products you will be out of business before you even know it. Having an assured and growing market for your products is the source of success for your start-up. You want someone who will help you in reaching out to larger number of valuable clients willing and able to pay for your products at prices that will ensure your profit margins are sustainable in the long-run. The strategic business partner should therefore be able to bring in a new existing market or has a proven capability of creating new markets for your products; hence contributing to the growth of your start-up.
In some cases, you might need a business partner with the technical skills required to run your business. For instance you might want to start a technology company but you are not a techie; or you want to start a healthcare business but you are not a medic. Having a business partner with technical skills in your industry helps you first gain credibility as well as have a complete understanding of how to run the business. In addition, their input in strategic decision making will be valuable since they will be advising you from an expert point of view to help you avoid grave mistakes you could had made while thinking from a layman’s point of view.
There is a category of entrepreneurs who are good in conceptualizing a big idea but managing the day to day activities of the new venture is out of their passion and capabilities. For such, you need to get on board a business partner with managerial skills to help you run the business operations on a day to day basis; as you focus on innovating the next growth phase of you start up depending on the strategic direction you want your business to take. Business partners with managerial skills will also help you design the most appropriate business model for your start-up in order to improve on efficiency and effectiveness as you grow and scale up your operations.
Finally, you might want to bring a new business partner on board so that they invest capital into your enterprise. In this case they are directly putting money into the business and therefore the main screening objective is to identify whether they have enough cash to invest in your business based on your capital need. In addition, there are other details concerning whether they will invest in equity or debt or a mix of both and their investment periods. However, the most important thing is to ensure that regardless the fact that they are bringing in capital, their goals and your goals as a business are aligned. This will help you avoid conflict of interests down the road as well as ensure that you benefit from their investor’s strategic networks, market linkages, technical skills and managerial skills.
In summary, when building a team of strategic business partners, the screening lens should focus beyond mere friendship, family relations or emotional attachment. The big question should always be; “What value are you adding to my start-up both in the short-term and in the long run?”