Partnerships And Collaborations

Businesses grow in levels and stages. At some point or the other, they might be a need for some form of collaboration or partnership to attain a new level or even to break into some new field of expansion.

A partnership is a legal form of business operation between two or more individuals who agree to share management and profit.

Collaboration is almost like a partnership, however, it is not binding, legal or contractual. It could just be cooperation.

It is important that businesses know and understand their capabilities and how to maximize their opportunities. Businesses that leverage on other businesses tend to go far and achieve greater things because of combined strengths and capabilities.

Partnerships are preferred, compared to collaborations because with partnerships, especially where a proper agreement is drawn out, risks and responsibilities are shared. Profits are also shared in the agreed ratio.

Other advantages of a partnership are:

  • It gives financial leverage and distribution of risks
  • It helps partners maximize their strengths
  • It gives both partners better opportunities
  • It expands the reach of both partners

One important thing to note when going into a partnership is understanding what each person is going to get from the deal and drawing up agreements to that effect. It is also important to address crucial things like:

  • How interests will be shared.
  • How decisions will be made
  • How purchase price will be determined when one partner decides to leave
  • When money will be paid to a leaving partner

Deciding whether a partner is a general partner or a limited partner is also crucial. A general partner manages the company and assumes responsibility for the company’s debt and other obligations. The limited partner serves as an investor only; they have no control over the company and do not have the same obligations as the general partner.

Big corporations go into various forms of partnerships to achieve expansion. You do not, however, have to wait to become big before going into a partnership especially when you have identified an opportunity. Just do proper homework on the company you wish to partner with and approach them with your proposal. Make sure that what you have to offer them will be worth their while.

Have you ever gone into a partnership? How did it work out for you? What factors did you consider before going into that partnership or any other?

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