Partnering To Grow Your Business

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Nearly every business reaches the limits of its owner’s ability to expand operations without either borrowing money or hiring employees. While either action could enable the owner to grow the business, each will also result in carrying costs that will either strain current financial resources, or cut deeply into future profits. But there is another way to grow the business, and that’s by partnering.

While the idea of having a partner conjures up certain visions, there are actually a variety of different ways that you can work with partnering arrangements. You can choose the one that works best in your particular situation. In addition, there’s always the possibility that you might want to take on different types of partners as you go along.

Taking in a general partner

A general partner is the form of partnership people most typically understand. You bring someone into your business who is a 50% owner, and has equal control over the operation of the business, access to its assets, the share of profits, and authority over the management of the operation.

In order for a general partnership to work, each partner has to be roughly equal in terms of abilities and contributions. That doesn’t say that you have to have exactly the same skills, but whatever skills you have need to be in relative proportion to those of your partner. You also need to be on the same wavelength as far as management and direction of the business are concerned.

If you’re both in sync in regard to running the business, and you bring in equivalent resources and skills, general partnerships can work very well.

But this is something of an all–or–nothing approach, and despite good intentions, it doesn‘t always work out as planned. However there other ways that you can benefit from partnering without going the general partnership route..

Taking in a silent partner

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This kind of partnership can work extremely well if one partner is rich in financial resources – to fund the operation – and the other is “rich” in skills and management ability.

People with money will sometimes seek out promising business ventures to invest in. Meanwhile, there are many talented business owners who lack the capital to grow the company. The marriage of the two types can be a recipe for fast-track success.

Let’s say that you are running your business and doing well, but want to expand and don’t have the capital. You can bring in a silent partner, who will provide that capital in exchange for an equity stake. But since the partner will be a silent, you’ll essentially operate the business is if you are a sole practitioner.

This type of equity split doesn’t need to be 50-50, it can be whatever you agree to. As the managing partner, you might retain 60% of the equity in the business, while your silent partner holds 40%. The silent partner will be entitled to 40% of the profits, but it will not be like a loan. With a loan, you have to make your payments regardless of your profits. The silent partner will only be entitled to profits if there are any. It’s even possible the silent partner’s primary concern will be having a stake in the business when it is sold for a large profit in the future.

Use of a silent partner is a way of bringing capital and talent together to create a stronger business.

Having a partner for a specific purpose

This is an arrangement that can be either formalized through a written contract, or maintained on a casual basis. What you’re doing here is working with a partner who will handle a specific aspect of your business.

Let’s say that you have a significant area of your business that you don’t have time to work on, but you don’t have the money to hire an employee or even an outside contractor. You might be able to bring in a partner who can handle that side of your business, in exchange for a minority equity stake in the company.

The possibilities here are endless. You can bring a partner to handle sales, marketing, billing, purchasing, computer functions, or just about any task that’s critical to your business. You compensate your partner with a minority stake in the business.

Partnering with related businesses

This can be a business that’s in the same industry you are, but in a different capacity. Let’s say that your business is handling search engine optimization for small business websites. You might partner with a website designer to build new sites from the ground up for some of your clients.

This kind of arrangement will allow you to do what you do best, and the partner to do what he does best.

That’s just one example of two businesses handling different aspects of the same industry. The arrangement doesn’t need to be formalized, nor does it necessarily need to involve equity sharing in any way

Both businesses can prosper as a result of the revenues they collect from mutual clients. The advantage comes in that you recommend each other for the same clients. As an SEO professional, you recommend your web designer partner to your clients, and he recommends you to his clients. Both partners win.

Networking – you scratch my back, I’ll scratch yours

Networking is perhaps the loosest form of partnering, even if we don’t think of it as a partnership arrangement. You’re keeping contact with various people who are engaged in a similar business, and sharing resources, referrals, and even industry secrets.

In earlier times, networking may have been referred to as a “guild” – something like a loosely organized version of a trade union, in which trades people worked together within a recognized group. Since the guild would be formalized for membership purposes, it’s status was well-respected by outsiders.

We don’t have guilds today, but networks fill much the same role, only in a less formal way. But even without the formality, networks provide a real opportunity for its members to gain business as a result of participation in the group. They work particularly well if all or even most of the members of the network actively attempt to enhance and promote each other.

Partnerships at whatever level offer an opportunity to leverage a small business, without the necessity of hiring employees or securing business loans. Before pursuing either, it may be worth taking a serious look at some form of partnership cooperation, even on a very loose basis.

Have you tried partnering to grow your business?

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