Many times you can catalyze significant growth of your business through a strategic partnership with a bigger, proven company that can readily provide an important catalyst to your business objectives without you having to take the time, incur the expense and face all of the associated risk.
For example, let's say you're a small software firm that has developed a unique product offering. You have a great product, but you don't have mass distribution. You can either attempt to create an effective distribution channel on your own, or you could create a strategic partnership with a company that can benefit by being able to offer your product through its existing distribution. While your per unit revenue may fall in this scenario, your volume stands to increase significantly. You benefit by having access to mass distribution that might otherwise take up lots of resources, if it can be achieved at all.
Here is how I know it works for even large companies. I work for a Fortune 100 company. Even this company with over $14 Billion in Surplus has partnerships with CPA's, Realtors and Attorneys, where they pay handsomely for working small portions of their business. And each business get's the exposure of offering services from a well respected company. Both sides profit! You can too.
Many ways to build strategic partnerships
By "partnering", I'm not referring to the literal or legal definition of the word, but am using it more loosely to represent a multitude of ways to form such relationships. You can create such strategic partnerships with licensing agreements, joint venture agreements or distribution rights agreements. A skilled attorney can help you determine the best form of the relationship based on the specifics of your needs and expectations.
Protect...then partner
Before talking with any company about your product or proposition, especially a bigger more powerful company, make sure you are properly protected through patents and/or trademarks. In addition, make sure you enter into a non-disclosure agreement with them. It's fine to make the agreement mutual in most cases, and the bigger company will likely require this. An intellectual property attorney can draft the appropriate document if necessary.
Remember, your strategic partnership doesn't have to be with a big corporation. As long as your agreement, mutually, represents the interests and over-all financial results that is expected from the partnership, it can prove beneficial. Note, do not confuse your strategic partnership as another interest in your business. You hard work will remain intact and only the specifics of your agreement are operated for the betterment of both businesses.
Do your homework
When you think you've identified a potential strategic partner, carefully study their product line before approaching them to ensure that your product is complementary and additive instead of competitive. Check out the distribution reach of the company to verify that they in fact have the type of broad distribution into markets that are right for your product. Always confirm that the relationship and financial standing of the company with its customers are in good shape as well. The last thing you want to do is to partner with a company that is in any way going to reflect negatively on you, your product, or your business. You can do a lot of fact-finding by just speaking to customers of the potential strategic partner.
Be crafty with a partnership agreement
Craft a strategic partnership agreement requiring your partner to meet certain fundamental performance criteria. In the event that they don't perform, make sure you have an "out clause" in the agreement. For example, require that a minimum sales level be met by the company during any year, whether defined by units or sales revenues, in order to keep their rights to sell the product. Should you have to terminate the partnership agreement, be sure you have a non-compete and confidentiality clause which binds the strategic partner to maintain your sensitive proprietary information and not use it for their own exclusive benefit. Again, it's critical to use a skilled attorney in these matters.
If you want to spark the growth of your business, try to use a little sense from Ralph Waldo Emerson and "hitch your wagon to a star!" Seek a strategic partnership in which you partner up with a company in order to provide you with something that you don't readily possess, and which is hard to create on your own. If done properly and carefully, partnership arrangements like these can be just the shot your business needs to dramatically increase revenues, get your product to market first and broadly, and put you in position to focus on your core expertise while your strategic business partner does the rest.
If you have a strategic partnership, please share your insight with the community. I would like to hear how you feel about these arrangements.