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How
to Find a Good Business Partner and How to Carry Out Business Partnerships
Introduction
Business partnerships play a major role in a business. Therefore,
it is essential to discuss this in detail to get a better understanding of
business partnerships. General partnerships are the most common type of
business partnership. Valuable business partnerships provide synergistic
benefits to the business and always act as a resource to the business. Partnerships
should be carefully handled to make the best out of it for the business.
Who
is a Business Partner?
A business partner is
a commercial entity with which another commercial entity is bound by an
agreement exercising some form of alliance among them. Business partnerships
enhance work performance and strengthen the business strategy leading to
achieving business objectives.
Red
bull and GoPro is a real-world example of business
partnerships where the companies share access rights for co-production.
Importance
of Partnerships in Business
· Brand Alignment
Brand
alignment should be considered before the partnership. Ex: Red Bull TV and
GoPro TV If the brand alignment is successful, business performance will be
enhanced and objectives will be easily reached.
· Similar Values
When
both parties in the partnership have similar values and goals, the partnership
becomes more successful. Integration is easy and both firms work towards profit
maximization and thereby shareholder wealth maximization.
· Access to Knowledge
Business
partnerships allow to access the business knowledge of the other party and
utilize such knowledge for the benefit of the business. Strategic business
partnerships bring knowledge to the business which can be used to brand
building and business growth.
· Competitive Advantage
Business
partnerships allow businesses to accumulate more knowledge, resources, and
expertise. This supports the businesses to achieve a competitive advantage over
the competitors and increases business turnover and market share due to the
competitive advantage achieved.
· Enhance Business Image and
Credibility
Right
partnerships enhance the entity’s image and credibility. Therefore, the
business signals to the market that it is with the right partner, and the customers
surrounding such business due to the trust and the image of the entity signaled
to the marketplace.
· Business Stability
Right
partnerships exhibit stability in the combined entity. Financial and management
stability is essential for a business. Innovation, expertise, and proper
management skills will nurture the business and support the business to achieve
its corporate business goals on a long-term basis. This is also a good signal
for the market place leading to an increase in company share price and shareholder
wealth maximization.
· Increased Customer Base
When
two inter-related businesses get into a partnership, their customer base is
automatically enhanced as they are able to serve the new customer base of the
other party as the products manufactured are interrelated.
· Legal Background
The
legal background attached to a business partnership may differ from regimen to
regimen. Therefore, an entity should be knowledgeable about the legal
background that is applied to a partnership model in carrying out business
obligations.
The
legal environment may differ from country to country. This situation directly
impacts international business partnerships and regularizes business
relationships based on the legal system of the respective country.
How
to Choose the Right Partnership Model
There are four basic partnership models.
#1. Equal
In
an equal partnership, all the partners in a business are responsible for the
business operations, profit earned, and debt of the business.
#2.
Limited
The
‘Limited’ partnership model can be seen in an unequal partnership where one
partner has limited obligations compared to the other partner which is related
to less risk-taking. This is usually calculated by the value of the investment
by each partner.
#3. Silent
This
is referred to the type of business partners who invest in a business and
receive dividends for their investment without active participation in the
business operations.
#4. Equity
In
this partnership model, each party retains some sort of ownership of the
business. The ownership or equity is calculated based on the amount invested in
the business.
Based
on the above four partnership models, Equal is the most responsible and actively
participating partnership model for the business. Anybody willing to be a
business partner can decide among the four partnership models based on the
amount of investment and time allowed for him to be involved with the business
operations. If someone does not want to be actively involved in the business,
he can be a silent business partner by contributing to the business only with
the investment and receiving dividends.
Essential
Qualities of a Professional Business Partner for Small Business
· Family Background
His
family background should be checked for any records of frauds or dishonesty
related activity. Good family background supports getting an understanding of
the historical behavior of the new partner.
· Attitudes
Attitudes
play a very important role in one’s character and a person with a good attitude
is very rare to be found. Therefore, honesty, dedication, and further super
good qualities can be expected from a person with a good attitude. Therefore,
such a business partner will definitely support easy and safe business
dealings.
· Trustworthy Character
Being
trustworthy is one of the main qualifications of a business partner. If a
person cannot be trusted, such a person can never act as a business partner
where money is at the center.
· Knowledge & Involvement in
Business
Partner’s
Expertise knowledge and involvement in the business will add value to the
business. Such expertise will lead to innovation and also gain a competitive
advantage for the business.
· Clear Agreement
There
should be a clear agreement between the two parties in a business relationship.
Business activities to be involved in, how remuneration is decided and the profit
shared between should be clearly mentioned in the agreement to minimize the disputes
that can be occurred between two parties.
·
Transparency
Transparency
in each and every business dealing is essential for both parties in a business
relationship. Here, the information related to the business needs to be shared
between two parties in order to maintain transparency. Business deals with
third parties should also be disclosed between business partners to be
knowledgeable on the status core of the business.
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