KEYS TO SUCCESSFUL PARTNERSHIPS WITH LARGE COMPANIES BY SMALL BUSINESSES
Many small business owners see large businesses exclusively in competitive terms. And for small enterprises, that characterization is an accurate one. An independent record store owner, for example, will undoubtedly and legitimately regard the arrival of a new record store operating under a banner of a national chain as a threat. Similarly, a small plastic manufacturer will view larger firms engaged in the same industry sector as competition.
But small businesses should recognize that large regional, national, or even international companies can take on other, decidedly more attractive, identities as well. Larger companies also may assume roles as business partners, product distributors, or customers. Indeed, large enterprises wear different hats to different observers. One small business’s aggressive competitor may be another small firm’s business ally, distributor, or client.
Large firms are an obvious source of assistance in areas of distribution, financing, marketing, etc., but small business people have a tendency to regard large corporations with suspicion. After all, many entrepreneurs come from corporate environments that were not necessarily characterized by adherence to any code of business ethics and most corporations have not always shown respect for small business autonomy. Given the “big fish eats little fish” history of large to small encounters, founders of small companies may understandably be doubtful of forming partnerships that they fear will destroy their company’s autonomy and identity.
But this should not be the case. We suggest that any partnership offer be examined critically and carefully. Entrepreneurs must learn to discriminate between corporate sharks with a bite and swallow mentality and those suitors who have a mutual beneficial arrangement in mind. It is natural to be suspicious. However, many founders of small businesses write off strategic alliances altogether, closing off what might be an increasingly important avenue for rapid growth.
Successful partnerships with larger companies
Following are several tips that entrepreneurs should consider when negotiating and maintaining a partnership with a larger company.
Research: Some partnership offers sound great on the surface, but are fraught with unpleasantness under the surface. Entrepreneurs should make sure that they undertake diligent research so that they can best assure themselves of finding the right partner. Not every partnership yields happy results: ill-conceived partnerships can leave your company in worse shape than before. And partnerships, like bad marriages, can drain resources, end up in costly litigation, and sour both partners on future relationships. Typically, however, warning signs will be there for the business owner who takes the time to look.
Fundamentally sound business practices: Entrepreneurs hoping to secure a partner to bankroll their Research & Development efforts or market their products are wasting their time if they do not have a viable business already in place. If the small company’s business practices are shoddy, disorganized, or incomplete, large companies will be sure to notice.
Recognition of own responsibilities: Entrepreneurial companies can reap many benefits by partnering with large firms, but they need to recognize that those big companies are for-profit enterprises; they expect something in return for their financial, marketing, and /or management help.
Monitor requirements for successful partnership: Many partnerships with larger companies require entrepreneurs to make a greater commitment to their business in order to meet the obligations and conditions explicated in the partnership agreement. If the entrepreneur in question launched his or her business for the express purpose of realizing greater personal wealth or establishing a significant presence in a given industry, finding the desire to meet those partnership obligations should not be a problem.
If, however, the entrepreneur launched his or her venture in order to stake out a lifestyle of independence and travel, that person may want to weigh the sort of impact that the partnership could have on those aspects of his or her life.
Do not be intimidated: The trappings of the corporate world (high-rise buildings, cavernous conference rooms, legions of blue suits, etc.) can be intimidating, but small business owners have to remember that they run viable businesses of value themselves, and they should negotiate accordingly.
Maintain independence: Autonomy is assured if you maintain ownership, so be leery of turning over too much equity in the business in exchange for financial help.
Establish clear and open lines of communication: Good communication practices are essential to all business relationships, both internal and external, and alliances with large companies are no exception.
Large business as product distributors
Myriad small manufacturers rely on major mass merchandisers (regional, national, or international) to sell their goods. Indeed, these distributors can dramatically heighten a small business’s fortunes in a matter of weeks or months. But entrepreneurs seeking to establish such relationships will find that 1) competition to secure a place on the shelves of major retail outlets is fierce, and 2) some mass merchandisers will be better suited for the small business’s products than others.
The single most important factor in securing a distribution agreement with a major retailer is, of course, having a quality product that will sell. But small business owners seeking to establish themselves with a major mass merchandiser also need to make sure that they attend to myriad other business matters every step of the way. After all, the mass merchandiser in question has plenty of product options from which to choose; if your company stumbles at any point, there are plenty other competitors waiting to take your place on the merchandiser’s shelf.
Given that reality, entrepreneurs have to make sure that they have a dependable production/delivery operation in place. In addition, small business owners should be prepared to provide prospective distributors with information on the firm’s management and financial situation.
Moreover, entrepreneurs need to make sure that they concentrate their efforts on finding mass merchandisers that already sell products to new product’s probable demographic audience.
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