Partnerships - informal, partial or completely integrated (multi-stakeholder) co-operations - are an advancement entrance that intends to increase the level of business; shared competence, innovation, scope, cost-effectiveness, impact as well as firmness. Nonetheless, in spite of the potential, partnerships do fail and fall short of expectations and prospects due to the fact that the partnering procedure is not fully comprehended or properly taken care of.
GBDA associate member service; partnership (pre)-selecting & closure
Partnership consulting delivers business people and its organisations collaborating with (potential) partners to enhance the partnering procedure and also warrant the cooperation, whether at local, regional, nationwide or global levels. Consulting and counselling to accomplish ambitious and vital advancement objectives in partnerships. Specialist, experienced and competent partnership consultants are able to take on this responsibility end are able to make a significantly difference.
A task that could be much more extensive as assumed, as partnership consulting goes far beyond of delivering just of pre-selected partnership candidates. GBDA associate members may, among others , take on the following sub-operations in partnership (pre)-selecting & closure;
• initiating / managing method, planning, reviews, expectations and decision making
• expert counselling and problem solving
• guide brainstorm sessions
• define partnership criteria & partner profile
• research & scoping potential
• (in advance) professional connection building
• discreet and confidential (anonymous) establishing contacts
• benchmarking of market and potentials
• drafting long list of options and reduction to a short list of potentials
• set analysis procedures
• evaluate/review effect of the presented partnership opportunities
• evaluation of the added value of the partnership to the partners
• in deep review effectiveness of the partnership
• design partnering arrangements / setups
• guide partners to reach agreement (intercessor)
• construct governance regulations
• strengthen organisational engagement
• constitute partnership capacity and organizational outline
• (co)-create a communications strategy (internal/external)
• monitoring of closure
Some basic assumption - often forgotten by rush and enthusiasm
Look before you leap as caution has to be taken in account especially if you are entering a partnership. Below we have listed some issues to consider to think about prior before formalise the partner procedure in a Memorandum of Understanding or in any type of legal partnership agreement.
• Know your companion! Do not hurry into the relationship too promptly, collect all fundamentals in the formation phase about the considered business partner; their background, business approach. and their vision for the collaboration.
• Certainly, only start a joined business with those you fully trust. Contact and verify every person, again be aware; carry out background checks and collect personal references.
• Discuss and address prospective concerns prior to they have become a problem. Do not only debate dynamic developments but also discuss worst-case scenarios, restrictions, and oppressive circumstances. If there is no unity or debate ceases, you will be a reason to reconsider.
• Fully understand partnership files before authorize them. Partners have to take ownership of the arrangement and share a comprehensive understanding of the operating the business.
• Take into consideration, obtaining different advisors for identifying possible issues and present solutions, if using the same advisor or lawyer as your companion exists in worries.
Partnerships developed between companies can differ in regards to the procedures of plans, setups and also just how activities or functions are shared or incorporated. Partnership cooperation could vary from informal arrangements for conversance sharing, such as inter-company or various other network engagements, through incorporated amalgamations as well as mergers, where an official procedure completely integrates 2 or more organisations into a solitary undertaking.
Business partnerships settlements might additionally vary in regards to:
• duration of the partnership, for example; one-off task/order or single function, time restricted or continuous and recurring,
• level of risk, liability, as well as investment commitment,
• kind of partnerships results sought after and
• degree of organisational autonomy of own business is preserved; conflicts/effects of partnership to own organisation or even (in the sequel) takeover.
Useful is to map potential, desired and also already existing relationships by determinate opportunities in value of engagement, conditions and also assumptions, starting by identifying the partnership discipline;
• business partner (co-shareholder, funding and eventually other added value),
• co-location / multi-tenanted centres,
• shared business centre /services,
• distribution & logistics,
• innovation & development,
• knowledge, information,
• market & sales,
• products services (shared business lines),
• production capacity (in/outsource),
• project consortia.
Review of partnership probability
A collaborative partnership is a prominent strategy for development and firmness but there must be a sufficient basis to succeed and proceed in constituting a co-operation. By a reviewing the components of the presented partnerships to opportunities and goals, a value judgment can be determined. Key issues in this are;
• intended partnership discipline
• intended partnership engagement/settlements
• personal fit of companion / personality
• (compatible) roles of partners
• similar or complementary business
• similar interests and objectives
• similar values and ethics
• imago in the market (companion)
• quality of processes (companion)
• association agreement of management, shareholders and stakeholders
• SWOT-analyse of partner (companion)
• intended partnerships settlements / agreements
• SWOT-analyse partnership
• expected added value
• future possibilities
• benefits of partnerships
• disadvantage of partnership
Memorandum of Understanding
Following a decision to further explore the possible partnership, formal positions and principles are usually recorded in a Memorandum of Understanding (MOU)
It reveals a convergence of willbetween the parties, indicating an desired typical line of activities (program) and will contain some of following subjects.
- the parties to the agreement
• assignments/responsibilities of each party
- the duties and responsibilities of each partner
• purpose & goals program
- statement of the purpose and goals of the collaboration or partnership between entities.
• agreed policy or procedures
• duration or period of Memorandum and Termination Process
- beginning, ending dates and mile stones of the agreement or its duration.
• termination process
- termination date / criteria and settlement
• meetings and consultation
- interaction between the organizations and also communication between the parties
• funding & financial considerations (accounting)
- financial or funding support and record keeping of consultation, training and establishment phase.
- some disclaimers can be include in order to exclude effects
• risk sharing
- of the program, consequential damages or accidents etc.
• rights and protection
- such as intellectual property, confidentiality, privacy
• pre-partnership agreements
- the basic principles of cooperation such as goals, can be premature identified and recorded
• program management control & reporting
- quality and performance monitoring
• review and decision making
- specify who will review and approve decisions and expense behalf of the contemplated collaboration
• staff & advisors
- capacities and roles for the program
• signatures with dates
- by the authorized individuals representing each company or individual.
Establishing Partnership Contract
Designing the partnership arrangement and establishing an appropriate legal identity for the partnership are both crucial phases in the collaboration procedure.
Comprehending the essentials of intentions, intended collaboration and results, how the partnership will be managed are vital to developing and designing partnership contract arrangements and documenting the regulations.
• partner functions and awarding powers
- have a good understanding of exactly the roles of managers / departments and employees of the partnership collaboration are authorized to do.
• tasks and obligations of each companion
- there ought to be a summary of each partner's tasks and obligations so mutual expectations are clear. Additionally, there must be determined repercussions for business partners not accomplishing their duties.
• grant of capital
- this consists of amount (money, assets) and time schedule of the preliminary along with added contributions that might be required to proceed operating business in the future.
• liberties to distributions, revenues, restitution, and losses.
- any kind of right of the partners to obtain optional or mandatory distributions, that includes a return of any or even all of their contributions - and also revenues, restitution, and losses -, needs absolutely to be specified in the in the partnership agreement.
• decision-making powers and voting rights
- from the beginning should be clear the decision-making powers of each and the occasions or decisions that will need an unanimous vote of the business companions.
• expulsion provision
- the advantage of such a clear arrangement is that you could place in the agreements when a companion can be displaced or forced out of the business partnership.
• take-over provision (buy or sell)
- another significant adjustments to the partnership arrangement as for example; if you or companion willingly or unwillingly leaves the partnership, and there have to be a buy-out. Or what restrictions are applicable to sell ownership (first partner or free to sell to a 3rd party). Also personal circumstances can have a significant impact; retirement, bankruptcy divorce or death, illness etc.
• dissolution or exit covenant
- considering the partnership is not able to yield the desired result, the partnership arrangement should indicate the occasions upon which the collaboration can be dissolved and settled (value scheme).
• non-compete provision
- as an example, companions might agree that if among the companions leaves the business partnership, they are not allowed to open a competing or benefit a competing organisation within a specific distance or a particular time period.
• various legal provisions
- these could include provision for lawyer's costs, arbitration or binding mediation clause or country / state law will be applied in contract disputes.
Advantages of Partnerships
The advantages of a partnership could be;
• market access
- obtained market information and sharing and acquiring new contacts will increase successful entrance and sales
- can lead to a competitive advantage and better (financial) performance
• access to the necessary capital and financing options
- more owners can lead to the ability to contribute more capital as well as the loan capacity and financial options may extend (better credit rating)
• cost-effective and costs reduction
- not only establishment and start-up costs are low, operational costs are “shared” and probably as well there is a scale advantage
• focus on main capabilities
- better use of individual partner competences, will also lighten the workload, distribution of tasks and optimal use of individual knowledge will lead to management improvement and saving time
• added expertise and management skills
- partnering should result in more and complementary knowledge of the business, market, processes, technology, etc.
• shared responsibility and shared risk
- running a company by yourself, while simpler, could likewise be a continuous struggle. Yet motivated companions, share risk and responsibility to perform better and this will certainly also lighten the workload
• added value in strategy planning along with decision making
- more heads is more (creative) skilled management and as all the companions as will take interest in the day-to-day operation, due to their ownership and depending on profit, they assist each other in business development, decision making and problem solving,
• flexible and simple operating structure
- as a result of the minimal number of companions there is adaptability in the procedures of service as owners of a collaboration are generally its managers, specifically when it comes to a small business, the business is rather very easy to manage, and decisions can be made swiftly without a great deal of bureaucracy, adjustment of any goals or modification of any kind of the operations can at any moment by mutual approval
• relatively easy to establish
- partnerships can be informal, partial or completely integrated (multi-stakeholder) co-operations, enrolment is elective in the case of a partnership company and can be developed without any lawful rule and costs as well as to operate
• ease of dissolution
- an informal collaboration can easily be dissolved with the common approval of partners or inning accordance with the contract. There is no formal file to be formulated as in the case of a joint stock company
• no published monetary reports
- most small collaboration can keep the business result secrecy with themselves as it is not required of any regulation to publish its revenue and loss accounts and balance sheet
• tax obligation advantages
- partnerships as a registered firm, so they pay tax obligation to government on reward, and afterwards share earnings amongst the partnership, which leads the partners to get the advantage of reduced assessments
Disadvantage of partnerships
As mentioned, there could be situations when a partnership is much less beneficial. Disadvantage of a business partnership collaboration could be;
• not-fitting cultures
- cultural mismatch do often results in businesses and people’s failures and changing culture is a rather complex, time consuming, costly and delicate process
- companions attitude must be; give up absolute control of the business and learn to compromise, conflicts will immediately effect day-to-day operations, operating results and working atmosphere
• contingent inequality and imbalance
- altering understandings or developments could create an inequality
• rigid contractual arrangements
- as a partnership is jointly run, it is necessary that all the partners agree with strategy, goals, roles and procedures. Much time should be inserted into the preparation and updating of such essential documents. An absolute pitfall is to give insufficient attention or to make inadequate explicit and to think it I just a lost on flexibility
• financial liability
- one of the fundamental demerits of collaboration is that the partners are directly and collectively in charge of all the financial obligations and errors made by the of the firm or individual partner. In case the business suffers losses and after that the personal effects of partners can be offered under the court order for the clearance of the debts of business. A solution can be the formation of a limited liability partnership.
• legal along with tax commitments issues
- general partnerships is an entity that could be problematic in many cases and also the levels of personal taxation could be less attractive as in a limited company
• profits sharing
- companions share the profits similarly or according to the agreement. This can bring about variance where several companions aren't putting a reasonable share of effort right into the running or management of business, but still gaining the benefits
• transfer ownership (buy-in & buy-out)
- can be complex situations, valuation of all the partnership assets, negotiations and can result in a management imbalance , if partners join or leave, and the procedure of this can be costly and time consuming
• partnerships with no legal status
- if a partnership firm does not have a legal status, such as a limited company, could this result in lack of public confidence and a low credit rating
• absence of consistency
- according partnership contracts every companion has equal rights. Some circumstances may occur in which one or various other partner(s) will certainly not settle on the exact same point which will certainly trigger a disagreement resulting mistrust and disharmony amongst the companions
• limited life of partnership business
- duration of collaborations are constantly unsure as they relying on mutual and personal circumstances
• frozen financial investment
- it is really simple to invest money in the partnership business by a companion, however extremely difficult to withdrawn any funds from the partnership business
• loss of business opportunities
- in case of distinctions in view among the companions, hold-ups might take place in decision-making and a loss to the business could occur. In collaborations there is a need to consult companions as well as discuss a lot more as decisions need not or should not be made by an individual.