Structuring Your Business - Planning for Partners
Management Tips

Building partnerships to improve market growth has become popular especially for “new economy” businesses. Most companies proudly talk about their partnerships in their business plans.

What are the meaningful terms of partnership? While it sounds good to have a partnership with a Fortune 500 Company, the details of the partnership are what investors look at. They look negatively on partnerships where Fortune 500 Companies earn 90% commissions on the customers they refer. However, investors look positively on more reasonable partnerships.

You have to detail the points of the partnerships. This includes the factors like how it will work payment terms, contract length, minimum/maximum guarantees, types of customer leads from each partner, timing of payments and more. If partnerships are a key part of the business plan then expect wise investors to interview the partners and examine the partnership contracts.

Partnerships can be a major factor in the success and growth of companies, providing leads, sales, capital and other critical benefits. Venture need to be cautious and not put too much strength on any one partner in the business plan. Partnership agreements like other legal agreements can be breached and if the venture puts a partner in the hot seat (as far as succes) it could be a risk for investors.

Partners can really further growing ventures. Business plans should discuss who the partners are and outline both the terms of the partnerships and the benefits. The business plan can’t place too much emphasis on any one partner, but otherwise, must convince potential investors that the business can succeed even without them.

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