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MenuHow do I setup a strategic partnership agreement without having to do a rev/profit share deal?
There are different companies that I want to contact to see if I could setup a strategic partnership with, where both of us would benefit. However, I want to avoid having to do a rev/profit share partnership because I feel if we both benefit in increased revenues through this partnership why would I have to make a rev/profit deal.
Also, what are some of the most common strategic partnership agreements that usually take place? Are they normally a rev/profit share deal?
Answers
If you are really investing in a strategic partner (one that will provide mutual benefit in the end, either in terms of revenues, access to financing or other resources) then revenue sharing isn't absolutely necessary. In the partnerships I help to form, they are often around shared value (http://www.fsg.org/OurApproach/WhatisSharedValue.aspx) which means shared revenue isn't the absolute aim. What is the aim, however, is sharing information, knowledge, technical assistance, operational help, etc) and build a lasting framework for engagement together into the future that will benefit both parties. I am happy to help you negotiate these types of partnerships (it's what I do!) so feel free to get in touch.
There are many partnerships and strategic alliances created without sharing revenue. It starts with the value proposition and that one should contain a clear win/win/win: win for you, for your partner and for the customer. The partnership needs to leed to synergy, often the phrase 1+1=3 is used and thus the result of the partnership needs to be bigger than you and your partner can achieve alone.
My advise to customers is always to begin with the value proposition, from there create a clear needs/contributions/benefits matrix and use that for the conversation with your partner. It depends a bit on your business, but quite often when these are worked out well then there is no need for the business model to contain a revenue share model.
Feel free to schedule a call to take a deeper dive. As a business coach and certified strategic alliance professional it is my daily work to help companies create successful strategic alliances.
It's not about your willingness or someones trust in the partnership, but giving it a proper shape in the form of partnership deed. If revenue or profit isn't something that you intend to share with your partner then be prepared to compensate them in some other form.
More insight could be provided after knowing the kind of partnership you're seeking, roles and responsibilities of either party, point of mutual benefits, utilization of mutual IP et al. Feel free to DM or patch me in a call to be able to share above points.
Related Questions
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What are my risks in entering a partnership with 50% voting shares, but only 25% equity overall? How can I protect my interests in this scenario?
The first matter for you to conclude is to agree the terms of a shareholder agreement between the two founders. This shareholders agreement should govern the management of all significant governance matters. Without this you will subject to the constitution documents of the company and local company company law. This is a standard type of agreement that any decent corporate lawyer will be able to advise you on. As the voting shares are held equally, then no major changes will be able to be made without both founders agreeing to the changes. The non-voting shares (assuming all other terms are the same) will have equal rights to financial returns (dividends and liquidation rights), but will not be able to participate in voting issues. In simple terms, you will have an equal say in the running of the company with your co-founder, but will receive 25% of the returns, while they receive 75%.NH
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How should I structure my real estate partnership?
I've been a commercial real estate broker for 5 years now and have ventured into a handful of business partnerships - some have worked and some have nearly ruined me. What I find, on a surface level, is that you must absolutely share the same VALUES and MISSION as your potential partner. Having even stake in the game also helps, as it avoids one partner eventually grabbing "the upper hand". If you are not bringing cash or equity to the table, be prepared to demonstrate how your hard work can be translated into $ value. If you have more detailed scenarios or questions, feel free to bounce them off me at anytime. Cheers! -S.SD
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How do you determine partner equity?
Hi, great question. You determine the value of the business before the partner joins, then you determine the value of what they bring. You then issue new shares to them. I made this video which may clear things up a bit for you. https://youtu.be/1EjKjSAd1F8 And this one about share dilution: https://youtu.be/FtogXYXCC1s If you want to discuss your specific circumstances, please feel free to request a call. David www.DavidCBarnett.comDC
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If a new partner is going to buy into our business, should he give us the money as shareholders or should he invest the money into the business?
Yes, it depends on what the goal is. If the company needs the money to grow, for example, then the company would issue new shares and the money would go into the company. Your ownership would be diluted but you'd own a smaller piece of a more valuable company. You also need to consider what the investor thinks is going on. Does he believe that he's 'buying in' to your company so you can 'cash out' in part. Or does he believe he's helping to fuel growth? Watch this video I made on this topic a few months ago.. https://youtu.be/1EjKjSAd1F8 If you'd like to discuss your specific situation, just arrange a call. Thanks David C BarnettDC
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If I have 51 percent and my partner has 49 percent of our company, what real decision making authority would I have?
On paper you have the advantage but after several startups control resides in he who knows how to execute the vision of the company.HJ
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