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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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How long should I wait to follow-up after a potential business partnership meeting?
I think the closest analogy would be - the same way you're flirting with a girl. Like, if you know she's really interested you call the next day. If she's not then you "play hard to get" and wait the standard 3 days. You have to look at their indicators of interest, whether there's a specific timeframe involved, etc. Either way - it helps to follow up as much as every 1-3 days - you want to get the conclusion to a simple yes or no as soon as possible. Hope that helps!Josh LimJL
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I need partners to help my company launch. How many shares and/or how much profit do I offer to get them?
There are several factors to consider: 1. Profit share does not have to equal equity. As an example, two people can agree to split net profits 50/50 even though the percentage of equity is split 60/40. Just get it in writing. So find out their expectations for long term income and equity. Are they expecting a share of net profits or just the ability to recoup their investment when you sell the business? 2. What value do they bring to your business? Are they funding? Are they bringing significant contacts or the ability to secure contracts? Are they helping with infrastructure or product development? What would you pay someone in salary with no equity to do the same exact thing? 3. Are the short term or long term? In other words, once they help you launch, do they continue to have value in building the company? Or, are they no longer needed? There is no right answer to how you compensate them for helping you get started. But, try to look at all the value variables. Maybe that will help you identify what they are ultimately worth and what a fair, win-win offer would be. It sounds like they are very reasonable and you have a good opportunity to get their help for a reasonable compensation package. Good luck. If you would like to talk more about this at no charge, I offer a one time free call to new callers. Just use this link to schedule a call. https://clarity.fm/kevinmccarthy/FreeConsultKevin McCarthy - Founder, BlindSpots.comKM
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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.comDavid C BarnettDC
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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%.Nick HarrissNH
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How to find a great partner?
By connecting with people, talking to them, building momentum, and investing enough time to explore goodness of fit. Don't be in haste to onboard one as you would encounter too many "Yes-Sir" and "Me-Too" kind of guys. But, in a long run it's pragmatic thinking and synchronization of vision that matters. Otherwise, either you or your partner will end up sitting back home,trying to establish everything around cocooned comfort of home than in right market. Use professional social platforms like Clarity etc to scout for right people. Otherwise, advises are always free!!Sushant BhartiSB
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