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Apr 3, 2012

Partner or Not: How to Decide

Bringing in partners to help launch a new business is the ultimate risk and reward proposition. These questions will help to ensure that the relationship is mutually beneficial.

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Deciding to create a new business line or enter a new market is a complex process that requires some diligence around defining and prioritizing your target customer and aligning internally on who's accountable for driving the new business. Equally important is deciding which (if any) potential partners to bring in to help build the business.

Going It Alone?

The first set of questions we ask about potential partnerships help us decide whether we even need external partners for a new business:

  • What are the essential resources (e.g., specialized skills, extra arms and legs) required to make the new business successful?
  • Where do we have gaps in those resources?
  • Can we fill those gaps internally? That is, can we hire or contract for the specialized skills?
  • Do we need to share risks with others? Are we uncomfortable with the total level of risk?
  • Are we willing to cede some control? Whenever we bring partners in to a business, we have to give up some level of control or oversight. With the right partners, their oversight may add value instead of being detrimental. However, partnering creates additional management and communication costs that you may not want to incur.

Identifying the Right Partners

Once we have decided to bring in a partner, it's on to the next part of the assessment. Beginning with a broad list of potential partners, begin winnowing them down by asking:

  • What are their motivations? Why would they want to partner in general? Why would they want to partner with us specifically?
  • What is the compelling financial and strategic business case we will make to a potential partner that defines a win/win result?
  • How can we add the external resources and risk-sharing we need without giving up an excessive amount of upside potential? We want to be creative in answering this question, as the first-blush answer may not be ideal.

Note that building a compelling case for partners is a good acid test of whether a business model is truly viable. After all, if we are unable to convince partners that our new business is compelling, we should question whether the business is worth pursuing. Outside eyes can help us avoid the rose-colored glasses syndrome, which can be an expensive vision problem to correct!

What has been your experience in building a business? Have you had success identifying and engaging partners? Please let us know in the comments below or email us at karlandbill@avondalestrategicpartners.com.


Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark