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Size Does Matter (in Partnerships)

We're typically taught not to talk about size in polite company, but savvy entrepreneurs need to understand the pros and cons of working with small vs. large companies.
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Entrepreneurs commonly partner with other companies in order to strategically build their businesses. Our company has done so with great results. And while they aren't hard and fast rules, we've definitely found that there are some distinct differences when partnering with larger versus smaller companies. We quickly learned that factoring in the trade-offs upfront is a must if you don't want to get caught feeling like you've ended up with the lesser of two evils.

On the one hand, fellow small companies tend to be more innovative, nimble and passionate. However, they are more likely to experience liquidity issues, lack the infrastructure to easily implement large-scale projects, and have less cushion if they realize mid-stroke that they need additional resources to complete a deliverable. Put simply, passion doesn't get the bills paid on time.

On the flip-side, larger companies offer bigger budgets, established reputations, and solid operations. But, they often lack flexibility, can "bully" smaller partners, and sometimes slip into being nonresponsive after the initial excitement surrounding the project kick-off. And quite frankly, money can't buy passion, soul, or responsiveness.

That's why I encourage entrepreneurs to consider size when deciding who to work with and when. Thankfully, we've found that with a little planning, it's possible to work with companies of an array of sizes. Here are some ways we've factored in size when selecting partners.

Buy-in at all levels. 

When you've decided that a big company is the way to go, step one needs to be ensuring that all the necessary decision-makers are on board. Of course it feels awesome to deal directly with the CEO of a Fortune 500 company. But here's the deal...if Ms. Muckety Muck's enthusiasm isn't shared by the other folks you're going to be working directly with to get the work done, all hell can break loose.

So before you dive in, take the time to build that almighty buy-in. And if you get the sense that people can't align, I would consider running, not walking, away from that project. For example, a key to our successful relationship with 1-800Flowers.com is that the strong commitment to our joint work flows throughout their company.

If it don't make dollars, it don't make sense! 

Regardless of the size of the company you work with, entrepreneurs need to be sure that 100% of the projects they sign on to have a solid sales opportunity. Especially when two small companies work together, it is even more crucial to remember to creatively craft your work to include opportunities that ensure you profit (or at least break even).

Another area to address is on-time bill payment. Skip the drama and set up clear payment schedules and understandings about the conditions of late payment. Help larger companies understand just how much late payments can hurt your small business. Of course don't make your business sound unstable, but if you humanize the situation and remind people that it's more difficult for a business of your size to float large sums of money, they are much more likely to push your payments through. Even a busy executive at a top firm doesn't want to be the reason your kid didn't get to go to band camp this summer! And for small businesses, keep the lines of communication open and try to ensure upfront that neither of you bite off more than you can chew, so that you can avoid difficulties making payments later on.

Occasionally, throw caution to the wind! 

Within reason, every once in a while it's important to do this. Whether with a big or small company, a project will come across your desk that simply "fits." When your gut says to absolutely move forward, go for it!

IMAGE: Flickr
Last updated: Apr 13, 2012

KHARY CUFFE | Columnist | Co-Founder, Heritage Link Brands

Khary Cuffe is co-founder and CFO of Heritage Link Brands. In addition, he has served as a marketer for the Procter & Gamble Company where he was responsible for a global multi-functional team.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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