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Are You a Small Start-up? Better Sleep With The Enemy

In order to grow, sometimes you need to partner with your competition.
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When I started high school after moving to San Francisco, the first thing I did as a new student was become friends with the toughest guys on campus. I thought that if I was friends with these bullies, I was less likely to be beaten up. I was right. 
 
A small startup entering a competitive market can benefit from the same strategy.  
 
I recently wrote that one of the three ground rules for growing your company is to go after large markets. But large markets mean many players--many companies looking for their piece of the pie. So where does that leave you, a small company, when trying to claim your territory? 
 
Keep your friends close, and your enemies closer. 

Every company has to start somewhere, and if you want your company to survive, you’ll first have to learn how to complement and work within the competitive landscape around you. Remember the evolutionary theory “survival of the fittest?” 
 
Before you make a big splash and announce that your company is a force to be reckoned with, observe the current market. Identify savvy companies and smart people with core values that you respect. Instead of working against these established businesses, brainstorm ways that you could work with them. Can you provide a service they might need to grow? Can you partner with them to offer an alternative solution to their customers?  
 
There are many positive outcomes to partnering with your potential competitor. Strategic alliances can amplify your brand, increase your customer base, give you access to expensive technologies and resources, and help you network and meet potential investors.  
 
Nothing lasts forever. 

If you do decide to work with another company, keep in mind that at some point, the market will probably tell you that it’s time to expand to a larger territory, or to stake out a larger share of profits. Your company’s growth plan may or may not include your partners.  
 
Here’s where the downsides to a business alliance factor in. Sharing profits and resources can be a headache; it’s common for companies who have been working in tandem to squabble over accounts, new leads, and networking relationships. You’ll also run into conflicts if the other company begins to feel threatened by your growth, and perceives that you could potentially put them out of business.  
 
Don’t let partnerships become a drag on company resources. When they’re no longer beneficial, you’ve got to admit that it’s time for a breakup.

Be warned: Partnership breakups can be just as bad as relationship breakups. It’ll never be a clean, surgical split. Let things happen organically, and try not to make rash decisions. To avoid burning bridges, don’t be antagonistic. Remain friendly, cooperative, and open during the entire separation process. 
 
Whether or not you decide to forge your own path from the beginning or leverage partners to kickstart your company’s growth, you’ll need to be constantly vigilant. Extend partnership offers that have clear and defined benefits or be confident in working alone. And whatever you do, remember the lesson from high school: don’t let your competitors get a whiff of weakness.

Last updated: Mar 11, 2013

MEHDI MAGHSOODNIA | Columnist | CEO, Rafter

Mehdi Maghsoodnia is the CEO of Rafter, which provides a cloud-based platform designed to help colleges make educational content more affordable and effective. He was previously SVP at CafePress and Intellisync.

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



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