I met someone at a networking event recently and we have decided that our companies should work together. Do you think that business co-operation or collaboration is a good idea?
In short: you can't be good at everything, so yes it may well be a good idea.
However, let's look at a few of the things that would be involved.
What opportunities do we want to capitalise on?
You will need to identify an opportunity. This might be submitting a joint bid on a tender, or entering another market sector, or a particularly large customer to target which otherwise you would not have the credibility, skill or the resources to convert into a customer. You may not identify a specific opportunity at the early stage, but all parties should have a purpose for wanting to collaborate.
Choose your partners - but choose wisely!
The choice of collaborative partner is critical. Sometimes the criteria for partner selection are woefully inadequate and more suitable to choosing a golf partner than a business partner. Getting on with business partners is essential, but more is needed.
Taking it on trust
Trust; this is a difficult one as it only truly forms with experience. There will be issues possibly, for some, on intellectual property and the need for confidentiality and confidentiality agreements. But ultimately you will need to trust partners, sometimes with sensitive information about your own business as you proceed to collaborate. Not only that, you will need to trust that the other parties will fulfil their responsibilities on the projects or ventures that you undertake; there will inevitably be division of labour and you are unlikely to be in a position to supervise, hands-on, the things that others are accountable for.
One of the big advantages of business collaboration is that you gain access to skills and competencies not available in your own business i.e. the other party excels in areas where you are weak and vice versa. This doesn't happen automatically; drawing up a skills map and skills-auditing each potential partner in order to match skills required with skills available is a crucial part of the preparation stage.
If you, as a sole trader, are wanting to collaborate with other sole traders, understanding the other party's style of doing business, vision, view of the world around them, their values and beliefs and behaviours will be important for effective collaboration.
If you are a larger business with staff and even possibly a management team, how you go about understanding each other's business culture will need a lot of careful thought. Each MD spending time at the other's business getting to know people and processes is a good place to start.
This is about how you or your company actually works from end to end. How you sell, market your products & services, communicate internally, & externally, deal with suppliers, customer relationship management; how you actually make the products and provide the service, how you run your admin and finance functions etc. Don't assume that because your own business runs effectively and smoothly that there will be no difficulties when you collaborate with others even if they too have a smooth running business.
Legal & structural aspects
Collaborative agreements or even legal entities may be needed depending on the depth of the relationship and complexity of the work being undertaken. Seek specialist advice.
So yes it is definitely an option to consider...
It is widely accepted that business cooperation / collaboration is a valid strategy for growing a business. There are huge benefits to be had from utilising the synergy of complementary businesses as well as potential economies of scale.
...but don't go into it blindfolded
We have only scratched the surface and looked at a few aspects, but even so it should be clear that some form of due diligence is needed before any decision is made. Good advice is essential for each party separately and, if the idea progresses, possibly a facilitator, either internal, or external to mediate and to project manage the formation and early stages of the partnership or joint-venture.
A sobering thought is that the majority of collaborative business relationships fail. So do your groundwork first, be prepared to put the time and effort into making the partnership work and you stand a chance of being one of those businesses that succeed with collaborative cooperative relationships.
In a nutshell:
- Identify the business opportunity
- Choose your partner carefully
- Spend time getting to know them and their business
- Take advice
- Be clear about the risks and benefits
If you think that collaborative co-operative working is a possible strategy for you but you're not sure where to start, talk to one of our business advisers.
That's all for this month.
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