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Documenting Partnerships in Your Business Plan
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by:
Dave Lavinsky
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Forging partnerships to improve market
penetration has become commonplace, particularly for “new
economy” businesses. And, most companies proudly mention
their many partnerships in their business plans.
The fact is that, regardless of whom the partnership is with,
partnerships by themselves are meaningless. What are meaningful are the
terms of the partnership. For instance, while it sounds great to have a
partnership with a Fortune 500 company, the details of the partnership
are what investors find important. For instance, investors will look
poorly upon a partnership in which the Fortune 500 company earns 90%
commissions on customers it refers. On the other hand, investors would
look favorably upon a more equitable partnership.
As such, be sure to detail the specifics of the partnerships. This
includes factors such as how the partnership will work, payment terms,
contract length, minimum and/or maximum guarantees, the type of
customer leads expected from each partner, timing of payments, etc. In
addition, if partnerships are a key part of the business plan, expect
prudent investors to interview the partners and scrutinize partnership
contracts.
Partnerships can be a major factor in the success of growing companies,
providing leads, sales, capital and/or other critical benefits.
However, ventures should be careful not to place too much emphasis on
any one partner in their business plan. Partnership agreements, like
other legal agreements, can be breached, and if the venture positions
any one partner as critical to its success, this will become a risk
factor to investors.
Overall, partners can provide a great boost to growing ventures.
Business plans should not only discuss who the partners are, but detail
the terms of the partnerships and how they will benefit the company.
Finally, the business plan must not place too much emphasis on any one
partner in order to convince investors that the business is capable of
success even without it.
About the author:
GT Business
Plans has developed over 200 business plans for clients that
have collectively raised over $750 million in financing, launched
numerous new product and service lines and gained competitive advantage
and market share. GT Business Plans is the sister site of GT Venture Capital
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