Business partnerships have always been a vital factor for entrepreneurial success. History is full of stories of partnerships that turned humble startups into mega corporations, and some that didn’t end so well.
Yesterday, Square disclosed that they were ending their payment-processing partnership with Starbucks. Square formed the partnership with Starbucks in 2012. Basically, this partnership meant that people would pay for their coffee using Square. Also, Starbucks was to invest $25 million in Square’s Series D round. The intention was for Square to raise their brand recognition standing on the shoulders of the Starbucks giant.
However, Square recorded a $15 million loss from that partnership in the first six months of 2015. That’s huge money lost.
Truth is, not many startups in the world can afford to lose $15 million from any deal whatsoever. It’s better to be wise and avoid any such hassle. If a partnership is done right, it will produce massive positive results for all involved. But if it goes sideways, it could spell doom for one or all of the parties involved.
To avoid losing out in any partnership, here are some things to take note of:
What do you intend the end game to be like?
It’s important for you to have a clear picture of what your business will be like at the end of the partnership. You have to ask: How much better will your startup be at the end? How do you plan to arrive at that desired end?
The two parties getting into the partnership must sit down and plan things out. It’s not enough to draft agreements and sign papers. The wise thing to do will be to document all possible outcomes (including the negatives) and create road maps based on them. What actions will lead to a positive outcome? What actions will lead to a negative outcome? Know the things to do and the things to avoid.
How much of a win-win is it?
A partnership is aimed at making sure both parties come out winners. In his book Winning, Jack Welch notes that mergers are never equal. He explains that such thinking is a pitfall and if the parties (especially the lesser party) see themselves as equals, then the partnership may be heading for the rocks.
In the same way, partnerships are hardly ever equal. Many times, one of the parties always has the upper hand in terms of resources and stakes. This is why the partnership, from the start, must be properly designed and documented to be a win-win partnership. Else, one party will come out of it with a wedgie.
How do you come out if it isn’t working out?
Not all partnerships will work out as intended. Some will go awry. It’s important for both parties to design an exit strategy beforehand. This exit strategy should be clear and simple. If it isn’t, a bad breakup could leave both parties feeling sore. You won’t want to go see a psych because of that now, would you?