THE MONEY ACADEMY
Creating partnerships, Breaking the glass ceiling
The glass ceiling conflict
The story of Monica is a story that lots of companies are sharing. The business may look from the outside as a successful one, having stable clients and signs of growth while, in fact, even though the reputation might be good, the numbers reflect on a different reality. A reality that does not allow the company to grow, to participate in bigger projects, to hire more employees, balance its financial obligations and bring basic stability of income to its owners. In many of the cases, I meet the owners of such companies, when they often fail to identify this “critical point”, where some changes are to be made mandatory.
In some cases, business owners are failing to understand that the business they opened was evolved and at this stage, it demands more management and financial skills that the business owner never faced before, when they simply do not have the capabilities or experience to deal with. Therefore, identifying the existence of a problem, a failure, or the fact that your business cannot be developed further without substantial changes, is the main factor for creating any kind of change or growth.
A firm in distress vs. a static firm
Obviously, when there are cash flow issues and the business is in distress, we immediately think on new solutions – creating fast “guerilla” growth and reducing of costs, but this is not the case we will discuss about today, as the situation here is not about a company which is in distress rather than a company which has reached its “glass ceiling” and cannot grow further. We shall focus today on small companies (“one woman/man show”) and also on larger companies, although their objectives and challenges are different. Small companies simply can’t increase their working capacities without creating financial stress or bring money from their personal sources, until they will recover some of this investment. Such small companies, can’t really compete on bigger projects, tenders or dare to dream to work with the “crème de la crème“ clients, which demands to prove large project management capacities upfront.
On the other side, larger companies sometimes lack the shareholder's capability in choosing the right strategies or leading the company into the right direction, due to lack of management skills, personal capabilities or existing financial commitments that the company has gathered during the working period.
Both companies, small and big are led by their owners/shareholder. Looking inside your company and your strategies while understanding that in most of the cases, the problem is within the company’s owner is already 50% of the result.
You may decide not to change and continue like this (hoping one day it will be ok....), but getting out of this endless circle demands the recognition you NEED a change first and then strategies and actions which can resolve the needs.
One of the leading solutions which we could identify in the case of Monica and her PR Agency will be to create a partnership or simply – bring a partner into the business which will provide the needed added values for the partnership.
The momentum of such a step, is the right one mainly when you are in a positive operational trend (but can’t really grow and expand) and not once you entered into a distress situation while presenting negative results.
The preferable situation for a new partner is to partner up with a company that is steady and wish to expand.
You, as to accompany the owner, will be in a better negotiation position once you seek a partner when your company is not in distress. However, in most of the situations, we meet companies which are facing already different kinds of challenges and stress that needs to be identified and addressed by the new partner. A good partner can identify added value which can easily bring an immediate change and growth
Creating partnerships – the guidelines
Bringing a partner into your company doesn’t mean you have failed. It simply means that you were smart enough to identify your weak points, you wish to grow, expand and looking to create a positive change. A change that will create a new reality for you and for your business and will allow growth and prosperity to all the entities which are surrounding the company.
What should be the motivations to bring in a new partner to the business? We can encounter 3 leading reasons when analyzing potential partnership -
The partner will bring additional know-how which is missing at your company, one which will open doors to new projects and opportunities, better managerial qualities, former experience in a new market or any other quality and is crucial for the company's progress.
The partner may have a large database of clients of his own, merging your 2 companies will create a stronger entity within your market
The partner will bring financial stability, other sources or direction for further investment in the company.
When analyzing a potential candidate for becoming your partner, you shall clarify what are the added values among the 3 motivations above that such a partner may bring to your collaboration. The more this process will be done in an objective way using “cold“ analysis, comparing the added values of each potential partner, then, the better results you will reach in identify finally the best one.
The process is not an easy one! Sharing our “beloved business creation” with another partner is not an easy task. Try to leave emotions outside the room. Analyze it realistically and admit you need to grow, your right to receive some help.
WANTED – a partner!
Once we decided we wish to allocate a partner, the only questions remain is - where can we find one?
Beware of spreading or put mass news about your company searching for a partner. this may lead to damage in your reputation as it may imply your company is in distress (even though it’s not the case ). Your competitors would love to share this news with your clients...
Searching a partner shall remain a discreet process, to be done in careful steps and in some cases even shall be considered to be done by a third party.
So who can be a good partner and where can we find such a one?
A supplementary service provider for my domain – for example – creating a partnership between an accountant and a lawyer. This may answer the need to know-how and having a greater database of clients
A private equity fund –funds can be excellent partners; they can provide you all the 3 motives – know-how, access to new clients and of course better access to finance sources. Most of the funds will not consider startup’s but will definitely take a deeper look at companies in growth, exactly like Monica and her PR agency.
Headhunting & networking – enlarging your business networking may bring new partnerships as well. Meeting other companies, which seek for growth and inviting them to meet and (maybe) develop together a change, is a very common thing in the business community. Once you have identified what you seek, you can perform your own marketing research and allocate potential candidates. In these days, social network are popular and contact by LinkedIn is very acceptable also for the creation of potential partnerships
The allocation of the right partner may take some time...so be patient, and do not forget to continue the good work in the day to day activity of your company, so when the right partner will pop up, you will have positive trends to show.
What about the contract?
A Business partnership is similar in many ways to a wedding vow. As we will never consider to get married without knowing our future husband/wife, it is similar in business but with different ways of establishing. Due to the fact we do not have the “few years” time to know our business partner, it is possible you will initiate businesses together while not taking into consideration the much needed planning and ground rules that need to be established prior. Creating the right base and structure of collaboration, is a very important one and must be done with the support of a legal advisor. A good partnership contract will remain in the drawer, but it better be there for a scenario which might happen one day when you may wish to split the partnership or resolve a disagreement between the parties based on past agreements.
Remember – contracts are not always for the use of court. Contracts can be used as well, to refresh the memory of the partners on what they agreed and obliged when they started the partnership!
Osnat Peled is the General Director and founder of Mentor Finance – Private Equity Investments
Mentor Finance is a Private Equity Investment company and a strategic investor.
The company provides companies with capital investment and unique financial instruments to achieve growth and solve situations of distress, focusing on companies throughout all parts of Europe.
Mentor acts and operates as a strategic investment partner, assuring the needed investment for the company along with optimizing the company structure, in order to maximize the business strategy, operational process, strategic options, profitability and financial durability, essential elements for assuring its growth.
Foto: Sebastian Moise Make-up: Monica Panait Şedinta foto a avut loc la Hotel Prince Park Residences Bucureşti *Articol apărut în Business Woman Magazine, ediţia 68
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