Walking into a strategic partnership, one feels a mix of emotions—hope, excitement, and often, a healthy dose of caution. Will the alliance be fruitful or a waste of time and energy? Worse, will your business get the short end of the stick or be taken advantage of? This is a very real concern, particularly for small businesses entering into a partnership with a larger corporation.
When in a strategic partnership, be extremely aware of the following red flags. If you see one of these warning signs, no matter how much your business may potentially benefit from the alliance, you may be better off walking away.
Too Good to Be True
If something seems too good to be true, it probably is. Watch out for partners who seem to offer you the world, especially if you don’t have much to provide in return. If, for example, a business promises you amazing advantages, such as access to their market, suppliers, and professional resources, yet they’re only getting, say, a positive marketing boost from your brand’s reputation, proceed with caution. There may be an advantage only they are aware of, but you were never willing to give.
As American businessman and chairman of AXS TV Mark Cuban has said, “Always look for the fool in the deal. If you don’t find one, it’s you.” Not every large corporation intends to take advantage of their smaller strategic partners. But, it does happen. Watching out for this warning sign is a great way to prevent it from happening to you. When a partnership just isn’t making sense, take a second look at your contract and definitely have a lawyer or other experienced, independent professionals look over the details.
Avoidance of Getting Key Points in Writing
When you watch Partner2Grow’s recent Strategic Partnerships Expert Panel webinar, you can hear an important cautionary tale on this “too good to be true” scenario, as well as another crucial red flag. During the negotiating process, it’s important to pay attention to how your partner communicates the agreement just as much as what they communicate.
Janine Zappini, one of our esteemed guests in the webinar and the Co-Founder of Simply Raw, a line of organic, raw superfood products, spent years building up her small business. She and her husband started out preparing their products by hand out of their Bondi Beach kitchen and selling them to local food markets. Committed to making truly healthy, tasty snacks through Simply Raw, Zappini was able to bring her product to the wider Australian market a year later. Soon after, she secured a partnership with a major player in the Australian food industry, something Zappini herself describes in the webinar as having felt, “too good to be true.”
The partnership process began relatively smoothly. She and her contacts with the company ensured their values were aligned and expectations were crystal clear. But, every time the issue of business IP arose, the company expected Zappini to share her information—which she did—but the other company avoided putting the IP agreement details on paper and never gave her their information. Instead, conversations took place over the phone, creating the impression that both parties had an understanding. The company had Simply Raw’s recipes, production processes, even the database.
After a year of negotiations, this food company, without informing Zappini, released a carbon copy of her product and began targeting her market and her distributors.
Key points like intellectual property need to be in writing. It’s important to understand that what you agree upon over coffee and a handshake is not legally binding, nor will it protect your interests. If a strategic partner is contract-shy over some issues, definitely take a second look at what type of relationship you may truly be entering into.
Your Values Aren’t Fully Aligned
The idea of forming a partnership is often inspired by mutual interests. While creating a win-win situation is a core foundation of creating a successful relationship, it’s also essential that your values are aligned. Think Christian Dior Fusion Sneakers and concept store Colette—the fashion brand’s relationship with a trendy French cult shop was a genius move in the right direction for both companies. But also, the companies are matched in terms of values, both prioritising pushing the boundaries of culture and style.
Financial Stability Isn’t Clear
It is vital that the business you are in partnership with is financially sound. Your partner should be comfortable discussing their finances with you as both of you need to know the other is stable and risk-tolerant. Angel investor and CEO of e-Healthcare Solutions RJ Lewis cautions, “Any time there is equity involved, treat it as though you are getting married.” Once you enter into a strategic partnership, your business’ finances are, to some extent, tied to theirs. If your partner contact isn’t willing to explain and provide relevant documents to demonstrate their financial situation, it may be a good idea to do some of your own research. If they keep on giving mixed signals and refuse to divulge relevant information about their financial standing, then it would be better to consider having “the talk” involving your future plans or if it’s worth it to continue.
Communication is essential for any relationship, whether between two people or two businesses. While any communication issue that makes you feel uncomfortable is a possible red flag, there are two you should look out for. If a partner doesn’t respond right away to your emails and phone calls, this may be a sign there is something wrong or that you simply aren’t a priority.
Any inconsistencies in what a partner tells you, such as if stories change or some comments don’t fit with the actual actions and decisions their business make, are warning signs you may be dealing with a dishonest partner. That’s certainly not something you want to bank your business on.
Feeling Dominated or Manipulated
Do you walk away from conversations about your partnership feeling like you are not sure what just happened or how you agreed to something you never intended on? Did you provide more information or concede more resources than expected in your last meeting—and failed to bring up the key points that matter to your business? This doesn’t mean your partner is intentionally being manipulative. What it may indicate though is that, in the relationship, you’re having trouble expressing your needs and making sure they are met.
Take a step back and try to change your behaviour. Bring a checklist of needs, expectations, and issues to every sit-down and don’t leave until they’re addressed. If you still can’t advocate for your business or if your partner consistently shows a “me first and always” attitude which affects your end negatively and leaves you feeling dominated or discouraged, it may be time to walk away.
Looking for Red Flags Early On
The earlier you can recognise these red flags the better. The more you wait to address things, the more difficult it is to change the nature of the agreement you create with your partner or to end the alliance. You can watch the full Strategic Partnerships Expert Panel webinar recording here for more key insights on the partnership red flags you must watch out for, as well as more information about important partnership issues, trends, and advice.
It’s always helpful to have an objective professional view to guide you through your partnership journey, something that Partner2Grow can provide. The more insights you have, the more empowered you are to make smart partnership decisions – because the success of your partnerships is of paramount importance and most of the time they fail, it could have been avoided.