The journey of 1,000 miles starts with a single step. Friday 21st of September 2020, saw me host the 21st of the Women Lifting Women Series (WLW). This series, born of the COVID-19 season, is one whose objectives are to:
- Offer an opportunity for participants to present their expertise, one woman, at a time.
- Offer an opportunity to learn new skills from different speakers.
- Take care of the mental well-being of the participants through sharing.
- Offer visibility of the participant’s/presenters businesses.
- Build confidence among the SME’s.
Women Lifting Women Series 21 was special as I got to host the very first international guest, Dr. Christine Martey‐Ochola. A Co-founder of Nuelehair LLC , a producer of organic and natural hair care products, she loves supporting women-owned businesses in various capacities. As a mentor with organizations such as the Philadelphia based “Alliance of Women Entrepreneurs” and PACT Mentor Connect, she provides coaching for high growth technology and healthcare businesses.
She currently sits on the boards of the African and American Youth and Leadership Foundation and Wape Nafasi Trust. Both of these support education for at-risk children. She also sits on the board of Logiri Women’s Group which supports women entrepreneurship in rural Western Kenya. She was recognized by the White House as a champion of change due to her engagement with diaspora communities on matters of economic empowerment.
Drawing from this wealth of knowledge and expertise, she enlightened 21st Series WLW participants on what to look out for when considering a partner for your business.
Does Your Business Need a Partner?
She started the conversion by differentiating between an affiliate and a partner. An affiliate is a transnational relationship with a company or agency that does not have an ownership stake but helps drive business growth through a specific service or product. Examples would be a PR Company or a Marketing company. A partnership, on the other hand, is an equity relationship that may be both transnational as well as strategic for business growth and sustainability.
In order to avoid the possibility of conflict in the future, the exact nature of the business relationship must be clearly defined from the onset. Failure to do so may create perceptions that may misconstrue the true nature of the relationship and the responsibilities that come with the same.
4 Reasons Why Businesses Seek Partnerships
Dr.Martey-Ochola shared the following factors as contributory to the need to enter into a partnership:
- The need to develop new products or services.
- To gain access to new local markets
- Enhance Brand profile
- Expansion into new global markets.
6 Steps to be Taken When Considering a Partnership
When considering entering into a partnership, an all-round approach must be applied. What needs to be looked into is:
Current Business Assessment.
Should your business take on a partner, this will have an impact on your current staff and as such it is important to involve your team in this process.
In assessing your company, look into your staff, your suppliers’ e.t.c. By so doing, you will fully understand where the strength of your company, its true value and the gaps that may need filling.
To Determine The Goals Of The Company.
The assessment process will have identified a gap that you need to bridge and hence look into how to bridge that gap and achieve your company goal.
Identify Potential Strategic Partners.
When seeking to identify potential partners, being a member a chamber is a critical part of running a business. This is so because this forms part of a larger regional as well as a global network. Further, you get to be aware of other businesses, develop relationships and hence you can easily zero in on those that would be of interest to your business.
Do Your Due Diligence Regarding Your Potential Partner.
Perhaps this is the most crucial part of this process. There are a lot of fraudulent and briefcase companies all over the world. It is important to do your due diligent about the company that you are considering to partner with. While online communication and transaction are the norm today, when it comes to partnership, physical meetings and scrutiny of the business premises and records is crucial to avoid losing millions while trying to save on travel costs. The expenses therein will be worth the while. Dr. Martey-Ochola shared instances where a Kenyan Horticultural firm delivered two containers of produce to the USA and the same was never honoured. On the other hand, a US firm was looking to trade with a Kenyan Steel Firm which due diligence revealed was just a shell company.
Establish The Integrity and Character of The Potential Partner
If there are any doubts, it is best to stay clear as it a reflection of what they are likely to bring on board. Christine shared a story of how she pulled out a lucrative partnership as based on how poorly he treated the waiters during a business dinner. She was sure that that is how he would treat her staff and that was a huge hindrance.
Develop a relationship
Structure equitable partnerships so that no one is short-changed
Role designation: It is important to engage experts so that the roles in the partnership are clearly defined and communicated.
The involvement of your team goes a long way in the processing and establishing the true quantifiable and the quality value of your company. By so doing, you are not short-changed by your partner as they too are looking to gain and win. Engage in healthy negotiations irrespective of the relationship who have with this partner beyond the business. Friend and relatives may be your worst partners as there may be certain assumptions.
What You Need to Put a Partnership in Place
- A quantifiable reason not just a quantitative but a quantifiable reason as to why you need a partner. That’s what is going to tell you what your value is and your equity component should be in that partnership.
- A good lawyer who knows how to structure partner agreements. Do not rely on downloaded online documents which are not custom made for your business.
- A good financial advisor who will provide the financial guideline on structuring the agreement to look into the financing and the structure therein.
- An exit strategy. The future may bring on interesting dynamics that may require exit of the partners, entry of new partner or perhaps sale of the company. The modality of how this would be executed should that moment arise must be discussed and agreed on from the onset of the partnership.
- An Updated Will. Death is inevitable and the only certain thing. The uncertainty is only in the when. As such one needs to be prepared with a will so as not to leave wrangles and uncertainty in the event of an unexpected exit.
- A Succession plan. Old age is also guaranteed and the question of who take over the company shares at the time when you are no longer be able to be active must be agreed upon and indicated in the contract.
- An updated will
Is Your Current Business Viable
- What is your partners’ business history?
- Is your potential business partner willing to sign a contract?
- What level of experience does your partner have and is it allotted equity commensurate with their experience.
- Do your fundamental values match
- How does your partner deal with ambiguity and conflict
- Is there a high level of trust among the partners
- Is your partner solution oriented?
Dealing with Equity
When dealing with equity, agreements must be in writing. While these are often difficult conversations, thy must not be brushed under the rag and they will come back to haunt. The composition of the split must be discussed. If you are the trigger of the partnership, you need to consider that kind of shareholding you want. Is it a major or minor one? 50/50 partnerships are the most challenging as these can translate into a grid lock in your company and hinder the ability to make decisions.
What if you are already in a 50/50 partnership?
You may want to go back and see if:
- There is a way you can evaluate your company input
- Have a 50/50 split in Profits/Capital gains/Losses
- Have a 50/51 decision split. Enables decision making and alleviate chances of grid locks and progress hindrance.
Develop tie breaker strategy as well as identify exit strategy for partners. Involve a lawyer to comp through the fine lines. If your partner refuses to sign an agreement, that is an opportunist rather than a partner and are likely to exit at first opportunity with your money!
Irrespective of your relationship (friend or relative) with your intended partner, be sure to read all the agreements in detail. Do not delegate the same entirely to The Lawyer and The Financial advisors. Human is to error and omission or inclusion of unwanted details could pause challenges in the future such as:
- Risk loss of business
- Adverse effect on one’s health.
- Diminished peace of mind
- Strain in relationships
While quoting the African proverb; “If you want to go fast, go alone, but if you want to go far, go together” Dr. Martey-Ocholla pointed out that partners can bring great value to a company if the partnership is well structured. Of utmost importance is to be keen on the details of the contract as the devil is in the details. While the involvement of a lawyer and a financial advisor is crucial, you too must comb through the contracts before appending a signature. The devil is in the detail. If you are weary of eroding your company at all, then affiliation is the better option.
Dr. Martey-Ocholla’s parting shot was rather thought provoking; ‘It’s better to be a small part of something big rather that a big part of something small’. What’s your take? Does your business need a partnership?