When running a small MSP, it’s easy to be wary of entering business partnerships. Of course you need suppliers and customers, but beyond those, how many connections does any SMB really need — let alone one that thrives specifically from making the most of each customer relationship, like you?
As much as business runs on connections, entering one that you don’t need can be a headache at best, or a death blow to your business at worst. That’s why when entering any partnership, advantages and disadvantages must be equally considered, especially in relation to the particular company you’re considering pairing up with.
So what are the advantages of partnerships? And just as importantly, what are the disadvantages of partnerships businesses should watch out for?
Here, we’ll break down the pros and cons of partnerships as a whole, but also in how they specifically relate to the MSP’s way of doing business.
What is a Business Partnership?
But when you get into a business partnership, what exactly are you entering, anyway?
Just in terms of structure, the nature of a business partnership is best summed up by the word of, well, “partnership.” All that’s consistently meant by the term is joint involvement in a business, especially on a top-level operational or managerial level, by multiple people. In some cases this also involves shared ownership of the business, but that may not be the case if you’re entering a partnership with another business.
Basically, a partnership means you’ll have more cooks in the kitchen when it comes to leadership responsibilities and divvying out profits. If more hands to cover those responsibilities isn’t something you really need, then you’re not likely to see many overall advantages of a partnership for your business.
Conversely, if you think you’d stand to gain from more insight or helping hands in your main operations, then it’s well worth weighing a partnership’s advantages and disadvantages that most relate to your situation.
With definitions covered, let’s get the bad sides of a business partnership out of the way. In these partnerships cons are usually about what you expect, but depending on your exact circumstances more can pile up than in others.
The most usual of these include:
- Shared profits
- Less independence
- More disagreements
But let’s explore those partnership cons in more detail.
One way or another, a partnership is going to cost you financially. Whether it’s fees for entering the relationship or sharing a percentage of all profits, disruption of your usual revenue is always one of the biggest partnership disadvantages — there just isn’t a situation where a partner will be doing what they do for free, after all.
Whatever advantages of a partnership you see for your circumstances, those positives will be for a very tangible price. While this shouldn’t be an immediate reason to turn down a partnership, it’s still a factor that must be considered.
By design, having a partner on board means more people get a say in what your business does and how you do it. And that input won’t be something you can just override every time, either. Your partners will be there in large part because they have a particular vision of how your company should be run, and though this can bring in guidance, it also means you’ll have more people who need to be consulted on decisions.
Obviously, this doesn’t mean you’ll lose all control over your business the second you sign a partner — in fact, it’s critical that you lay out clear terms on how much control your partner gets when coming onboard. But suffice to say that if you envision your business as an organization where you call all the shots unquestioned, a business partnership isn’t for you.
On that note, consider also that having someone additional to report to means you’re all but certain to have more disagreements when it comes to running your company. However much you may like your prospective partner, they’re bound to have a different idea on management somewhere down the line.
Since entering this relationship gives them a say over how to actualize plans, those different ideas will come to light sooner or later, and they may very well seem completely inadvisable to you. In short, expect some degree of conflict as part and parcel of this relationship.
But that’s enough of the negative. Flipping the script to the positive, the pros of partnerships stack up very reliably, For many, a partnership’s advantages do more than just outweigh the disadvantages — they become the difference between success and failure for fledgling MSPs.
Some of the biggest plusses include:
- Shared workload
- More idea development
- Split costs
- Better brand recognition
Let’s take a closer look at those pros of partnership now.
The number one advantage of a partnership, unsurprisingly, is simply having more hands on deck to help your business. More management at the top means more assistance with business plans, paperwork, taxation and any other high-level routines that sap time from your day. That also extends to conducting market research, bringing in new leads or technical learning, so anyone struggling with top-level issues like these would do well to consider this setup.
More idea development
Especially for those just starting out, it can be difficult coming up with fresh concepts for marketing campaigns, sales promos or other ways to drive business. Having a partner to bounce ideas off of can be an easy way to add creativity to your brainstorming efforts, as in many cases a fresh point of view will be all it takes to improve the process. For new players in particular, this extra insight can make a tremendous difference in your business results.
While a business partnership means you’ll split financial responsibility, that doesn’t only apply to profits. Expenses are also split between you and your partners, which will better help you stretch every last dollar of capital you have available to invest. Given how cost can often feel like an insurmountable part of business management, this partnership advantage in particular is something fresh-faced business owners shouldn’t ignore.
Better brand recognition
This one isn’t common to every business partnership, but in certain cases it’s worth considering that your partner will represent a more recognizable business than your own. As important as it is to build your own brand, starting out it will be consistently easier to lean into any larger recognition you can pull from partners or associates. Don’t discount this factor, no matter how invested you are in establishing and expanding your individual business identity — using a more known name for your marketing and sales will consistently translate to more business for less effort.
Business Partnerships: What MSPs Say
All of that is in the abstract, though. In an actual partnership, advantages and disadvantages will all but certainly differ from this list if only in specificity.
So, what have actual MSPs said about the partnerships they’ve held? In general, the conversations we’ve had have highlighted more positive notes than negative, but at the same time that goes to show these partnership advantages will apply to most MSPs who enter one.
Bodie Engel, CEO of CYA Cloud Services, finds that the advantages of a partnership are critical to MSPs struggling financially.
“Find another partner that can help you understand the market and will work with you to get the product going.” he recommends. “In fact, we’re doing that with several MSPs. They’re not phone people and they don’t want to invest in phone people, but they do want to sell phones. Their big issue is they’re afraid we’re going to be a competitor — we’re telling them we’re not just trying to get them more comfortable.”
What Bodie alludes to here — knowledge over a product or industry — is one of the best advantages of a partnership that newcomers in particular shouldn’t overlook. When you’re facing an uphill climb in stabilizing your business, having real industry experience can make that journey significantly easier.
That said, even seasoned businesses have room to learn from business partnerships. Cyna Milinazzo, president of Liberty Communications, points out:
“I’ve had partners where they are so good at sales — I’m not the best at sales, I’m the best at fulfillment — but I would like to be better at sales and organizing that structure of my business. So when I help partners with their fulfillment, and they give me their sales routine, such as what their sales people do every day or the forms they use. We all help each other in that way.”
That being said, remember to limit these advantages of the partnership to only yourself and your partners. This means sharing your business acumen and strategies only with those businesses you’ve inked an actual deal with — others in your industry are still competitors, no matter how much of an informal relationship you’ve built with them.
Sean Galt, president of Thompson Networks, advises:
“If you’re like me and had networking relationships with other MSPs, and you didn’t want to step on their toes, change that. If those relationships are keeping you from committing to both MSP and UCaaS, then you are missing out on a big future. No one cares about stepping on your toes — it’s just a matter of time before someone will.”
When considering whether to enter a partnership, pros and cons will always be specific to your situation. But in most cases, a partnership’s advantages and disadvantages come down to the usual factors involved with sharing something you own.
Namely, adding a partner onto your business means you’ll now have an additional person to report to on big decisions, as well as more ways to split earnings. At the same time, the pros of a partnership mean entering one will bring in more hands to cover administrative-level work, more industry knowledge, greater ability to brainstorm and possibly even more recognition for your business.
Again, the exact value of these advantages will depend on where your business is at right now and what particular challenges you face. What matters most in deciding if a business partnership’s advantages outweigh its drawbacks is how badly you need those improvements; if any of the listed ones sound like a way to make your business better, then it’s an arrangement well worth considering.
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