Outside of the practical elements of performing the work, it’s a good idea to set financial expectations. Your partner is usually working with you to enhance their bottom line, and it’s important that you (as clearly as possible) give an indication as to what that is.
It’s true that many partnerships are dissolved because business didn’t meet expectations, but many are dissolved before the partnership is given a reasonable chance to succeed. To prevent an early demise clearly state what volume of business your partner can expect. Do this early, don’t leave it till it’s too late. The later in the day this gets, the more difficult it will be to set expectations. If they’re supposed to help you generate business, then clearly specify how much they’ll receive for each of the projects you both undertake. Review these periodically to ensure that both your partner and you are happy & that things are on-track.
Specifying the mechanism that you’ll be using to receiving/distribute the business is also important. Here’s an illustrative example of a mechanism and a rough forecast:
Financial Process: ACME Corp provides Client to Partner
|1||Partner||Send internal quotation #1 to ACME Corp|
|2||ACME Corp||Send client quotation #2 (with ACME Margin) to Partner|
|3||Partner||Send quotation to client|
|4||Client||Issue purchase order to Partner|
|5||Partner||Remit proportionate amount of the difference of #2 – #1 to ACME Corp at each stage of project payment|
Forecast: Upcoming Client Projects
|Month||Client||Total Project Value (US$)||Partner Margin (US$)||ACME Margin (US$)|
|Jan||Retail Outlet XYZ||100,000||7,000||8,000|
Total Projects: 6
Total Partner Margin: US$ 45,000
Total ACME Margin: US$ 50,000
Note that stage 5 of the Financial Process specifies when the payments should be disbursed. If your client is going to pay in parts, ensure that you specify when your payments (or payments to your partner) are due.
Of course you’ll need to use the financial model that’s best suited to your business. You’ll also need to think about what financial information you do and don’t want to share with your partner. This can substantially affect your model of engagement with your partner, and may have other substantial business implications (level of commitment, long term support, client remittance processes, etc.).
Whist I personally prefer to be as transparent as possible with partners, you’ll need to find a model that works for you. Not all industries are suited to the same model. Look at what other companies in your industry, and in your target market are doing. I’ll shortly be writing an article about different models of engagement with partners, the implications of each model, and my experience with these models.
Even if you haven’t formalised a model that you want to work via, it’s important to clearly state how transactions will happen & what financial benefit your partner is expecting to receive. Also consider clearly specifying what happens if an unforeseen expense occurs – will the partner be absorbing it from his margin, will you, or will you be mutually sharing the additional burden?