You look at your company bank account and calculate the company’s cash burn. Most likely you have raised just enough money to keep the company going with little room to color outside the lines. But to truly grow a company to greatness, its founders need the ability to do more than pay bills. Raising equity capital is time-consuming and raising debt capital often requires solid financials that many young companies just do not have. So how does one get from Point A (small, but great, business) to Point B (next big thing)?
Looking at your bank account may have been the first mistake. Instead, a company should take inventory of its non-monetary assets and determine how best to utilize those assets to grow. What are non-monetary assets?
Answer these three questions as you take inventory of the hidden wealth your company has yet to tap.
What can my company offer another company in exchange for something we lack and need?
What is an employee’s time worth (i.e. measuring opportunity cost)?
Will working with another company divulge our competitive advantage AND disadvantage my company in the short term? The long term?
Smart companies use strategic partnerships to grow. To succeed as a company, the company does not need to be great at everything, but instead the best at one thing. Having a core competency and growing the business from this position of strength gives a company the best chance to succeed. So as a company solidifies its foundation from which to build, why not rely on other businesses, building different foundations, to help your company grow?
Mutually beneficial partnerships can be a way to instantly (and without the use of scarce capital resources) gain additional competencies that would otherwise take thousands, if not millions, of dollars and tons of time to acquire. The barter system remains king amongst young companies that are short on cash and can be by far the most cost-efficient way to grow your business. If your company’s executives have a strong industry network or your company has intellectual property or data that would be valuable to a potential partner, why not trade this asset for something (say the infrastructure or brand building abilities of the proposed partner) that my company needs to solidify itself in its intended position of strength.
But remember, not all non-monetary partnerships are value additive. There is a reason that three questions were listed instead of just one. If the non-monetary asset bartered with would put a huge burden on one (or more) of your top employees that would otherwise spend their time in a more valuable way, the partnership that may look golden at first glance could, in reality, be detrimental to your long-term growth. Further, if partnering with a company would offer a competitor or potential competitor a recipe to your secret sauce, it may not be worth the short-term benefits.
Many factors go into determining if a particular partnership is right for your company. However, actively discussing partnership opportunities and seeking the right partnerships will ultimately prove extremely beneficial for a young company as it grows on its early stage bootstrap budget.