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Drawing up Strategic Business Partnership Agreements

in Strategic Alliances

Having approached a company, discussed the possibility of establishing a strategic partnership, and agreed in principle to proceed, the next step is to draw up the agreement.

A written agreement is essential to ensure that everything is clear from the start. It will help to prevent arguments arising from misunderstandings and also help both businesses get the most from the partnership.

A good strategic partnership agreement should cover the following:

Aims and Objectives

What are the primary and secondary aims of the strategic alliance, for both businesses? Clearly specify the aims, such as revenue generation, cost-reduction, or to increase your customer base.

Non-Financial Contributions

What will each business contribute to the partnership aside from financial commitment? For example, there is usually some form of cross-promotion, such as widespread prevalence on each others’ websites and visibility on new marketing material.

Financial Commitments

It may be the case that one business is making a financial commitment in return for certain things supplied by the other business. This financial commitment may help to even-up the partnership in instances where one business is gaining more than another. Always try to specify the amount of investment to prevent the business providing finance attempting to cut costs.

Ownership of Intellectual Property

If you’re starting a new venture together intellectual property, such as logos or even inventions may be created. Always specify who owns this in the agreement to prevent costly arguments arising when the partnership comes to an end.

Evaluation Dates

The reason for establishing a strategic alliance in the first place is to benefit both the businesses involved. Therefore specify certain dates on which the partnership will be evaluated. This ensures that if one business isn’t benefiting greatly the issue can be resolved at a specified date rather than allowing problems to foster.

For a straightforward strategic partnership between two businesses where the purpose is to be mutually beneficial a simple written agreement should be sufficient. The main problem that is likely to arise is one company feeling that they are getting the raw end of the deal, but this is nothing that cannot be resolved through negotiation.

However, joint ventures, where two or more businesses create a separate business entity to exploit a new opportunity, are far more complex. Legal advice should be sought when drawing up these contracts.

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