The Piggy Back Theory. Part Three – Official Agreements
In the last two weeks, we have looked at the preparation that needs to go into a strategic partnership and the steps you need to take for a successful meeting and writing a proposal for a potential partner. This week we look at a critical step in forming a strategic partnership – Forming an Official Agreement.
Protecting yourself is important, especially when you are a startup. If the relationship goes south, you don’t have the money or resources to counteract the problem, then you are up shit creek without a paddle. I am a huge advocate of a strategic partnership, but I have been burned three times since I started this business and let me tell you, it’s not nice, it ain’t pretty and my business would be financially far more ahead if I had official agreements in place.
Part Three – Official Agreements
I guarantee you that if you are talking to a larger business or a business that has been around for a very long time, you will be faced with a challenge after the initial proposal if they want to continue the relationship. You are a new business, you hold no proven strategic value to anyone yet – so many businesses will think that they can drive the relationship and how it will work. This will present itself in a way where you will have an “informal handshake agreement” or “informal trial” – this is not a strategic partnership, that is taking advantage of a startup. Do not move ahead with these agreements, they are risky because they offer you no value – if someone is going to make you a promise in business, they should not have a problem putting on paper if they are committed to the relationship.
Most startups enter partnerships from a point of desperation, it’s obvious to the other party, I have been there – I have been that desperate startup, willing to put in a tonne of extra work, promote another business, build networks and only to have no reciprocation around our initial discussions with the other business. This is a harsh pessimistic view on things, but when forming strategic partnerships, you need to assume everyone has an agenda, you need to be open about yours and make sure all are agendas are in writing.
Official Written Agreements
Official agreements do not have to be complicated, you do not need to draw up massive contracts with lawyers or sign one hundred page documents. A simple Memorandum of Understanding is quite sufficient, signed by both parties to set out formally the expectations both parties have of each other and the deliveries each party must complete for one another. With each change that happens in regards to any agreement, another MOU should then take it’s place. Both parties should keep original and digital copies of the written agreements.
How to set out a MOU
Simple agreements, mean it is easy to understand and there is little to no room for interpretation. Avoid jargon, and creative vocabulary at all costs, personally I imagine that I am writing it for somebody, who has no idea what any of the discussions that took place were, that way I cover all expectations clearly. Setting out an MOU is very easy:
- Title: Simple titles like “Memorandum of Understanding: Shoe String Media and XYZ Company” are quite sufficient.
- Intro and Purpose: State what the MOU is about and the purpose behind the MOU, that means all the agenda’s!
- What Company 1 expects from company 2: What you need to deliver for them, how it will be done
- What Company 2 expects from company 1: What they need to deliver for you, how it will be done
- Time Limit: When first setting up strategic partnerships, I usually go for a 3 to 6 month period to begin with, that way you can all regroup and assess at regular intervals and see if it holds value for both parties.
- Signatures: one signature from authorised people of both parties
- Dates: Put the dates on the form, than scan the form and email to both yourself and them for an electronic time stamp
You need to remember that during the negotiation phase that leads up to the signing of an MOU – you are probably going back and forth to reach an agreement, you need to seriously think about keeping those emails in a folder, if for any reason a relationship looks like it could go sour, as a startup these may offer you some form of protection if they have stated they will do one thing for you and instead do another. I personally have a strategic partnership folder and within that sub folders for each relationship I have external to the business and let me tell you, when you are caught between a rock and a hard place and need to refer back to a particular conversation, on a particular date, having an electronic message to refer to is a life saver.
Setting up an official agreement is the easiest thing to do, the key is to NOT be complicated about it. The more complicated things are, the easier they are to screw up. Remember – It’s all about putting your agenda’s on the table, win for you, two wins for them.