Owning and operating your own business can be incredibly rewarding. It can also be incredibly lonely at times. One way to replace the camaraderie you gave up when you left the corporate world is to collaborate with another small-business owner.
The collaboration definition is to work together to create or achieve something. Business-to-business collaboration can be for a one-off project or to form a long-term relationship. The idea is to come up with an arrangement that is beneficial to both parties. Some reasons you might want to collaborate with another small-business owner are to provide better customer service, to compensate for a weakness or to increase both parties’ bottom lines.
One episode of the popular TV show "Bar Rescue" demonstrates how this works. A failing bar had terrible food in addition to terrible service. It happened to be located next door to a barbecue takeout restaurant that was so popular that out-the-door lines were routine. In addition to doing his usual retraining of staff and giving the bar a face lift, the host negotiated an arrangement between the restaurant and the bar.
He cut through the wall dividing the two businesses and installed a service window. Voila! The bar can offer great food served quickly, which attracts more customers who buy more beer. The barbecue restaurant is making more money than ever, and everybody is happy.
Business Collaborations Controversy
One type of business collaboration that is both commonplace and controversial is the arrangement we often see between a university that does medical research and a pharmaceutical company. Over time, companies that manufacture drugs and medical devices have increasingly looked to medical schools to do their research — for a fee, of course.
The criticism is that since big corporations are paying them, scientists might feel pressured to provide results that favor them. To address that criticism, pharmaceutical companies have moved more toward funding the institution and not individuals. Additionally, there’s an emphasis on cultivating long-term relationships with universities instead of working together only on separate, short-term projects, like getting FDA approval for a new drug.
Types of Collaboration Tools
You’re probably not operating at the level of Philips Healthcare and Boston University, at least not yet. So, the court of public opinion is unlikely to play a role in any of your business collaborations. However, there are still principles to consider.
For instance, if you’re collaborating with another business to develop a new product, you’ll want to have a mutual nondisclosure agreement in place. This is a legally binding agreement that states neither of you will share any information with anyone else about the product you’re developing. You can find free and for-purchase templates online.
It also makes sense to draw up a contract that clearly states what each party is going to do and by when. You’ll want to make sure that the contract is drawn up correctly so if your collaborative relationship deteriorates, it will stand up in court. You and your collaborator might want to split the cost of hiring a business law attorney to write this contract for you.
Get Started Collaborating
Long before nondisclosure agreements and contracts, think about how to approach your peer at another business about collaborating. First and most importantly, be prepared. Think through how the collaboration would work and how it will benefit both of you. Makes notes if necessary.
On a practical level, you can just ask the other business owner to lunch to discuss it. Be careful to give him just enough information to pique his interest. Don’t go into too much detail until you get a sense of how interested he is. You don’t want him to walk away with your ideas and use them to collaborate with someone else.
Last but not least, insist on picking up the tab. You extended the invitation, so it’s just good manners.
LeDona Withaar has over 20 years’ experience as a securities industry professional and finance manager. She was an auditor for the National Association of Securities Dealers, a compliance manager for UNX, Inc. and a securities compliance specialist at Capital Group. She has an MBA from Simmons College in Boston, Massachusetts and a BA from Mills College in Oakland, California. She has done volunteer work in corporate development for nonprofit organizations such as the Boston Symphony Orchestra. She currently owns and operates her own small business. In addition to writing for PocketSense, she writes for Bizfluent, Budgeting the Nest, Legal Beagle, PocketSense and Zacks.