When small companies compete with large companies, it is inevitable that they will encounter many difficulties because they do not have the necessary capitalization and other resources that these larger companies have. In addition, in many cases, the smaller companies can not take many risks because they need to have any assurance that the investments they made will pay off even for a short period so that they can still exist in the future.
So what can a small company do then to be able to compete with the large counterparts? Well, it has been discovered that partnerships with other small companies will enable them to become more profitable and even enable them to take advantage of the further capitalization. That’s because the income statement of a single small business entity may not look attractive at all for some financial institutions for these businesses to take a loan. But when the finances of several small businesses are combined together,these financial institutions will take a second look at the said endeavor.
You should also note that these kinds of partnerships will spread the risk of entering new markets so these small companies can be more innovative and creative in their approach to attract potential customers to spread. Additionally, these partners can provide the necessary distribution channels for your products and services to be made available to a large number of customers while minimizing distribution costs at the same time.
There are some people who say that partnering with a larger businesses is better though. However, while this type of partnership have its advantage, you should note that in most cases you may need the help of big companies more than they need your help. Therefore, you will notice that most of these partnerships end up with the smaller company compromising some factors just to let the deal push through.
This scenario is certainly unlike the case when you partner with the same size as you, because the grounds of negotiations are equal so the negotiating processes will be less painful while providing benefits for both parties as well.But take note that you should also choose your partners very well ecause a nice partner could turn into a fierce competitor some day.
So while this collaboration may sound extremely attractive to some people, it is definitely important to do your research and even allow your partners sign a contract, you should make sure that your business practices and processes are protected. There are certainly many things you should consider before going into these types of partnership but many businessmen do this nowadays to improve company’s performance and profitability.
