Building strategic alliances with organizations that can provide assistance with technology, market analysis, sales, support, and finance services can be extremely beneficial. Why re-invent the wheel? Conserve your scare capital by leveraging the expertise of your alliance partners. The bottom line is that time is of the essence; especially when considering all the things you need to work out before your launch. Doing your own market research, branding, building technological applications etc. may result in significant losses in revenue due to launch delays.
There are two categories of alliances: those that raise your awareness of the market and those that provide actual operational services. Your most appropriate alliances should be based on your immediate needs. We have to be clear about what we want to provide our customers. For instance, if you want to sell a product to customers and other distributors, you may be able to handle a great deal of business through your website, but you may need to partner with a telemarketing firm to handle phone interaction with your smaller distributors. Once you’ve defined your needs, you can ask the VC investor for suggestions about partner recruiting; also, a little peeking in on your competition can’t hurt. You will have to sit down and develop a mutually beneficial arrangement for you and your alliance partner before finalizing the agreement.
Once you’ve sold your plan to a partner, you’ll have to draw up a formal contract. Try to keep you partnership exclusive for the time being, as it will benefit you in terms of short-term stability and it will seem very attractive for your partner. At the same time, however, you must draw up very specific expectations and responsibilities in order to avoid unsuccessful arrangements. Also, keep the timing of the partnership very specific: this will give you a chance to gauge the effectiveness of the relationship, as well as determine whether your company has grown past the need for this particular partner.
To further narrow the thought process behind administrative services, we deal with the infrastructure implementation category. On the physical side of infrastructure, you have to secure the actual brick-and-mortar for your brick-and-mortar business. You must acquire and implement…everything! The building, computers, furniture, HVAC, telecommunications, space allocation for employees. And remember, you must keep the real possibility at the forefront of your thoughts that your business will take off quickly, and need for rapid expansion will overshadow all else.
It’s important not to underestimate the costs of real estate. It’s critical to secure space early and for the long-term. Keep your eyes on competitors and see how they use their space. How much space do they allocate for different employees and how much does it cost per square foot? Keep in mind location, in terms of accessibility for employees and in terms of room for expansion. Your real estate should support your business goals; for instance, buying your own building could serve as a liability to your exit strategy because it looks like debt to be services, as opposed to equity, to potential investors. Another good idea is to look for real estate with local landlords. You want someone with whom you can have regular interaction. Also, your landlord should be comfortable with your being a startup entrepreneur, i.e., in light of your potential ability to make payments, you may have to offer credit, a guarantee, or a fixed annual rent increase in exchange for a lower security deposit.
Another big problem is being conscious of your technology needs. Fiber-optic network and telecommunications providers are obviously another facet of infrastructure that needs careful planning. Landlords can limit access to their buildings to only a few providers, so get to know what the policies are and learn you rights for roof antennas and satellite dishes. It’s a good idea to check with local utilities about power outages and whether backup generators are appropriate or available. After all, you don’t want to strand mission-critical systems with a less-than-reliable power source. Finally, make sure you don’t get taken to the cleaners on HVACs for operation during non-traditional business hours. You can do so by setting cost caps specified in the lease.
In terms of lease, be wary of long contracts-if you expect to double in size in one year’s time, a five to ten year lease term can cripple you. If this is impossible to avoid, carefully work out clauses for subleasing, termination, and renewal. Subleasing can be a good way to make some money as well as being a way to expand at a later date. Also, termination of a lease is an option if the landlord cannot provide expansion room. On the other hand, renewal options can be important if you are in a low-vacancy market in which a landlord can otherwise force you out in favor of higher bidders, and set parameters that limit rate increases over time. The last point about leases is the default section. Your lawyer should be going through all of this with a fine-tooth comb, but this section is especially critical. Since these are grounds by which a landlord can force you to move, you must make sure that infractions are rigorously quantified, and that reasonable time should be allowed for the rectification of defaults.