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How and When A Freelancer Should Collaborate

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Several years ago, I was one of four Freelancers who collaborated on the development and presentation of a half-day marketing and sales themed professional development conference whose target audience was in-house sales and marketing professionals who had the authority to hire Freelancers to manage special projects at their respective organizations.  Each of us would cover an aspect of sales or marketing (I agreed to present a networking workshop, another would present B2B sales training, etc.).

The conference was the brain child of an experienced and successful marketing services competitor. She invited us to participate, assured us that she had relationships with more than a few corporate clients and acquaintances, at least a few of whom we could count on to attend, and she ran the show.  Rather a lot of time was spent on planning meetings. A few hundred dollars was spent on production expenses: printing the promotional fliers, the room rental fee (we received a good discount at a fancy law firm’s conference room) and continental breakfast for the attendees.  We charged maybe $69 to attend.

We managed to draw an audience of about 30, a number that we considered respectable, but the corporate prospects failed to materialize, apparently because my marketing competitor hugely over-stated her client relationships.  The audience consisted entirely of people just like us—Freelancers who were trying to make themselves more attractive to those who control billable hours and who were hoping, no doubt, to meet a corporate marketer or two.

The whole thing was a complete waste of time and money because,  as we three along for the ride came to realize, corporate types do not feel the need to attend such programs. They are not looking to upgrade their skills at a conference hosted by a bunch of Freelancers.  They don’t even turn out for conferences hosted by their local chambers of commerce, despite the fact that most of their companies are members.  In fact, it has become increasingly difficult to meet them at all,  except perhaps in certain social situations or in board service.

Collaborating with carefully selected colleagues can open up doors to success that would ordinarily be closed and can result in good clients added to your roster and more billable hours added to your Income Statement.  However, there are questions that you would be wise to ask your prospective collaborators and also yourself, to increase the chances that the collaboration will be a win-win for all involved, including the client.

Can the collaboration achieve worthwhile goals?

Precisely, what valuable tangible and intangible assets will the collaboration produce for you? The project mentioned above was highly speculative and as a result, risky. Partnering with a colleague or two as a strategy to win the bid on a lucrative or prestigious assignment is less risky than creating yet another professional development conference.  Collaborating to chase rainbows is not what you want.  Collaborate to more effectively compete for a valuable resource, such as a project that exists and has funding.

What resources will the collaborator provide?

Collaborations are formed to bring together entities that have complementary skill sets.  A few months ago, I collaborated with an author to provide for her book content editing, serve as photo editor and perform self-publishing services that she preferred to outsource.  In exchange, I gained experience, added book editing to my CV and obtained (minimal) payment.  Collaborations should be win-win propositions and the project(s) on which you and your collaborator(s) partner should reflect Aristotle’s recommendation, that “the whole is greater than the sum of its parts.”

The trust factor

Collaborators must be able to trust one another for without trust, there can be no successful partnership. This is hugely important, because your reputation and client relationships, current and future, will be on the line.  If your collaborator(s) cannot or will not hold up their end, your brand can be damaged and unfortunately, you don’t really know anyone until you’ve either lived with or worked with them.  A discussion of the interpretation and practice of work ethic and customer service will give insight into the matter.

For example, if there is a big deadline looming, are collaborators willing to work and respond to emails on weekends, holidays and after 6:00 PM? How will collaborators respond to a high-maintenance client who emails at 9:00 PM on Sunday nights when there is no apparent emergency?

What will be the ROI?

The properly conceived and managed collaboration will allow the participants to offer additional services, exceed the client’s expectations, build good client and partnership relationships and enhance the possibility of referrals.  A good client will be added to the roster of each participant and billable hours that would not otherwise have been available will appear on Income Statements. The client will receive measurable ROI as a result of the venture.

Thanks for reading,

Kim

 

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Arranged Marriage: Propose A Strategic Partnership

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On numerous occasions throughout the life of this blog,  I’ve urged readers to create strategic partnerships as a way to grow and sustain their enterprise.  Strategic partnership can bring great advantages to the entities involved.  But if poorly conceived and executed,  the partnership will be an expensive and frustrating disappointment.  You know which scenario you want,  so let’s talk about how to get there.  Freelance consultants and small business owners will likely have one of the following goals in mind when contemplating a strategic partnership:

  • Expertise that is project specific or ongoing
  • Labor needed for the short-term or intermittently
  • Access to a certain target market
  • Increasing sales in existing markets
  • Sharing resources, e.g. office space or technology

Define goals that you can reasonably expect to achieve via the partnership.  Your need may be as simple and short-term as finding a talented and reliable graphic artist to design a save-the-date card,  invitation and program book for a nonprofit agency fundraiser that you are planning or a photographer to capture special moments at the event.  If you produce many events,  you will want to form ongoing strategic partnerships that will create a team of suppliers on whom you can rely.  If a long-term arrangement is your goal,  consider carefully the expected benefits to your organization in terms of market penetration,  access to bigger projects and clients,  increased revenue,  or other pertinent factors.  Project how long you expect it will take for your organization to realize progress towards the goal.

Well-defined partnership criteria will help you to pre-sort candidates in advance of approaching someone.  You won’t know until you have a meeting,  but learning about the potential candidate’s business model,  client list,  business goals,  business practices and organizational culture are important deal-makers or deal-breakers.  The more alignment between the participating organizations,  the better the chance for success.  Prepare and prioritize your list.

Next,  think about potential partnership candidates and your relationship with those individuals or entities.  Look for a firm where a complementary aspect exists with yours,  as noted above in the example of an event planner in search of a photographer or graphic artist.  Will organizations that offer any competing products or services be disqualified?

If it’s a long-term partnership that you will propose,  prepare a partnership worksheet for each candidate,  to ensure that you approach only those with whom you are likely to partner successfully.  Be specific about what you want the partner to provide and the responsibilities of each entity.

As you consider partnership candidates and develop the worksheet,  confirm and learn to articulate the expected benefits that would accrue to an entity that would partner with your own,  attainable over the short and long-term.  How long do you project it will take for the partner’s organization to realize progress towards the goals? Seeking feedback from a knowledgeable and neutral third-party might be helpful at this stage,  to eliminate excessive optimism on your part.

You are now ready to enter the recruitment phase of your search.  This process can be formal or informal,  depending on your familiarity with the organization leader.  You might run into that person at the grocery store and suggest that the two of you sit down over coffee and talk a little business.  If you’re not so chummy,   send an email and set up a call time or a face-to-face.  If the proposed arrangement will be complex,  provide your prospective partner with a copy of the partnership worksheet.  The worksheet will make you look super-prepared and can only raise your stature in the eyes of the candidate.

Especially if your intended has a bigger and more prestigious organization than your own,  providing the partnership worksheet should be a good tactical move.  The worksheet will also help you to launch discussions of organizational priorities;  clarify the perceived benefits, of the partnership;  anticipate obstacles;  reveal alignments or disconnects in business practices;  and give insight into organizational culture.

If at the meeting the partnership seems like a good fit,  propose or answer any questions that would constitute due diligence as you develop a formal partnership agreement.  The two of you must agree in writing to the specifics of the partnership:  its goals,  expectations,  services provided,  resources shared,  responsibilities,  fee schedules,  deadlines,  effective date and how success will be evaluated and other factors that would impact the relationship.

Thanks for reading,

Kim

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Howdy, Partner!

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It is said that two heads are better than one and that is often true.  When two people join forces to work on an important goal,  expertise and resources are shared and the goal is reached more quickly.  Moreover,  there is someone available to help make decisions,  someone to vent frustrations and celebrate victories with.  Human beings are social animals.  Most of us have an intimate partner in our life,  or would like one.   Many aspiring business owners and entrepreneurs would like to have a partner in their enterprise,  as well.

A life or business partner can bring many advantages to a relationship,  or can bring disaster.   Most business partnerships fail and nearly 50% of marriages end in divorce.  Your marriage partner and your business partner must each be chosen with care and an eye to the future.  Opposites may attract,  but they are usually unsustainable affairs.  Shared values,  goals,  priorities,  expectations,  vision for the enterprise and complementary skills are the ties that bind.

Before you start talking partnership with your presumed intended,  catalogue the resources that the business needs to reach and sustain profitability.  Consider what you are willing to give up to obtain those resources.  If you need start-up or expansion capital,  approaching a lending institution may be the best strategy.  If your financial projections indicate that business revenues generated will allow you to repay the borrowed money within 5 years and also your credit is good,  talk to your accountant and banker and figure out a loan strategy.  If specific expertise is what the business needs,  then write-up job specs and hire employees.

If money is the primary issue and you prefer to finance privately,  then some form of partnership is your money-raising strategy.  Calculate the optimal amount of capital investment required and ask your accountant or business attorney to estimate how much ownership you will likely have to relinquish to your investing partner.   If it appears that you cannot afford to keep at least 51%,   then consider taking on two partners and giving yourself controlling interest.  Never split 50 – 50,  to avoid becoming deadlocked on important decisions.  In my business plan writing workshop,  I emphasize that you have to know yourself when you’re in business.  Think objectively about how much of a presence of others in your business you can tolerate.  Your personality type may lead you to seek a limited or silent partner arrangement,  a partner who mostly wants to make money and believes in your ability to operate the business wisely.

However,  you may conclude that you need a general partner,  one who makes both a monetary investment and contributes expertise and business acumen.   You will then have to accept that there is more than one way to view challenges,  opportunities and risks and that decision-making will be shared.   Those realities are always big adjustments for the founding partner.  Additionally,  you and the partner must carve out your respective roles and responsibilities in the business.  Be sure also to address the amount of time the partner plans to contribute weekly.  Can you live with that?  The division of labor must be established and written into the partner agreement.   Check also the presumed partner’s financial history.   Do not form a partnership with one who carries heavy debt.

Finally,  include an exit strategy in the partner agreement.  Sometimes things don’t work out and someone wants out.  Protect the business and yourself with a partner buy-out option and provisions for the divorce,  illness,  or death of a partner.  Make sure you don’t wind up in business with an ex-spouse,  surviving spouse,  or the partner’s children.

Thanks for reading,

Kim

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A Profitable Partnership

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Whether you are making a plan to start a business or expand one that exists,  inviting partners to join you may be the best way to achieve business goals.  Ideally,  partners bring some combination of complementary skills,  capital resources and strategic relationships that will make the business grow and prosper faster.

Before initiating a partnership,  evaluate the resources you need to launch your venture.  If you anticipate that start-up or expansion capital may not be available,  then taking on a partner or two may be the only way to take your business from the drawing board to reality.  But if skill sets beyond what you possess are the issue,  you may be better off hiring  a few key employees.  Speak with a business attorney to devise a way to attract key employees for your management team by offering equity in the business,  but not so much that you risk losing control.  Remember to include the option of your being able to buy back shares if you like.

Similar business goals and priorities

Business partners must share a vision of the long-term goals and priorities for the venture.  How big do you want the business to be? How much of your life are you willing to devote to building the business?  Have conversations and brainstorm different scenarios that might happen during the life of the business and how each of you thinks it would make sense to respond.  Partners must be able to agree on a course of action to move the company forward if success is to be realized.  Serious discussions about each partner’s preferred vision of the future will give valuable insight into how to handle challenges and opportunities that might present themselves down the road.  Write a business plan together and as you do,  almost everything will come out in the wash.

Similar approach to customer service

Customer service is an important aspect of the business brand.  Customers must know what to expect when doing business with you.  It will only confuse and frustrate clients if one of you is willing to burn the midnight oil and move heaven and earth to exceed expectations every time and the other is willing to let whatever it is wait until 9:00 AM the next morning.  Whatever approach you take,  devise standardized,  written customer service protocols that all partners can accept and agree to abide by.

Mutually agreeable exit strategy

Is this a one-off project based partnership,  or is everybody in it for the long-term?  Do you envision building the company rapidly and attracting a buy-out offer,  or is this a business you would like to pass to your children? Guided by a business attorney,  discuss the circumstances by which a partner can quit the partnership and how the transition will take place.  Who can buy out a partner? What is the protocol if a partner becomes medically incapacitated and can no longer work in the business? In a divorce,  can you wind up being in business with a business partner’s ex?

Partnership agreement

Your state may not require a written agreement to form a General Partnership,  but you are strongly advised to do so anyway.  A written agreement will clarify the parameters of the partnership.  Specify the share of the business owned by each,  the division of net income (or losses) and the duties and responsibilities of each partner.  Commit to writing everyone’s shared understanding of the partnership business arrangement.

Forming a partnership and going into business with one or more people can be an enjoyable and profitable experience,  but it doesn’t work for everyone.  When partnerships go wrong,  they ruin relationships and bank accounts.  Choose partners wisely,  be realistic and transparent and put everything in writing.

Thanks for reading,

Kim

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May I Have This Dance? Partnering Possibilities Part II

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How might one brainstorm and evaluate  expanded services that may or may not involve taking on a partner to a greater or lesser extent? One might start by asking the clients.  As I’ve mentioned many times before,  establishing  relationships that  make communication comfortable for both parties  is so very important.

Speaking with those who are not clients,  but who work  in or are familiar with your target industries,  can also yield some bright  ideas.  In my January CEO forum,  Carole gave me a great tip on how I can expand my strategic plan facilitating services.  Carole’s  husband works in the NFP sector and has been through more than one strategic planning process that has not delivered the desired results.

Carole clued me in on helpful extras that should increase the likelihood that decisions agreed upon in the planning process will actually be implemented.  Demonstrating to clients that I am available to offer follow-up that will keep them on track with their plan could be an excellent selling point.  I won’t need a partner,  but I will make referrals  for required services that are outside of my domain.  I will surely incorporate Carole’s suggestions  into subsequent client meetings and proposals.

Before introducing a new feature to a client,  imagine yourself working in that client’s business.  What  need does your company fulfill?   Envision the big picture and place your services within it,  to get a good idea of where your contribution fits.  Will additional services allow the client to achieve objectives in a more effective,  less expensive, timely or streamlined way?

Although decision makers are timid about spending money these days,  a decent percentage will open the checkbook if perceived value is there.  Moreover, one stop shopping is in vogue and you may be able to work that to your advantage.  Do you have the resources and expertise necessary to deliver those services on your own,  or must you link with another Freelancer or small business?

Be careful about the sphere of influence that each partner will have,  particularly when those involved have the potential for overlap.  No one wants to confuse clients with a power struggle.   Be clear about who takes the lead and who makes the decisions in each aspect of the project.

It is also imperative to really know the business practices of a potential partner.  I recently had an unfortunate incident when I was invited to be a last minute replacement in an unpaid speaker’s program.  This was not a partnership in the classic sense,  but a collaborative venture nonetheless.

After the organizer successfully separated me from $200 to help cover program expenses for what was sold to me as a quarterly program featuring the four speakers on board,  she proceeded to recruit new speakers for the series, without consulting the original roster.  I eventually deduced that the new recruits were not required to pay $200 to join the roadshow,  as had the original crew.  If that was not enough of a slap,  the organizer decided that I would not speak at the second program!

I was not pleased with the bait & switch, to say nothing of the unilateral decision making and I requested that my investment be returned.   After some patronizing and stonewalling,  the organizer eventually mailed a check for $100.

No,  nothing was in writing.  I naively thought that a contract was unnecessary for a $200 transaction with someone I thought I knew!  Moral of story:  protect yourself and leave nothing to chance.

To sum up,  collaborations,   joint ventures and partnerships can be long term or ad hoc. Specifics of duties, authority and expectations should be in writing (an email may suffice).   If a formal partnership (or merger) is formed,  obviously the attorneys and accountants get involved.   Again, know who you are planning to dance with!

Thanks for reading,
Kim

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May I Have This Dance? Partnering Possibilities Part I

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At our January meeting,  a member of my CEO forum told the group that partnering is high on her list for 2010.  She’s decided that the right partnership vehicle will propel her to this year’s  financial goal.

Pam is a market research specialist,  with solid clients in the life sciences industry.  She’d like to have more presence in high tech,  but needs a way to get there.   Pam is acquainted with another marketing specialist who has a good roster of high tech clients.  The two are now in early stage partnership exploration talks.  Maybe they can figure out a  way to team up and increase traction in both industries?

As luck would have it,  Pam has learned of an upcoming conference that will address partnership,  joint venture and collaboration options,  strategies and methods to make the arrangement beneficial to all parties,  including clients.   She plans to attend.

Very soon,  I plan to approach Pam about the possibility of adding early stage product and market development for life sciences products to her array of services.  Could this give her yet another useful competitive advantage?  I will first visit her website and confirm that she does not already have that base covered.  Then I will ask if she feels that addressing the prospects for early stage products might be a good fit for her business and interest level.

If Pam gives the go-ahead,  I will introduce her to Regina, who guides biotech, medical device and pharmaceutical companies as they sort through which of their exciting newly patented  products has the best potential for success.

So you see,  a form of mergers (and even acquisitions) can apply to Freelancers and small business owners. This dance is not only for the Fortune 1000.  In fact,   many of us have done this for years.  General contractors often form partnerships or joint ventures with real estate developers and structural engineers when they come together to work on one building project or several.

Event planners (my first business venture, BTW) must collaborate with caterers,  florists, limo companies,  photographers, etc.  in order to pull together a project.   Over time,  one develops a list of preferred vendors for these services.   Sometimes,   the parties will join forces and form a legal partnership.  Wedding event specialists and bridal shops are known for this practice.

Teaming up with someone who has complementary business skills can open many doors and can be an excellent way to gain market share and opportunities to work within industries where one has not gone before.   It is possible to greatly enhance your company’s appeal to current and potential clients.

More on partnerships next week,
Kim

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Starting A Business? Consider Your Legal Entity Part II

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The type of business that you are in will guide your choice of legal entity.  If you are a solo Freelance consultant, then operating as a Sole Proprietor is most likely appropriate. However,  if your business exposes you to liability, then it is highly recommended that you spend a few dollars and protect your assets by establishing a separate legal entity. Many business entities evolve as they grow, transforming from Sole Proprietorship to Limited Liability Company to Corporation.

LIMITED LIABILITY COMPANY

The  LLC is a relatively new option.  It creates a separate legal entity and may be used by a solo entrepreneur or a multi-owner business.  It is required that an EIN be obtained for the business and a certificate of organization be filed with the Secretary of State, along with a fee of about $500 paid annually.

There is no limit on the number of owner–partners in an LLC.  A certain degree of protection from liability is granted, as in an S Corporation.  It is highly recommended (but not required) that in a multi-owner LLC an operating agreement be written that names a managing partner and other specific partner roles and responsibilities.

Single owner LLC tax filing is similar to the Sole Proprietorship.  On April 15  you file schedules C and SE and form 8829 if claiming a portion of your home as an office. Quarterly estimated taxes are due on the 15th of January,  June and September reported on form 1040–ES.

Additionally,  an LLC with 2+ members must file form 1065, the informational Annual Return of Income.  Owner–partners file form 1040 with schedules E and SE,  plus estimated quarterly taxes on form 1040–ES.

Be advised that an LLC is dissolved in a bankruptcy or upon the death of a partner.  Include contingency plans in the partner’s agreement so you don’t find yourself in business with the spouse or children of the deceased, for example.

GENERAL PARTNERSHIP

A partnership is a non-corporate legal business entity that is formed by 2+ people (or entities) who desire to do business as co-owners.  GPs can be formed by individuals, corporations, estates or trusts.  This classification also includes joint ventures and syndicates.

A GP is not a separate legal entity,  so there is no requirement to register the partnership with the state.  Partners will be on the hook for any business liabilities, including unauthorized actions by partners who acted on behalf of partnership business interests.

Absolutely, write a partnership agreement.  Include the purpose,  goals,  partner contributions and responsibilities.  Management duties, decision making power, permissible and restricted business activities outside of the partnership and financial matters such as access to financial records and expense authorization should also be specified.

Moreover,  spell out how profits and losses will be distributed, the penalties for failing to fulfill responsibilities and contributions and the procedures to follow should a partner die.

Partners are taxed on the income/losses of the partnership on schedule  C, filed with their personal 1040, along with form 1040–SE self employment tax.  The partnership as an entity must file form 1065 Annual Return of Income on April 15.  Quarterly estimated taxes are due on the 15th of January,  June and September.

LIMITED PARTNERSHIP

This format is similar to the GP, with the exception that a partner(s) agrees to contribute resources to the business entity without becoming involved in its day to day affairs.  These are “silent partners”, often investors.

LPs have a share of ownership but neither operate nor manage the business or act officially on its behalf.  They have a liability to the business and its creditors that is proportional to what they have invested.  LPs and GPs receive a share of business profits/losses based on percent of ownership.  Again, it is recommended that an agreement for LPs be written.

As with  GP, form 1040 with schedule C and form 1040–SE will be filed on April 15 and quarterly taxes reported  on 1040–ES and filed on the 15th of January,  June and September.

More next week and thanks for reading!

Kim