Many business owners trust their accountant more than any other professional advisor. So you might be the first port-of-call when a client wants some guidance about collaborating with another business to break into new markets or develop a new product.
These can be really interesting alternatives to the normal projects you get involved in and can represent excellent additional fee earning opportunities.Collaborating with others could transform the fortunes of your clients. If the Australian experience is anything to go by, firms of every size gain an advantage, most notably in these areas:
- 42.9% – improved customer service
- 40.5% – increased revenues
- 26.2% – gained a competitive advantage
- 21.1% – reduced operating costs
A lot of hard work is involved and collaborating with other firms is not without risk. But many have succeeded and, with the right help, your clients can increase the probability of a positive outcome. Your understanding of the process could be pivotal so the summary below aims to set-out the key success factors your clients should strive for. Let’s start by first understanding some of the main barriers to collaborative business arrangements.
Business collaboration risks
The main barriers and risks are:
- Management perception: Small business owners tend to be more risk averse and reluctant to engage outside help on matters regarding innovation and collaboration. Short-term time horizons are a problem too, for small firms and larger enterprises. Effective collaboration may require time horizons longer than twelve months.
- Finding suitable opportunities: With limited previous experience, businesses new to collaboration find it daunting to seek suitable partners and assess how collaboration could work.
- Uncertainty of outcomes: Collaboration requires a “discovery” phase to perform due diligence on potential partners. It requires clarifying acceptable outcome for all parties. Many firms see the effort required for this stage too time-consuming without any quantifiable outcome being available up-front.
- Knowledge of the collaborative process: With little in the way of best practice available, business owners typically envisage complex scenarios where they have little control yet unlimited exposure to cost.
- Lack of trust: Without previous knowledge of the entities and individuals involved, business owners are naturally suspicious about whom they will be sharing commercially sensitive information with. There will also be concerns about how equally the benefits of any collaboration will be apportioned.
- Project management: Without clear leadership and direction, the commitment from collaborators may become inefficient and wane, or become dominated by strong personalities.
- Legal implications: Collaborating with other firms in new areas may require specialist insurance cover, licences or regulatory approval.
These represent the majority of risks associated with collaboration. The good news is that they can all be addressed, and your skills are ideally suited to smoothing the way.
Key collaboration success factors
- Common vision: Like every project, clients need to start with a clear understanding of what they want out of the collaboration. They should also note what stops them from achieving that vision now. These points should be succinctly documented. This will be useful during initial partner evaluations and information sharing.
- Identify candidate partners: How your clients go about this depends up what they want from the collaboration. The following are good places to start from:
- Suppliers in the same industry
- Existing customers
- Competitors with complimentary offerings
- Industry consultants
- Firms with strong distribution networks in targeted markets
- Research and government institutions
- Business clubs and trade associations
- Due diligence: Your support in this phase can be a big help to clients. Key points to assess include:
- Financial stability and the other usual checks
- Involvement in other collaborations
- Market perception: could association with a potential collaborator harm your client?
- Complimentary resources, skills, assets, channel access, etc.
- Clarify objectives and strategy: This is where each party reveals what they expect from the proposed collaboration. This should include perceived strengths, weaknesses and the ideal deliverables. It may be like head-hunting a senior manager and involve a number of false starts. During negotiations, clients should try to assess the personalities and management styles of candidate collaborators; could they work with them? Once drafted, does the collective set of collaboration objectives align with your client’s business strategy?
- Project plan: This requires a business plan that all participants are satisfied with. This is an obvious additional fee earning opportunity. The plan should also establish formal processes for working together, communications, roles and responsibilities, what happens if someone pulls out part way through or if one party doesn’t pull their weight? A formal project management approach may be best – an Agile methodology will keep bureaucracy to a minimum.
- Expectations and agreements: Does the collaboration justify a formal agreement that binds all parties? How will the collaboration be deemed to have ended? How will it be wound-up? Who “owns” the benefits and how will these be valued? What are the key metrics that will guide the collaboration? Your expertise can play a big role here.
- Leadership and communication: Perhaps most important of all is the culture required; the way the different parties will engage. Mistrust must be avoided at all costs. The person or group nominated to lead the collaboration must be endowed with integrity, well versed in open communications, and be capable of instilling trust and fairness in all proceedings. If the fee earning potential looks attractive, you may want consider this role. The potential PR kudos could also be valuable to your practice.
- Legal aspects: Does the Memorandum and Articles of Association allow clients to engage in business collaborations? Do existing insurance policies cover collaboration? Will clients need to comply with new regulatory and compliance standards?
- Stakeholder commitment: do clients need to seek formal approval from shareholders or lenders? What about key customers and potential conflicts of interest?
Handled well, collaborative projects are seen to help over 90% of all firms that participate, and can transform business fortunes. Accountants are ideally positioned to take a leading role in making such collaborations successful. Collaborations may represent a potential new service offering for your practice and some good fee earning opportunities too.