The Benefits and Risks of Collaborations When Building a Business

Collaboration is one of the most powerful tools available to entrepreneurs. The right partnership can unlock new markets, accelerate innovation, strengthen operations and improve resilience. The wrong one can drain time, money and emotional energy and even destroy a promising venture.

Globally, strategic alliances are recognised as a key way for organisations to expand market reach, access complementary resources and gain competitive advantage. In South Africa, collaboration between SMEs and larger partners, including state-owned enterprises, has been shown to improve SME performance and technological capacity. Yet research also shows that up to 70% of business partnerships fail and that around 65% of high-potential startups fail because of cofounder conflict.

In other words: collaboration is a high-impact strategy and a high-risk one.

1. Benefits of Collaborations – Beyond Brand and PR

a) Access to new markets and customers

Strategic alliances and partnerships are widely used to expand into new geographies or customer segments and to gain market share faster than going alone.

• Example: logistics and retail collaborations in South Africa (such as Aramex partnering with brands like Specialized Bicycles) show how joint strengths can reshape reach and service capability.

b) Shared resources and capabilities across functions

Collaborations can touch every function in your business:

• Operations and supply chain – shared warehousing, last-mile delivery, joint procurement. Studies on supply chain partnerships show that stronger collaboration improves integration and relationship commitment, which supports performance.

• Technology and innovation – SMEs partnering with larger organisations or research entities benefit from technical know-how and improved dynamic capabilities.

• Finance and risk sharing – co-investment or revenue share models spread risk.

• HR and training – joint programmes to upskill teams or share specialist talent.

c) Faster innovation and problem solving

Knowledge-sharing partnerships have been shown to increase “solution efficiency” by around 25%, because organisations combine expertise, research and practical experience to solve complex challenges.

d) Increased resilience

Strategic partnerships can make businesses more resilient in volatile environments by pooling resources, improving agility and enabling shared responses to shocks.

e) Stronger ecosystem impact

Emerging market research shows that SME development is often strongest where there is collaborative effort between government, private sector, civil society and education providers rather than isolated intervention. For entrepreneurs, this means collaboration is not just about co-branding a campaign. It is a strategic decision that can upgrade every function in the business.

2. The Risks and Failure Patterns in Collaborations

a) High failure rate of partnerships and cofounder relationships

Multiple sources indicate that around 70% of business partnerships fail and that cofounder conflict is a leading cause of startup failure, with estimates around 65% of startup failures linked to cofounder tensions.

Common issues include:

• misaligned goals

• clashing values

• unequal effort or contribution

• communication breakdown

• power struggles and ego

• unclear roles

b) Unreliable partners and operational damage

A 2025 survey of 1 000 small business owners and freelancers found that 38% had experienced significant setbacks because a vendor or partner failed them, even though 79% rated a trusted network as critical to success – more important than having sufficient cash flow. This shows how much is at stake when collaborations fail.

c) IP leakage and loss of strategic knowledge

Research on SME–large firm collaborations finds that while partnerships can improve performance, they also expose smaller businesses to risks around the leakage of strategic knowledge. Formal safeguarding mechanisms (contracts, IP clauses, NDAs) significantly improve partnership success.

d) Over-dependency

A single powerful partner can become both lifeline and risk. Losing that contract, distributor or corporate ally can destabilise the business if there is no diversification plan.

e) Reputation risk

If your collaborator behaves unethically – in customer service, finances, labour practices or public communication – your brand may be associated with their behaviour.

3. Collaborations Across Business Functions – Where They Help and Where They Can Hurt

1) Product and service development

Benefit: co-creating products, bundling offers, leveraging each other’s expertise.

Risk: unclear ownership of IP, disagreement over direction or quality standards.

2) Operations and supply chain

Benefit: better logistics, lower costs, more efficient processes.

Risk: dependency on a single operational partner, misalignment in service levels and delivery standards.

3) Sales, marketing and distribution

Benefit: cross-selling, shared campaigns, expanded reach and credibility.

Risk: confusion over who owns the customer relationship, commission disputes, inconsistent messaging.

4) Finance and investment

Benefit: shared risk, access to capital and financial discipline.

Risk: control issues, disagreement over profit share, decision-making deadlock, investor–founder misalignment.

5) Technology and data

Benefit: shared systems, analytics capabilities and innovation.

Risk: data privacy breaches, POPIA non-compliance in South Africa, disputes over who owns the data and algorithms.

4. How to Navigate the Risks – Especially in a South African Context

a) Start with alignment, not excitement

Before signing anything, clarify:

• shared goals and long-term vision

• values and ethics (B-BBEE approach, labour practices, customer treatment)

• decision-making structures

• how success will be measured for both parties

Many failed partnerships trace back to misalignment that was never surfaced early.

b) Formalise the relationship and safeguard your IP

Research on SME collaborations indicates that formal safeguarding of strategic knowledge (contracts, IP clauses) improves partnership success.

Your agreements should cover:

• who owns existing IP and newly created IP

• confidentiality and non-disclosure

• use of trademarks and brand assets

• whether either party may reuse or resell co-created work

• data protection and POPIA compliance

• dispute-resolution mechanisms

• exit terms

c) Protect confidential information and client data

In South Africa, POPIA makes it essential to clearly state:

• how personal data will be collected, shared and stored

• which systems will be used

• responsibilities if there is a breach

This should be embedded in your collaboration contracts.

d) Test before you lock in

Where possible, start with a pilot project or short-term scope before entering a long-term arrangement. Experts working with cofounders and partnerships often emphasise the value of “trial collaborations” to reveal communication styles and stress responses early.

e) Avoid single-partner dependency

Collaborations should strengthen your resilience, not create a new form of vulnerability. Build a portfolio of partners over time and keep developing your own direct capabilities.

f) Keep your numbers and operations tight

Collaboration is not a substitute for strong internal systems. You still need:

• clean financial records

• clear operating procedures

• your own customer relationships

• independent understanding of your cost base and margins

This allows you to negotiate on equal footing and walk away if a collaboration becomes unhealthy.

5. Conclusion: Collaboration Is Powerful – When Done Consciously

For entrepreneurs, collaborations can unlock opportunities that would be impossible alone: shared innovation, expanded markets, stronger supply chains, better technology and broader impact. But the statistics are clear: a large portion of partnerships and cofounder relationships fail, often due to misalignment, poor communication and lack of formal safeguards.

The goal is not to avoid collaboration. It is to enter collaborations consciously:

• grounded in values

• protected by strong agreements

• supported by clear numbers and systems

• aligned on vision, behaviour and ethics

When you approach collaboration with discipline and discernment, it becomes a strategic asset, not a liability, in building the kind of business that can stand the test of time.