Although they can be highly advantageous, small businesses may seem reluctant to leverage the potential of a strategic partnership, simply because these assets aren’t always readily apparent.
However, what were once the preserve of large, blue-chip companies now provide a powerful range of benefits to SMEs across all industries. Because of this, it’s well worth buddying up with another business if you’re looking to increase revenue and profitability.
Here, we’ll define everything you need to know about strategic partnerships, from how they work to some best practices you can use to help optimise the process.
What is a strategic partnership?
Simply put, a strategic partnership occurs when two or more businesses come together for a specific period of time in order to achieve a mutual goal. They allow both parties to pool their resources while focusing on their competitive advantage and growing their operations at the same time.
Although they can help, there is no need for formal documentation or commission agreements; a strategic partnership can be as straightforward as two friends working together. In fact, there’s a chance you may already be doing it without realising.
That said, if you’re thinking of forming a strategic partnership, there are a few things you might want to consider beforehand:
What are the benefits of a strategic partnership?
If you’ve found the right business to partner with, then the advantages afforded to both parties makes the partnership a highly attractive proposition.
Growing your customer base is a huge goal for a lot of businesses. Once you gain an initial customer base, the focus shifts to both retaining and growing your customers. In partnering with another company that has a similar product set or services, you theoretically have access to a new base of customers who have bought from and are being serviced by the partner, and vice versa.
Although you’ll probably be working with a partner within a similar or associated field, their customers may be in different markets and sectors to you. In fact, that may be one of the reasons you chose to partner with them. As opposed to starting anew, you’ll have a chance to expand into new markets and sectors where you already have a base of clients.
And although we mentioned that close proximity is valuable, if your potential partner is based in a country you have a desire to expand into, then that’s definitely a plus. The partner has experience with the business styles, culture and, obviously, language of their native country. Additionally, they’ll probably already have useful networks which could be useful to your own business.
Partnering with another business can help both parties to save. Take for instance, if you order supplies in bulk with your new partner, you’re likely to get a better price. There is scope to cut costs across a number of business elements, including aspects such as joint marketing campaigns, staff training, shared infrastructure and transport facilities.
Running a business tends to involve investing a substantial amount of money. Raising said capital can prove challenging for a business going it alone. In a strategic partnership, both businesses can pool their resources towards different ventures. Whether it’s overcoming recruitment difficulties or pooling necessary funding to grow, sharing these resources can be hugely valuable in the long run.
It’s also a great way of improving your chances of securing funding from financial institutions, allowing both businesses involved to meet their objectives at a greater pace.
We noted the importance of retaining your existing clients earlier. Thankfully, a strategic partnership can be used to build on what they’re currently spending, encouraging them to remain with you rather than seek alternative suppliers. By associating yourself with a business that offers a similar product, you can reduce the risk of other companies approaching your customers and offering themselves as the better choice.
Another important element that businesses of all sizes and sectors place value on is increasing their own brand awareness and customer trust. If you aspire to grow, so too must your customers’ trust; partnering with another business provides different routes to market and introduces you to the marketing strategies of the partnering business.
The increase in products and services to your portfolio as a result improve your customers’ perception of your business; as they view you as an industry insider, their trust and confidence in you strengthens, too.
Strategic partnership best practices
Defining specific outcomes, deliverables and milestones before the partnership formally begins is advisable. Greater definition drives and secures the commitment and resources that are needed to make it work.
The boost of credibility a smaller company gets from partnering with a larger one might look good on paper, but if the partnership lacks real value, then the business might not be able to advance.
Strong bonds get more done; make sure you’re utilising staff with strong interpersonal and relationship-building skills who can be used in critical partner management and liaison roles to foster relations.
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The accountability of everyone is what drives success; executives must continuously review and prioritise the partnership, while managers are accountable for staffing, prioritising and implementing the partnership outcomes and goals. Accountability connects all levels from the top down to ensure success for all involved.
These may take a number of forms; from annual relationship meetings with key representatives to setting up a separate corporate unit to oversee multiple partnerships. However it’s governed, things should be straightforward enough to implement and maintain; if things get too complicated, it’ll be tough to update in any meaningful way.
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