Strategic alliances have always been a part of human history. From political to personal, and of course between businesses. Now more than ever, partnerships are a consistent part of doing business. Whether it’s sponsorships, co-branded products or exclusivity deals, for many businesses to grow a partnership is as inevitable as acquiring funding.
But what if you own a small business? Does partnering with other businesses make sense? The short answer is yes, but you’ll need to do some research and planning ahead of time.
What are the advantages of small business partnerships?
For fledgling startups or even established businesses looking for growth, strategic partnerships can elevate your efforts. Here are a few of the advantages to consider when partnering with another brand or business.
Reach new customers
Growing your customer base can be difficult for smaller businesses. You need to identify ideal customers, establish credibility, and showcase value over your competitors. But what if you could do all that at once?
Partnerships give you direct access to an already established customer base. The other brand vouches for you in the process and provides direct exposure that wouldn’t be possible otherwise. Depending on who you partner with, this could be an entirely new complementary audience or an expansion of the market you already serve.
Share resources and expertise
You’d likely outsource or hire an expert to handle areas of your business you have no experience in, right? Well, partnerships with other businesses can also help fill that gap in expertise. It’s a cost-effective method to explore new opportunities without risking failure simply due to a lack of experience or resources.
Take the original partnership between Disney and Pixar for example. Pixar was at the forefront of 3-D animation and storytelling but had no knowledge of the movie industry or distribution channels. Disney was a staple in the animation industry but was struggling to produce high-quality films under new management.
By partnering, Pixar now had expert guidance and financial backing to distribute and sell their masterpieces. And Disney was once again associated with revolutionary animation, without risking continued failure on their own projects.
Grow your reputation
Partnering with other brands basically gives them your seal of approval. To your customers, employees, and suppliers you vouch for their mission, products, and actions. Luckily, this is a two-way street and the brand you partner with simultaneously vouches for you.
This can be an excellent opportunity to grow awareness and a positive reputation for your business. Not only amongst customers but other businesses, vendors, and professionals. However, this can be a double-edged sword if the business you partner with has a poor public persona, so be very careful who you associate with.
If you’re able to take advantage of any of the previously mentioned advantages, there’s a good chance you’ll also increase your revenue. This can be due to expanding your customer base, sharing resources and costs, or launching a collaborative product, among other things.
Typically, increased revenue should be one of the reasons for approaching strategic partnerships, even if it’s not your primary goal. It can help ensure that your partnership provides the necessary return on investment to make the effort and use of resources worthwhile.
How to identify potential business partnerships
Knowing the benefits of partnerships can only get you so far. Sure, you want to reach new customers, grow your reputation, and increase revenue, but how are you going to do it? And who will you do it with?
Like pitching your business to investors you need to be prepared to pitch a partnership and identify partners that make the most sense for your business. Here are a few approaches to partnerships that you can take.
Complementary products and services
Which brands, businesses, or products could complement your business offerings? Now think about your customers’ interests and where the two overlap. There’s likely an opportunity there.
A brewery offering an exclusive craft beer for a local pizza place. A PC hardware manufacturer partnering with an upcoming video game on a branded GPU unit. You don’t need to look far to find plenty of new examples being announced every single day.
Find a gap your business can obviously fill or an opportunity to bolster both offerings through collaboration. It can be more than enough to kick off talks of a partnership.
Share similar company values
As said before, partnerships can improve or damage your reputation. While it may be obvious to avoid partnering with businesses with abhorrent practices or a negative public image, it may be less obvious to find partners with similar values.
This is something that nonprofits have to constantly consider when vetting donors, and can be something that helps for-profit businesses find potential partners. If you share a similar mission, company goals or internal HR practices, you’re more likely to work well together. Having these elements in common can also make the initial pitch that much easier, as you’re already working from common ground.
Opens up your network
Business communities can be like high school cliques. They’re supportive, full of people you like and relate to, but potentially limited in scope. Which means when looking for a potential partner, sometimes the best thing to do is look to expand your network.
Focus on companies outside of your industry or vertical. Still look for opportunities to create complementary products, but with the goal of expanding outside your customer base and business contacts.
Makes you more competitive
If you work within an extremely competitive industry, one with already established players, partnering up can help you take on the competition. Look for smaller businesses to partner with and focus on pooling resources that can bolster your ability to innovate and market. Or look to partner with well-known brands outside your space that can provide unique benefits your competitors simply don’t have.
How to develop strategic partnerships
Once you’ve identified a potential co-branding or partnership opportunity, it’s time to get to work on actually developing that partnership. Here are the steps you should take to ensure you’re prepared to successfully manage it.
1. Understand the deliverables
You need to determine your requirements and clarify what each side needs to deliver up front. Understand your partner’s goals and how the partnership fits into their business strategies before signing on. Focus on the following elements to start your partnership off on the right foot:
Be as transparent as possible during negotiations. Make sure you understand your partners goals and that they understand yours. Doing so sets the precedent to maintain that same level of trust and visibility throughout the partnership.
Use the same measures of success
Discuss KPIs (Key Performance Indicators) and measurements of success up front. Be sure that you’re on the same page for what defines success for both parties and try to make them match up. If you have different goals that can’t be measured exactly the same, set additional internal goals to make sure you and your partner both deliver.
Be willing to reset timelines and goals
Not every plan hits pre-established milestones right on time. There’s always uncertainty and setbacks that pop up, especially when you throw two separate organizations into the mix. Showcase a willingness to reset timelines and revisit goals when problems arise.
Just be sure to set up bare minimum requirements to make sure a partner isn’t taking advantage of your flexibility. Too many setbacks or a lack of productivity can quickly turn a profitable partnership, into a costly waste of time.
2. Set the terms of the deal
Consider this as the nuts and bolts of your partnership. If something doesn’t fit correctly, chances are it will fail. Set terms and consider every possible condition, from the start.
Lay out investment costs, points of contact, profit sharing, branding guidelines, responsibilities, and any other necessary requirements. Don’t skimp on the paperwork and make sure you consider every possibility to make the partnership successful and foolproof.
3. Be prepared to manage relationships
In some cases, you’ll need to nurture relationships to work well together. Fill gaps and manage new questions that arise over the course of the deal and partnership. You’ll likely need to facilitate joint decision making, especially if the contract does not lay down everything that needs to happen
Make the chain of communication clear and minimal. Identify key individuals that need to work together and make sure they can trust each other. If necessary, set up communications channels exclusively for the individuals working between both companies to keep everyone in the know.
4. Make sure your partnership is flexible
To survive a good partnership, it is important to explore new opportunities. At the start, one method or investment may make the most sense, but a few weeks or months in, something changes. The competition releases a new product, leadership shuffles or a setback opens up new possibilities.
Especially in a long-term partnership, try and be flexible. Work with your business partners to pivot and explore beyond the parameters of your current collaboration. This can ensure that you are both actively reaping the benefits rather than falling behind.
5. Get your entire team involved
It is never a good idea to announce a partnership negotiated between two leaders and expect team members to follow. Engaging the entire team is vital for success, especially if they are expected to work with a brand new team. Even if team members are not involved in the direct negotiation, getting to know the different players and defining their role will definitely expedite the partnership launch.
Focus on growth when approaching small business partnerships
Partnerships are always tricky to maintain, but while some are extremely successful, others need a bit of a nudge. To achieve the former, you need to trust, collaborate, communicate, and comply with each other. If both partners are open to new ideas and creative avenues, it will give you the edge that you need to grow.