Aside from customers, the most important relationships you will make in business are with other companies. Forming close bonds with like-minded entities like yourself is truly the key to greater success. In fact, high-growth brands are three times as likely to use strategic partnerships as part of their overall strategy, than no-growth firms.
It’s about teamwork at the end of the day and strategic partnerships are what keep the ball rolling. They’re mutually beneficial business relationships that work to reduce costs, build better processes, increase revenue, and help a business grow.
However, finding the right strategic partner can be easier said than done. You need a teammate that can help expand your reach to potential customers and clients, while breaking into new markets.
There are a multitude of different partnership types you can sign up for, it just depends on your specific business model and operational needs. Whether you run a startup or enterprise network, building positive business relationships is how you grow.
In this article, we’ll examine what defines a strategic partnership, the different types, the benefits, pitfalls, and how to form one of your own.
What is a Strategic Partnership?
The main objective of a business partnership is the sharing of resources. A strategic partnership typically involves two non-competing companies that share both the risks and rewards of decisions. Both entities offer value to one another by contributing services that the other business may not have access to.
Partner companies are typically sought after when a business needs to acquire new capabilities and competencies within its own organization. This gives both companies the opportunity to reduce overall costs, increase brand awareness, gain new customers, and boost profits.
There are different types of strategic partnerships that can form based on business needs, size, market position, and other factors. Here are a few different kinds of partnerships with examples of big brands that use them:
This is when two companies team up within the same supply chain (distributors, retailers, and suppliers) in hopes of stabilizing the supply chain and increasing sales.
- Example: Ticketmaster and LiveNation
Companies within the same field join forces to improve their market position.
- Example: Facebook and Instagram
An investor provides capital and shares in profits/losses for a percentage interest in a business.
- Example: Balmain and H&M
Two or more companies form an entirely new legal entity in which profits and risks are shared. The original companies also continue to exist on their own.
- Example: Microsoft and MSNBC or Starbucks and the Seattle Seahawks
This is when one company takes over another and establishes new ownership.
- Example: AOL and Time Warner, now is just Time Warner
Two companies agree to move forward as a single entity, and the original business no longer exists.
- Example: Exxon and Mobile are now Exxon Mobil Corp.
Benefits of Having Strategic Partnerships
Business owners know that a successful partnership has many advantages. Strategic partnerships offer all parties involved the chance to increase their customer base and reduce expenses. The purpose of these mutually beneficial relationships is to form a strategic alliance in which everyone wins, whether you’re an entrepreneur, a startup with a new product, or an established business.
Strategic partnerships are designed to increase brand awareness, service functionality, and overall reach. It’s an extremely powerful tactic that gives any business a competitive advantage.
In fact, 85% of small business owners believe that partnerships are essential for business success. There are many reasons why this is a common strategy for business growth, such as:
- Gives you access to referrals and new customers
- Improves supply chain performance
- Gives you a product line extension
- Sourcing of extra capital
- Expansion into new markets
Partnerships like this also accelerate innovation and add value for your existing customer base.
Different Types of Strategic Partnerships
When a company decides they want to form a strategic partnership, the first step is identifying the main reason why. This will help you decide the type of business relationship and market that will be the most beneficial. Here are a few different types to consider
As your business acquires different types of technology (like SaaS), you need resources to take care of it. Whether that’s partnering with an IT brand that can fix your computers at a cheaper price, or a cloud services provider that offers discounts based on the space you need.
Finding a strategic technology partner will keep your operations running smoothly, with fewer disruptions and unwanted notifications.
Strategic integration involves making two separate programs work together; typically in the digital landscape. For example, a user will log into various online stores using their social media data. This saves the user time and draws them further in. Companies will also partner with payment apps to allow for easier purchasing both in the online store and through physical storefronts.
The main goal of integration partnerships is to make a customer’s interactions more simple and convenient. It’s also an opportunity to tailor messaging, making products so easy to use, it becomes a part of their daily lives.
Supply Chain Partnerships
This is the most common type of strategic partnership. Not to be confused with supply partnerships, supply chain partnerships involve multiple companies working together to create a finished product. These are manufacturers and vendors who supply a business with materials, products, and services your company needs to keep rolling.
Sometimes, these partnerships can be exclusive, like giving an exclusive contract to a printer supplier for your office needs. If you own a physical store, shelf space is sold to vendors to house their products (this is often non-exclusive).
One example of a strategic partnership is if your company builds motorcycles, but it’s more inexpensive to purchase some parts from another manufacturer. This is a prime opportunity to join forces. You can think of the partnerships as one large, moving manufacturing company, with each business creating its own parts, then shipping to the next company, and then the next, until product completion.
Keep in mind, many supply chain partnerships are exclusive, as a finished product is often considered intellectual property
If your organization isn’t in the financial market, it might be wise to partner with an outside firm to handle your accounting. They have the expertise to exclusively manage financial matters, understand regulations, and save your business from penalties. They can cover everything from taxes to stock programs and benefit plans.
These partnerships are also mutually beneficial. For instance, some businesses offer their employees benefits for banking with a specific brand; one with whom they have formed an in-house strategic partnership.
In this type of strategic partnership, both entities in a related field work together to help each other find new customers. This type of relationship is one of the keys to a world-class channel partner strategy.
It works like this...say you own a limo service and you have a local friend that owns a hotel. In this case, you can both refer clients to the other business, using localized, cross-marketing strategies. The hotel can advertise limo services, and the limo drivers can suggest the hotel to new people in town.
This can also happen on a larger scale. Enterprise companies (like manufacturers) partner with brands that sell the manufactured products, agreeing to manufacture and sell exclusively for each other.
Strategic marketing partnerships also include reseller partner programs. These help companies increase sales, build relationships, and expand their network. Resellers work to engage and motivate end users and redefine value for your brand.
How to Form a Strategic Partnership
Business owners need to start by conducting a lot of research on potential partners and business entities. Whether you need help with finances, marketing, or distribution, you should have a specific goal in mind. Once you have that in place, it’s time to form a strategic partnership. Consider these steps:
1. Research Partnering Strategies
Contact people in your network, go online, or call for references. It’s your job to ask the right questions. Gather information on which companies can most likely help to meet business needs. Try to look for a partnership that’s mutually beneficial, this way everyone is fully engaged in the work.
2. Identify and Recruit Ideal Partners
What are the best ways to identify ideal partners? Google is a start. Check out the reviews. Search hashtags, social media, and influencer pages. Other ways to find top talent include:
- Use specialist tools
- Join affiliate networks or work with an agency
- Attend events
- Invest in paid advertising
- Join online forums and groups
- Hire a partnership manager
You can also leverage your existing customer base and/or publish a partnership page on your website.
Once you have found the right brands, you must also entice them to work with you. Develop an “Ideal Channel Partner” profile in advance so you understand the best ways to recruit them. Make it about the partner and not about your products. Additional tips for recruiting include:
- Work with distributors to reach top-performing sales partners
- Follow up with leads quickly or you’ll miss out
- Demonstrate exactly how you add value to sales partners
- Prioritize responsiveness to build trust and keep partners selling
Another thing to consider is that it’s important to know when to say “no” to new or further investment in a partner.
3. Create a Strategic Partnership Agreement
After you have found the perfect partner, you need to put it in writing. This official agreement (called a strategic partnership agreement) should be drafted by a legal professional and include the following:
- Certain services each company provides
- All companies involved
- The duration of the job
- Specific agreed-upon terms
- Initial metrics or benchmarks
- Signatures of the responsible parties
Before signing, both parties may have their own stipulations to work out. This is common in the negotiation process. That is why it’s always recommended to hire a lawyer.
4. Honor the Agreement and the Partnership
What is a channel partner? Nothing without a positive business relationship. In the end, you must honor the agreement and demonstrate you value the partnership. Always keep an open line of communication with your strategic partner and continue to give them referrals. Make sure your partner shares in the success and remains happy with the terms of the agreement.
Strategic partnerships open up doors you never even realized were there. It is the goldmine of opportunity, especially for a new business. It grants you access to a larger network of potential customers, improves supply chain performance, and helps to source extra capital.
Strategic partnerships fall under a variety of categories from assistance with technology to finance, marketing, and supply chain management. The best way to decide on the method that works for you is to take the time to research and establish some goals. This will make it easier to choose a partner that will go the distance and drive mutual success.
Relevize is a tool that can help you increase sales revenue and boost partner relationships. The platform enables your partners to easily launch paid campaigns. This helps to acquire new leads that can be nurtured to generate qualified channel pipeline.
What is the answer to developing a strategic partnership that lasts? Download our latest e-book, The Secrets to Building Strong Channel Partner Relationships, to find out