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Thursday, June 7, 2012

The Importance of Strategic Partnerships

from: the National Federation of Independent Business

Strategic business partnerships allow small businesses the opportunity to grow their customer base and improve their business.

Small business owner Scott Schnurr, of Plainfield, Ill.-based DRF Total Property Solutions, a professional property solutions business, has seen the benefits of business partnerships firsthand. He’s been working with big-name companies like Sears, Home Depot and RainSoft Water Treatment Systems to better serve his current customers and to gain new customers.

“The main objective [of partnerships] is the true synergy of one plus one equals five instead of two,” says Schnurr.

But gaining new customers is only one of many reasons for forming partnerships. A partnership could mean your business will have access to new products, reach a new market, block a competitor (through an exclusive contract) or increase customer loyalty.

Some prefer to use partnerships to strengthen weak aspects of their business. Schnurr’s mentor, Rob Slee, founder of MidasNation, an aggressive business mentoring community, says small businesses should use strategic partners when those partners can better serve your customer. “What do you really know how to do in your business?” asks Slee. “Do those things extremely well and outsource everything else.”

Schnurr identifies his customers’ pain points and finds partners that can resolve them. Some of his customers were working on large projects that required several contractors. He partnered with contractors who had skills his customers needed—like painting or electrical work—so his plumbing customers, for example, could get all the services they need from one trusted name.

Want to get started? Here’s how:

Map out a plan. What is your purpose in forming a business partnership? Your purpose will drive who you decide to partner with.

Determine prospective partners. This will require a bit of time and digging. A few factors to consider:
  • Brand alignment. Do they share similar brand values? Are the cultures of your companies similar? Because Schnurr’s business is faith-based, he’s careful about which companies he partners with. “We’d never want to be in a meeting and have [a partner] say, ‘We need to find a way to rip off our customer,’ when every day [DRF is] trying to find a way to serve our customers,” says Schnurr.
  • Location. Is the potential partner in close proximity to your business? Will time zones and long distance travel strain the partnership?
  • Complementary products. This might work well if you’re a service business and can partner with a product you commonly use. Schnurr’s business installs water softeners. He partnered with RainSoft , a water softener manufacturer, and North American Salt Company, a water softening salt producer. They get access to his customers, but DRF gets valuable educational materials that he can pass on to his employees and customers.
  • Ability to deliver. Both you and your partner must benefit from the relationship. “If [both parties] can’t see what’s in it for them, why would they want to play?” says Slee. Be sure the business is successful and mature enough to partner with you. Schnurr finds that companies equal to or greater than your company in size and strength are best to partner with.
  • Target audience. The business must have the same customer profile as yours.

Pitch your idea to the prospect. “A lot of times people are going to think you have ulterior motives,” says Schnurr. “But a true collaboration has to be win-win. Everyone has to benefit.” Clearly lay out the benefit for both parties. You may explain your idea verbally at first, but make sure you put the agreement in writing, says Schnurr, so there’s no confusion about the purpose of the partnership.

Determine objectives and metrics. It’s better to set metrics in the beginning, rather than let a partnership fail due to unreasonable expectations. “What would define success for both parties? If you agree upon that up front, you don’t have surprises,” says Slee.

Don’t be afraid to get started. “If you have substantial market know-how and have a system that’s fairly effective at something, you can do partnerships,” says Slee. “Most people are scared, saying, ‘I’m just a small firm. Nobody will take me seriously.’ If you have a compelling value proposition, that speaks for itself.”

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