In an era where globalization and technology are forcing enterprises to constantly innovate, strategic partnerships are often the best way to minimize risk and increase profits. The choice to partner with another business is an important decision and hence there a number of things to consider, such as:
How do you know forming a partnership is the correct thing for your business?
We first have to understand the different types of partnerships and how you can make them work to the advantage of your business entity.
Types of Partnerships
Currently the rule is you can form an alliance with almost everybody, even your closest competitor. Here is a list of possible partnerships that a business can consider:
- Suppliers: By establishing alliances with suppliers you increase your chances of procuring inventory whenever the need arises. In addition you can share information and training to enhance your production process.
- Competitors: This partnership can operate like a joint venture with both partners’ pooling resources to reach a target market. When two rival companies decide to work together towards a common goal the possibilities are endless.
- Employees: In most cases employees make the perfect partners. They are effective at forming relationships with customers, suppliers and distributors. You can motivate your staff by offering a share option plan. This way they can be part-owners of the company and take on more responsibilities.
- Customers: Though this partnership is overlooked in many cases it can be very valuable. The customers can provide essential feedback about your business.
How to Determine the Right Partnerships for Your Business
When seeking a partnership with another business it is important you find one that is compatible with yours. They are areas you must examine before entering into a partnership. These are:
- Operations: You must establish if the company is being properly managed. Find out extensive information about the company, those who manage and own it.
- Financial Situation: Try and establish the state of their finances to ascertain if they are financially stable or, are facing financial challenges.
- Product Quality: Ensure your potential partner takes quality of their services and products seriously, as you do. If you have a reputation for good quality products among your customers, do not risk tarnishing it because of a bad partnership.
How to Make Partnerships Work
- Outline both your goals and aims in writing so you can refer to them whenever you review the partnership.
- Maintain constant and open communication to discuss the aspects of the partnership in order to find out what is working well and those aspects that require changes.
- Ensure the partnership is balanced with both sides putting in the effort and not one party taking advantage of the other.
- Discuss the financial matters upfront. Determine how much is to be invested and the profit as well as the loss sharing ratios.
For many businesses, strategic partnerships work out to the advantage of both parties. The success of the relationship depends on the time and resources both parties put into the relationship. A business partnership can offer your company a larger market share, increased profits and improved brand visibility.
Learn More:
