A strategic business partnership can help your business grow at low cost, can help you get new customers, enter a new market, save money on marketing, and boost your brand. But to enjoy the benefits, you need to follow these steps to prepare yourself and your business to enter a partnership.
Determine your goals
What do you want? Knowing what you want to get from the partnership will help you determine what kind of business partner to look for.
- Do you want to sell your products in other areas? Consider a sales or distribution partnership.
- Do you want to offer more services to your customers? Consider a sales, co-branding, or distribution partnership.
- Do you want to increase your brand exposure and make more people recognise your brand? A co-branding, cause, or promotional partnership may be what your business needs.
- Do you want to improve your marketing results at less cost? Take a look at promotional, co-branding or cause partnerships.
- Do you want to develop new products without huge risk? A joint venture or co-branding partnership can help you achieve this.
- Do you want to upgrade some of your own business processes or systems? Consider a service exchange partnership.
- Do you want access to new technologies or manufacturing expertise? Consider a joint venture.
Put your house in order
Before you start thinking about a partnership, you need to make sure that your own business is running smoothly. If you have issues in your business, entering into a business partnership will not solve the problems. In fact, it will shine a light on the problems you are facing and this can cause the partnership to fail. You need to review the following areas:
What is the state of your business finances? Is your record keeping up to date and correct? Do you fully understand all your income and expenses?
Employees and business partnerships
Do your employees have the necessary skills to carry out their work? Will they be able to take on additional work when you start the partnership? Are you having issues with any staff member? If you are going into a partnership with a partner who is more advanced than you, how will you ensure that your employees are able to keep up?
Processes and systems
Are your business processes and systems in place so that you can work efficiently? Consider your financial administration & record keeping, but also any inventory management & reporting, customer database, marketing assessment processes, and your payrolling systems.
If you are a small business, there is no need to purchase advanced software programmes. Most of the time, Microsoft Excel or LibreOffice Calc Spreadsheet (100% free) will be enough.
Address any other business issues
Evaluate your entire business. Are there any areas where you are having issues? Try to address these issues before starting the partnership.
If it is an issue that you are hoping the partnership will help you improve, make sure to clarify the issue in writing. Explain the issue and don’t forget to explain what you hope to achieve + what steps you have already taken to address the issue. When you enter into discussions with your partner, this will help them to understand what you need.
Identify potential business partners
This requires you to fully understand your market and the areas where you want to improve or grow. Start by making a list of businesses in your city, region or country that you think may have that which you are looking for. This will be your “longlist”. For example, if you want to start selling your products in another region, look for businesses that are already selling there.
Your next step is to evaluate them. Can they really do what you are looking for? Is the business doing well? Also make sure to study whether their way of working is something that you agree with. Because if you become partners with them, it will also affect your business reputation.
For example, let us say that maintaining good business relationships is important to you. When you start doing your research, you find out that the potential business partner is doing really well in sales, but it is because they are coercing their suppliers. This means that there is a gap in values. How important are you values to you, and is this potential partner a good fit for your business? If you become partners, will it cause problems later on in the relationship?
You may need to visit stores or talk to customers and suppliers to get an idea of how these businesses are doing. You may even need to buy a product from them to see how they perform. Don’t forget to check their social media! The main thing is to use this evaluation to cut down your “longlist” to a “shortlist” of potential partners.
What can you offer?
Nobody will partner with you unless there is a win-win potential, meaning that they too have to be able to benefit from the partnership. So, what do you have to offer?
When you are looking at potential partnerships to expand your business, try to stand in the other business’ shoes. Study their products, services, marketing, business location and any other thing that you can think of and that you can access. What might they be lacking? Where might you be able to offer them some support?
Make sure to also consider what kind of terms you are willing to offer. Will you share profits and losses 50-50? Will the partner (or you) have to invest money into the partnership? If you decide to end the partnership, what terms should apply?
These are things that you should consider before entering into negotiations. You should also consider in what areas you are willing to compromise (and how much). Make sure to also fully understand your red lines. Those are the things that you are not willing to negotiate about.
Have a business partnership agreement
When you enter into a business partnership, you should always have a written partnership agreement. This will help to avoid misunderstanding and conflict. The agreement should tell you how the partnership will work. If the partners are bringing assets or resources into the partnership, there should be a list of these assets or resources. The agreement should also explain how the responsibilities and duties of the partnership are divided among the partners (who is responsible for what), how each partner will be compensated, how you will measure the success of the partnership, and how you will divide profits or losses.
If you are one of the almost 500 entrepreneurs receiving my weekly email, I have good news for you! Check your email because I am sending you a free draft business partnership agreement that you can freely edit.
Don’t forget to check back next week. I will be showing you how to choose the best business partner.