A "Key Partnership" in business refers to the network of entities with whom you relate to leverage each other's talents for the benefit of both.
In tough economic times this is an effective method of increasing the amount of business your organisation does. It can achieve increasing sales, better margins and higher profits. The alliances can help to reduce risk of running your business, make acquiring assets cheaper. It is a partnership in which you leverage what you each bring to the marketplace in order to add value for your respective clients.
In a nutshell, a strategic partnership is an agreement (either formal or informal) between two or more business entities with the objective being to benefit all parties.
Ask Yourself, What’s in it for them?
We can distinguish between different types of key partnerships:
- Strategic alliances between non-competitors. An example could be an attorney and accountant. The attorney will have clients who need the services of an accountant and vice versa. The relationship is mutually beneficial. By sharing referrals, both parties can have a win-win situation.
- Co-operation with competitors. Recently, two branches of a franchise operation called The Tax Shop found they faced the same problem of name recognition. Their answer was to run joint adverts in local magazines. By working together, the joint adspend allowed a much wider exposure to the public.
- Joint ventures with Networks. An example would be a Networking group such as BNI. By collaborating with groups of service providers, one builds a trusted circle of influence.
- Buyer-supplier relationships to assure reliable supplies. Some suppliers may have minimum standards to qualify for special prices. By signing exclusive deals, one could steer all orders to a single provider and qualify for a better price.
- Improve value proposition by creating Power Teams. For instance a draughtsman could have a range of service providers who have been tested, and will provide above average service. This makes it easier for clients who do not have to vet 6 or 7 other service providers.
Are their risks?
Yes, there are risks. It is critical that you choose your partners carefully and ensure that all parties have a clear indication of what their responsibilities are as well as to the benefits available to all. Some questions that would be worth considering prior to entering into an agreement may include...
- How long have they been trading?
- What reputation do they have?
- How are they positioned within the marketplace?
Key partnerships are critical to your survival.
Part 1 of a series of articles on Building Your Business.
Article written by Nico Kleynhans CFP(R) from Northwood Financial Services cc