3 Reasons Your Business Needs Strategic Partnerships and 3 Ways to Form Them

As a small-to-midsize business owner or executive, most of the possibilities for scaling and growing your business come with a hefty cost attached. But one option may not require an influx of funding and can instantly add value and new capabilities to your organization. Forming strategic partnerships – working with another organization toward mutual goals – can bring new skills, expertise, clients, resources, and reputational benefits that can add up to a meaningful competitive advantage.

Strategic partnerships come in many forms, from formal exclusivity deals, sponsorships, reciprocal referrals, and co-branded products, to informal arrangements in which two organizations agree to simply meet occasionally, discuss possibilities and learn together. No matter what arrangement you ultimately pursue, there are several key reasons to consider getting started.

Reasons to form strategic partnerships

Grow your customer base: Assuming your organization and a potential partner have overlapping audiences, working together gives you access and exposure you would not have otherwise – at least not without making a significant investment. Your new customer base is likely to be much more receptive to you than a traditional marketing audience, as your partner has vouched for your products and services.

There are many opportunities to grow your customer base in a partnership, including co-branded products and services, reciprocal arrangements in which each company rounds out the product or service offerings of the other, or even trading marketing lists.

Share valuable resources: Every small-to-midsize business has knowledge and skills gaps that are just too difficult to fill in a streamlined workforce. You may often outsource tasks or bring in consultants when expertise is needed, and these options can be costly. But a strategic partnership can give both organizations immediate access to new experiences and skills.

Often, the collaboration reveals deficiencies you never recognized, and that also helps you to strengthen your organization. Strategic partnerships offer a unique and cost-effective way to share knowledge and skills that is ideal for smaller organizations with limited resources.

Broaden your offerings: Are there products and services you would like to offer your current customer base in order to respond to competitors and meet market demand? You could invest in R&D, or you could partner with a business that has a complementary lineup. By aligning, both organizations gain an immediate open sales pipeline with minimal investment. You simply pool your resources and cross-train sales and service personnel to round out your offerings.

When your competition offers a popular new product or service, you must respond with urgency, or risk losing market share. A strategic partnership gives you that ability.

Methods to uncover potential partnerships:

Find overlap in markets: First make a long list of closely related products and services to your product line. Then think about which of them your customers would most likely be interested in if you could offer them. Then find a potential partner that offers those products and services, with a potential reciprocal interest in selling your offerings to their customers.

Be creative; sometimes this type of partnership can be based on unrelated offerings, but common customer demographics and preferences. The integration of cleaning supply and office supply businesses likely began with this approach.

Find complementary strengths: Does your company have a market-leading sales force, while a competitor has a line of products you would love to offer. Do you have elite-level customer service while another company excels at generating higher order values? By combining offerings and skill sets, both teams can focus on what they do best, while adding value to both organizations. Consider the areas in which your company excels and your relative weaknesses, and find a partner with complementary strengths.

Partner with a big business: Smaller businesses are often more nimble and innovative than larger companies. They can often bring products and services to market more quickly, and can become incubators for fresh thinking. Larger organizations may see attractive synergies in a potential partnership. Think about what your organization may have to offer a larger company, and what you may be able to gain in a mutually beneficial relationship.

If you’re not certain about whether a strategic partnership is the right avenue to pursue now, learn more by having exploratory conversations with other business leaders. You may find out that a simple conversation could ultimately result in an alliance that alters the fortunes of two businesses.