Entering a business partnership is an exciting new opportunity, but it’s also a decision that requires trust and commitment. It’s important to choose a business partner that shares your business’ values, vision and goals.
A successful strategic business partnership can increase brand awareness, widen your business market and grant access to new customers, among many other benefits. It’s crucial to not only create a successful small business partnership but to maintain it. Read on to learn how to build a rewarding strategic partnership for your business.
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Types of small business partnerships
The first thing your business needs to do when entering a partnership is to decide which type of partnership is the best fit. This is important because the type of partnership your business chooses will determine how your business operates.
Below we’ve defined several examples of different types of business partnerships. While we will be focusing mainly on strategic business partnerships, it’s important to understand all the possible options for your business.
Business partnerships
This type of partnership involves two or more partners running a business together. The typical main categories of legal partnerships are general and limited; however, this may vary from state to state so it’s best to seek the advice of your attorney or the secretary of state to see if there are any requirements for forming a business partnership and if any other necessary documents or paperwork might be required to set one up.
- General partnerships
A general partnership is an agreement, typically written, where two or more partners are actively involved in the business for joint profit. This means all participating partners are involved in business operations and take mutual responsibility for assets, debts and legal obligations.
General partnerships appeal to a lot of business owners because they can be easier and cheaper to start. General partnerships also allow for flexibility in structuring your business while giving partners the ability to more closely control operations.
- Limited partnership
A limited partnership is when partners take on uneven levels of involvement in the business. The general partner oversees the company and assumes unlimited liability, while one or more limited partners serve as investors but might not participate in day-to-day operations.
Strategic partnerships
A strategic small business partnership is a mutually beneficial relationship that focuses on creating joint value for two or more companies that retain their independence. This partnership involves sharing resources in creative ways to expand brand awareness, enter new markets, or generate trust in the industry. This is generally a long-term arrangement that allows companies to work together toward a common goal.
Strategic partnerships are an important tool that small businesses and startups should strongly consider when looking to grow their business. When executed correctly, these collaborations offer benefits that can lead to long-term growth profits and increased efficiency.
- Marketing partnerships
A strategic marketing partnership is a great way for businesses with customers/clients in a related field to come together to effectively market to new audiences and achieve marketing goals together. These partnerships are beneficial because they can allow both companies to potentially double their marketing exposure.
Marketing partnerships provide a way for small businesses to grow and acquire new customers with little overhead. The power of marketing partnerships is fundamental in helping to expand distribution channels, widen audiences and stay relevant, especially when working in a competitive marketplace.
When considering a marketing partnership, align with a business that delivers similar quality and value as your small business. Both parties should be equally contributing to and gaining from this partnership.
- Supply partnerships
A strategic supply partnership involves a small business teaming up with a vendor/manufacturing company that will supply them with the products, services, and/or materials their business needs.
This is a continuous relationship that requires commitment and trust. Small businesses choose a supplier to work with based on common goals and a mutual understanding of each company’s expectations of the partnership for long-term success.
A supply partnership can help in securing the best price, delivery and consistency from a supplier as they can count on the continued business.
- Integration partnerships
Integration partnerships are most commonly used in the digital space. This partnership can allow companies to offer a seamless user experience by linking their online site to social media and other websites. For instance, many businesses will partner with payment services to integrate purchasing. Creating an efficient user experience can help attract and retain customers by eliminating time-consuming processes and integrating offerings to a single platform.
Choose a partner that will allow your small business to solve customer problems and build new solutions that can save both time and money.
- Financial partnerships
Financial partnerships are generally between a business and financial institution such as a bank, financial firm or financial investor to handle finances while leaving the operations to the current business owner.
The purpose of a financial partnership for a business is to find a financing partner that can give the small business the working capital it needs to expand its business, enter new markets, service debts, etc. On the other hand, the financers are looking for a business with a good return on investment and desirable growth opportunities.
How to make your business partnership work
A successful business partnership can be established in many different ways, but there’s a certain set of criteria your small business should consider when looking to enter into one.
The best relationships require some give and take, so your small business should enter into its partnership search with clear expectations and an open mind.
Establish objectives
Your small business’ long-term vision and goals must align with those of your business partnerships to create a successful partnership. Be upfront with your company’s expectations from the start and create clear objectives to determine if your business will be well-matched with a potential business partner.
The only way to know what your business is looking for in a partnership is to know what your small business wants to achieve.
- Be honest about your business’ weaknesses.
- Determine what tasks each business partner will handle.
- Plan tasks and priorities focused on business growth.
How To Set Expectations in a Business Partnership To Ensure Success
Assess your resources
It’s essential to assess the resources both parties are bringing to the table. A strong business partnership requires talent and resources that complement each other. Partnering together should make both businesses more successful than if they were independent of one another.
It’s good to ask how each business will contribute to the partnership before agreeing. Is your small business able to provide the necessary resources for the partnership to succeed? This could include time, money, employees, and technology.
Be financially aligned
While not every business partnership will require your small business to be financially aligned with your business partner, it’s something your company should consider when entering a serious agreement. At the end of the day, this is a financial relationship, and discussing business finances and financial roles is a necessary part of creating a successful business partnership.
Some financial considerations both business partners should assess include:
- How is each business contributing financially to the partnership?
- Which business will be contributing capital, how much and at what times in the course of the business relationship?
- Is seeking outside working capital necessary for this partnership? If so, is the partner able to tolerate potential debt?
- Taking out a loan or using investors comes with financial risk, so both businesses should agree on how much potential debt they’re willing to take on.
- Do either business hold any financial liabilities?
- Most likely, both businesses may have some form of outside financial liabilities that could impact cash flow. Be sure to discuss this openly with your small business’ potential corporate partner.
- How will business expenses be managed for this partnership?
- Set up and stick to a business budget. Plan on how to handle additional expenses when they arise. The clearer your business partnership’s rules on spending, the easier it will be to avoid conflicts.
Create a written agreement
Once your small business has found a company that you’d like to partner with, it’s good to have an official agreement written up to protect all partners involved.
This should include details of the relationship such as:
- The type of business relationship.
- Responsibilities.
- Mutual risks and rewards.
- Duration of the intended business partnership.
- Branding guidelines.
- Rules of engagement.
Consider a test run or a short evaluation period
Before committing to a serious partnership, it might be a good idea to establish an evaluation period to test if both business partners actually make a good fit.
In theory, it could seem like a prosperous relationship, but in practice, your business could find that it isn’t compatible with the potential corporate partner. If it’s ultimately not a good fit, both business partners can save time and resources by trying out an evaluation period.
Nurture the relationship
The key to a long-lasting strategic business partnership is to honor and nurture the business relationship. Remember, you are creating this partnership because you believe there’s immense value in working together.
The goal of any small business partnership is to benefit both companies, which is why it’s important to continue to look for ways to make the business partnership better for all involved. If your business is doing its part to honor the partnership, the other business partner is more likely to uphold their side of the business relationship.
Finally, don’t be afraid to reevaluate your business partnership agreement periodically to improve or adjust terms as the partnership evolves.
Summary
Strategic business partnerships can be a great asset to any small business. The right business partnership can give your small business access to new markets, a wider client base, financial freedom and much more. There are many types of partnerships including legal and strategic partnerships.
Once you find the best fit for your business, put effort and thought into establishing clear objects, aligning resources, and nurturing the relationship with your business partner. The more knowledgeable and engaged your small business is throughout the process, the more successful the business partnership will be.
