Today’s savvy business owners realize that to achieve maximum sales success, they may need to rely on more than traditional selling methods. Many are partnering with noncompeting businesses and forming strategic partnerships to enhance their sales channels. To learn how this is done, we spoke to Monique Reece, founder and president of MarketSmarter, a marketing consulting firm that helps entrepreneurs develop the strategies and marketing plans to grow their business.
Small Business Center: In a nutshell, what is a strategic partnership?
Monique Reece: A strategic partnership, which is also referred to as a strategic alliance, is an agreement between two or more entities to support each other in ways that are mutually rewarding to both organizations.
How can such an arrangement help small-business owners increase their revenue?
Small businesses are typically challenged with three very important aspects of running their business: capturing new customers, making more sales, and expanding into new markets. Strategic partnerships are usually developed to help a business do this faster than they could on their own.
For instance, a strategic alliance will often open the door to new customers the business does not have access to, or would have a difficult time selling to, and this would increase sales volume and revenue. If a small business, for example, has only two salespeople and a strategic partnership is created with a company that has 15 or 20, this can immediately add sales without requiring the small business to hire a direct sales team.
A strategic alliance can also help a business expand into new markets. Although so much can be done virtually today using web conferencing, email, and other technologies to communicate with prospects located across the country or across the world, some businesses require a higher touch. A strategic partner with “feet on the street” in a particular market is what some companies may need to be successful.
And, finally, a business could experience the acceleration of a key asset, such as licensing rights. Or it could be a certain product or service that a company would like to bundle with their own to create more value for customers. Or perhaps a business needs to create a competitive advantage or a stronger brand preference than its competitors.
What key characteristics should a business owner look for in a strategic partner?
The business owner should prioritize the factors just mentioned and find a partner who has these attributes. Other things to look for are a strong brand, good reputation, and shared core values.
Can you provide a brief step-by-step outline about how to form an effective strategic partnership?
First, you should determine what you want from the partnership. What are your objectives? What are the ideal outcomes you envision for your business? Then, after the basic terms have been negotiated and agreed upon, hold a strategic planning meeting with the key stakeholders from both businesses. Ideally this should consist of a cross-functional team of people who represent the departments that are responsible for the success of the strategic partnership. For example, sales and marketing are important, but you may also need others from operations, product management, or finance. This initial meeting will communicate the purpose of the alliance and get everyone talking so people can ask questions, share ideas, raise any concerns, and create positive momentum from day one. Then agree on the targeted revenue and benefits each party will receive. It’s important that both parties have some “skin in the game.”
The next step is to create a partnership marketing plan that outlines all the roles and responsibilities, marketing programs, costs, and other support needs. You’ll also need to define how sales will be made and by whom. How will both sides support the sales teams? If the product or service is complex, a joint sales team with both a salesperson and a technical expert may be needed. Remember to evaluate the training requirements for various teams to be successful. Training may be necessary for only the sales team, or it may be required with other departments such as operations and customer service.
Finally, you have to agree on what metrics are important to track, measure, and report. This will enable everyone to see the progress being made, or if there are obstacles that must be overcome. Be sure to review the results and make adjustments quarterly.
Should the agreement be put in writing?
Absolutely. If it’s not, no one will be held accountable. The agreement does not need to be a long legal document but it should outline all the basics, such as sales targets, commissions, and other financial arrangements. It should also define operational requirements and the roles, responsibilities, and commitments each firm has agreed to provide.
Once in place, what can the partners do to ensure the partnership benefits them both financially?
The result of a strategic partnership is directly measured against how well it’s managed. A big mistake is to structure an agreement and then expect people to operate on their own to produce results. A manager would never expect a new hire to be fully engaged and productive after going through one day of onboarding. It’s the same with strategic partnerships.
If you could give one piece of advice to small-business owners contemplating forming a strategic partnership, what would it be?
Invest time and resources early in the relationship to establish accountability that will create a mutually beneficial partnership. Businesses that take a passive approach do not enjoy nearly the same success as those that put structure, commitment, and energy toward making the partnership successful.
Any last words?
Focus on creating ”quick wins.” Start small to build momentum and create success stories.