The concept of a fruitful strategic partnership appears straightforward: 1 + 1 = 3. In reality, collaborations are a well-established method for enhancing financial performance. A 2019 online survey by Forrester Consulting revealed that 49% of participants experienced an increase in revenue due to partnerships, with 77% viewing “partnership development as essential to their 2019 sales and marketing agenda.”
However, establishing effective partnerships is not always simple. Initiatives that fail can result in disappointment, monetary losses, and potentially legal disputes, according to David Gage, co-founder of the mediation firm BMC Associates and author of The Partnership Charter: How To Start Out Right With Your New Business Partnership (or Fix The One You’re In). “People often reference Don Corleone from The Godfather when he states, ‘It’s business, not personal,’” Gage explains. “Yet, partnership dynamics intertwine both personal feelings and business operations.” He stresses the importance of addressing both the operational and legal sides of partnerships, along with the personalities involved.
Before forming a strategic collaboration with a partner, take these steps into account:
- Review all dimensions of your business and pinpoint areas ripe for growth.
- Identify your strengths and where support is needed. Denise Rodriguez-Lopez, a former American Express OPEN Advisor who advised small businesses on partnerships, emphasizes that partners should enhance each other’s capabilities. “The objective is to enhance abilities—whether that involves introducing new products or services, increasing capacity or expanding reach, or engaging in cross-promotion,” she states.
- Ensure both organizations align seamlessly to better serve the customer. “Obvious synergies are essential,” Rodriguez-Lopez remarks. “While it’s not illegal for a tech firm and a janitorial service to collaborate, how many opportunities will arise from such a partnership?”
- Screen the potential partner to confirm they possess robust finances and a history of reliability and ethical business practices. “Be clear about your interest in quickly learning as much as possible about them,” advises Gage. “Following that, reach out to their past business partners, employees, and employers.”
- Do their values resonate with yours?
- After conducting thorough research, trust your instincts, Rodriguez-Lopez suggests.
- Document everything formally.
Written agreements for strategic partners should encompass the following elements:
- Clearly define responsibilities. Be precise.
- Decide who will act as the primary contact for clients. “Clients need clarity on who their point of contact will be,” Rodriguez-Lopez notes.
- Outline the monetary exchange process if applicable.
- Determine policies for any new innovations resulting from the partnership. Who owns the intellectual property?
- Set a trial period for the collaboration with scheduled check-ins.
- Formulate a mediation plan or exit strategy should the partnership not proceed as anticipated.
Jennifer Schaus
Principal
Company: Jennifer Schaus & Associates, a government contract consulting network
Strategic partnership philosophy: Unite consultants with various specialties to enhance client service and improve overall profitability.
Proof it works: Schaus’s profits increased by 15% from 2011 to 2012 due to her partnerships.
When I began my journey as a government contract consultant in 2005, I took on various consulting roles: sales and marketing, certification, business development, and contracts. While I was adept at all these tasks, I discovered that my concentration and ability to manage time effectively waned since each government entity operated differently, and each consulting type demanded distinct skills. I concluded that honing in on one facet of the industry made more sense, yet I still aimed to address all my clients’ needs.
In the past four years, I’ve formed a coalition of 16 government contractors with diverse specialties, allowing me to concentrate on my area of expertise—consulting for government contract documentation. When clients approach me for services beyond my scope, I refer them to one of my partners, for whom I have established referral fees. Occasionally, I enter into contracts necessitating the hiring of another consultant alongside my own services, compensating that partner as a 1099 employee. I profit from their services by marking up the fees. In 2012, I referred about 35 to 40% of the work that came my way.
My partners are individuals I encounter at networking functions or within the contracting community in Washington, which is small enough to allow for thorough vetting of their work quality. We have written agreements, but these are relationships built on trust; people I regularly lunch with, and our contracts are mutually beneficial, under the philosophy of “I’ll help you if you help me.” Their profiles are displayed on my company’s website. I find this arrangement fulfilling, and it allows me to utilize my energy more effectively by focusing on work I truly enjoy. I also manage to serve my clients better, as I no longer need to turn them away. Instead, I can say “yes” even when requests fall outside my expertise—while still earning from the collaboration.
I could have developed a business with employees that required process management, but that was never my goal. This setup enables me to engage with clients while maintaining my independence.
Mike Kilchenstein
Founder, CEO
Company: RAMP Sports, a manufacturer of ski and snowboard gear
Strategic partnership philosophy: The seasonal sporting goods brand found a product to market during its off-peak season.
Proof it works: Came close to achieving sales targets in the program’s inaugural year.
Within the skiing industry, sales typically soar to 100% during the peak winter months and plummet to 0% during the off-season. A significant drawback of this model is that off-season, businesses often have to let go of their technical representatives who facilitate product demonstrations—an essential part of driving sales. Consequently, many skilled reps do not return for the following season, creating challenges.
To address this seasonal void, we chose to partner with a paddleboard company, which thrives in the spring and summer months. The stand-up paddleboard market has been rapidly expanding, with considerable overlap observed in the customer base for both sports. When seeking a paddleboard collaborator, I prioritized a company that aligned with my organization’s values. This includes maintaining an environmentally friendly approach—our products incorporate bamboo and eco-friendly resin; we have a recycling program for old skis, purchase carbon offsets with each sale, and ship merchandise in reusable bags instead of cardboard. Additionally, we wanted to collaborate with a partner offering innovative technology, particularly skis engineered for a variety of sizes and skill levels. It was also crucial that the partner would be open to our direct-to-consumer sales model, which posed some challenges.
At a national outdoor retail conference, I engaged with numerous paddleboard companies, ultimately determining that C4 Waterman was the ideal match. Their technology stands out in the market, offering inflatable and easily portable paddleboards, unlike traditional materials that require car racks for transport. Their business values—balance, endurance, strength, and tradition—align well with our company’s ethos. Additionally, they implement sustainable practices, including bamboo usage.
An essential aspect of our partnership was C4’s readiness to venture outside their usual parameters. This involved selling products directly online, a strategy they hadn’t previously explored. We collectively agreed on retail pricing for C4’s products and committed to cross-promoting both brands via discounts on our offerings. Every paddleboard purchase granted our customers the option to acquire RAMP skis for $149 or snowboards for $99—a significant incentive within a typically non-discounted product range. Our aim was for paddleboards to contribute 25% of our total revenue, with projections estimating a 20% realization in 2012.
Along with increasing their product sales, C4 derived additional exposure from my firm’s tech representatives demonstrating their products at various venues in Park City, Utah, and from our marketing strategies that spotlighted significant events like Bonnaroo, Dave Matthews concerts, and ESPN’s summer X Games.
While C4 and I established a written agreement, we did not involve legal advisors in its formulation. It was more of a mutual handshake agreement, reflecting our shared respect for each other’s goals. We even requested that C4 contribute prizes for our contests, a feat they rarely undertake, but they readily agreed.
David St. James
Director of commercial sales
Company: 1-800-GOT-JUNK, a junk removal enterprise
Strategic partnership philosophy: Forge alliances that yield benefits for the partner, the company, and the client.
Proof it works: In 2012, 3 to 5% of revenue stemmed from alliances—a revenue stream growing at double to triple the rate of other business lines.
Strategic partnerships are pivotal to our success; hence, we have an eight-person National Accounts and Strategic Alliances team. We currently maintain partnerships with around seven commercial enterprises. Half the time, we reach out to prospective partners, while the remainder involves them contacting us. We prioritize collaborations with companies that demonstrate excellence in their category, recognizing 1-800-GOT-JUNK as the largest player in its field. Transparency and openness are crucial in the partnerships we seek. We aim for agreements that deliver mutual benefits over the short and long term.
Nevertheless, the primary condition is that their clients must have a direct need for junk removal services. Established long-term partners include:
RE/MAX and Century 21, as individuals selling their homes typically require junk removal for staging purposes, while those relocating often need to dispose of unneeded items. Clients enjoy a discount on our services, while agents can offer a broader array of services, benefiting everyone involved.
Another partnership example is our collaboration with AAA, collectively hosting e-waste collection events at AAA retail locations for the convenient drop-off of unwanted electronics, which we subsequently recycle responsibly. No funds exchange hands, yet both AAA and 1-800-GOT-JUNK gain heightened visibility at events that support environmental and community well-being.
At the onset of every partnership, we create a written agreement outlining anticipated activities and quarterly check-in meetings. While these plans remain simple, we review them during each meeting to assess successes and improvements. We view these relationships as enduring friendships rather than setting a definitive end date.
A noteworthy success story arose from our partnership with the mini-storage business PODS. Initially, we collaborated on some online and national direct marketing initiatives, which yielded limited returns. Recognizing our franchise nature, we shifted the collaborations to a local level—local franchisees from 1-800-GOT-JUNK partnering with their local PODS counterparts on trade shows and joint direct mail initiatives. This strategy flourished into a productive symbiotic relationship.
These partnerships are crucial to our business as they foster repeat transactions and a higher frequency of customer engagement compared to other lead generation channels.
