â€śAnything we can do to share resources and prevent costs is what we [will do],â€ť says Jones, author of Dare to Walk in My Shoes: Confessions of a Sole Queen (Jones; $14.95), a self-published book about entrepreneurship.
But for Jones, 37, whose store grosses $280,000 a year, strategic partnerships are a way of life. Since her first week in business she has held three to four â€śShoe Soireesâ€ť at Sensual Steps and in clientsâ€™ homes every month. During her parties she advertises other businesses in exchange for complimentary products and services to offer her clients.Â Plus, she regularly attends promotional parties thrown by other local businesses and sometimes permits them to hold events at her store. Though critics told her she was foolish, she has even gone so far as to co-market her store on flyers with other small shoe stores in the black community, saying that working together cut her advertising costs in half.
If your company is on the fence about whether to build a strategic partnership, take these tips into consideration:
Identify your competitors. By understanding the competitive space, partnerships can better decide what resources they will need to combine and in what ways.
In Jonesâ€™ case, Greenhalgh says that Sensual Steps and her strategic partners are marketing against the nationally branded stores and malls that pull customers and their dollars out of the Bronzeville community. By forming UB2, the Bronzeville store owners are showing residents that when they shop in Bronzeville they will benefit from a variety of stores and that everything customers want or need to shop for can be found in the community.
Ask yourself, what makes this partnership profitable? Creating greater value for the customer should always be the purpose for any partnership. â€śYou need to look at what is going to sway the customer to do business with [your new team] as opposed to the competitor,â€ť says Greenhalgh. Determine if profits will be made from one group project, or if the financial gain will come as a result of decreased overhead, fees, or energy expenditures over time.
Write a detailed plan. After youâ€™ve come up with an idea, set up a meeting with the potential partners and explain what you want to do and how they will profit from it. â€śPeople are skeptical,â€ť says Jones. â€śThe more information you share the better.â€ťÂ Outline how much money or the types of services that you expect them to contribute and estimate the return on investment for each partner.
Donâ€™t lose control. Partnering with a company as opposed to a legal merger or acquisition is the difference between dating and marriage, says Greenhalgh. Every partnership you enter is a risk that can leave you liable since your partners can drop out at any time. Ascertain the legal ramifications of any agreement that you enter whether they are formal or not.
Consider forming a Limited Liability Partnership (L.L.P.). Under an LLP, all ownersÂ have limited personal liability for business debts. Forming such a partnership will keep any one partner from being bound to the performance of others in the alliance.
Return on Investment Calculator â€“ Predict the anticipated ROI for partnering with another company.
Promotion Calculator â€“ Identify how much a particular promotion will cost you with or without partners.
Buyers Co-operative â€“ Consider joining a buyerâ€™s co-op which will provide cost savings.