When considering options to grow and strengthen your business, inspiration can come from the corporate world, where an organisation’s size and breadth of their services often opens up a raft of valuable cross-selling opportunities.
Many small businesses already mimic this lead-generating model by building their own networks with like-minded entrepreneurs. However as anyone who’s trialled this approach knows, some partnerships are more successful than others.
In addition to the obvious need for a balanced relationship in terms of effort and results, some of the most useful partnerships come from a great cultural fit, or perfect audience alignment. When it works, both businesses benefit from new customers at a reduced marketing cost, as well as increased brand visibility.
If you’re considering setting up some new partnerships, or reviewing your current arrangements, take a moment to find out more about the different types of partnership and the secrets to making them work:
Businesses that appeal to a similar audience and have analogous products or services are particularly well placed to collaborate. For example, an SEO agency, web designer and graphic designer might work together to boost their offering and cross-sell (or refer) one another’s services and secure more work as a group.
Some even go one step further and pitch as one combined team in one agency’s name. This kind of pooled resource can be great in the early stages of building up a customer base, but if you go down this route make sure you are legally protected and be conscious of how much time you invest into winning work in another agency’s name.
While some small business networking groups offer automatic referral schemes, they can be more problematic than partnerships formed directly between business leaders. Forced referrals between all members of a particular networking scheme rarely compare to those made because of a genuine relationship backed up by trust and shared values.
Another example of a complementary partnership would be two or more e-commerce businesses purchasing goods as a co-operative for economies of scale, or sharing warehouse space. Office-based businesses can also benefit from sharing space with similar enterprises.
Of course, when it comes to sharing premises, issues of contracts, insurance, allocation of space and cost splitting need to be clearly addressed from the outset to protect all parties.
It may seem counter-intuitive, but partnering with competitors can also provide returns. In practice, this could be a group of businesses pooling marketing budget to achieve more than each could on their own, such as a group of tech businesses hosting an event together.
Equally, businesses that are directly competing for the same customers can refer clients to one another where they are unable to take them on directly because of a conflict of interest or lack of capacity. Again, this relies heavily on trust – on a true alliance – so choosing the perfect partner is vital.
Strategic partnerships have great potential for small businesses looking to achieve economies of scale and boost their marketing – but as with any successful relationship, the benefits need to be mutual.
As such, for businesses working in a partnership, metrics and measurements are crucial. It’s critical to monitor how much revenue is coming from these partnerships to make sure that they are worthwhile.
Working with an accountant or trusted advisor, it’s possible to assess the sources of new business to identify what work has come directly from the partnership. Comparing this information with the amount of time and money being invested into the partnership, businesses can start to calculate the cost of each new customer and figure out how valuable the alliance really is.
The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management. This article originally appeared on the KPMG Small Business Accounting website