The 10 things you absolutely MUST know about creating strategic partnerships and joint ventures (JVs)
The more complex and challenging the business environment becomes, with the ever present threat of COVID shut downs, new technologies emerging at an ever increasing rage, innovation cycles getting faster, the need to do our bit to protect the planet and increasing recognition of the importance of social impact —the more strategic partnership relationships make sense, providing access to new markets and channels, sharing intellectual property, resources or infrastructure, reducing risk and opening up opportunities to do more good in the world.
And the better businesses get at managing these partnerships, the more likely it is that they will become “partners of choice” and able to build entire portfolios of practical and value-creating relationships.
In this article you’ll discover ten of the key things you need to know to create and manage effective strategic partnerships to ensure maximum value for all parties involved.
1. HAVE A PLAN
That’s right you need to have a strategic partnership plan that is directly linked to your business goals and plans. (After all we know that if you fail to plan you plan to fail). But what is a strategic partnership plan and why do you need one?
Let’s start with what it isn’t. A strategic partnership is not an opportune relationship developed from a chance encounter. A strategic partnership is a planned strategy or activity developed to help two or more businesses achieve their business goals more quickly, easily and effectively than either one of them could have achieved alone.
If you aren’t clear on your business goals then there is no point in looking for strategic partners. So what are your business goals and objectives for the next 3, 6, 9 and 12 months? When you know that it will be easy to identify who may be able to help you achieve them.
2. UNDERSTAND YOUR BUSINESS
First you must know who your target market is. This is absolutely critical to identifying and developing successful strategic partnerships. The better you understand your target market the easier it will be to find and create successful alliances. This high end day spa doubled her business by giving away gift hampers to the buyers of new Mercedes, BMWs and Porches NOT just any new or second hand cars. Know your niche.
Second you MUST understand your business finances: your customer acquisition costs, the lifetime value of a customer and your profit margins. If you don’t know those then you are at risk of not capitalising well enough on strategic partnership opportunities or worse still of sending your business bankrupt as the result of a successful marketing strategy. Let’s go back to our day spa owner for a moment. She knew the lifetime value of a customer so she gave away hundreds of dollars of products and services in her gift hampers – NOT ten percent discounts! But what if she hadn’t understood her profit margins – a sudden intake of new customers with not enough profit margin can send a business out the back door. Know and understand your business finances.
3. KNOW WHO TO CREATE ALLIANCES WITH.
Once you have a plan and you know what you want to achieve it is easy to work out WHO can help you.
- Who shares your target market?
- What are the businesses before and after you in the supply chain?
- Which businesses see the problems you solve?
- What other things do your clients shop for and from whom?
- Who has already captured your market that you could leverage off?
Write a list then it will be easy for you to recognise the people who can help you when you need help. Here’s a guide to how to identify your ideal strategic partners.
4. KNOW WHERE YOU CAN FIND THEM.
Do you already know them? Who do you know who knows them (remember 6 degrees of separation) – if you don’t ask you will never know. Will you find them at networking events, at community service organisations, at the golf club? Will you have to resort to the yellow pages or online searches? Find out – where are the people who share YOUR target market – for some of you this may be the most valuable piece of information you will ever collect.
5. KNOW HOW TO MAKE THEM WANT TO WORK WITH YOU EVEN IF YOU HAVE NO LIST AND NO MONEY.
This is a sales process – YES I’m sorry to say it if you hate sales – but you HAVE to learn to SELL your strategic alliance idea.
Step 1 – find out what THEY want – no assumptions. What is their PAIN – it may not be the same as yours.
Step 2 – make them an irresistible offer – show them the benefits from THEIR point of view
Step 3 – call to action – just as in any sales process you have to tell them what to do – close the sale.
6. KNOW WHAT YOU CAN DO TOGETHER
- Can you refer business to each other?
- Can you set up an affiliate program for them or can you be part of their affiliate program?
- Can you advertise together and share the costs?
- Can you share information products or event create an information product together?
- Can you provide each other with additional products or host beneficiaries?
- Can you help each other to reduce costs?
- Perhaps you can even create a whole new product or service together – a real Joint Venture
7. KNOW WHICH STRATEGY TO CHOOSE
No, all strategic partnerships are not the same. There is not much point suggesting a referral strategy to someone who doesn’t want more customers (and that’s right some people don’t). Different strategies produce different outcomes. Link back to what you want to achieve and what your potential strategic partner wants to achieve that way you will select a strategy that will not only be successful but be effective as well – not always the same thing!
8. HAVE AN IMPLEMENTATION PLAN
I have seen more strategic partnerships fall over at this stage than at any other (except the next). Two business owners get together – they agree that they share the same target market, they promise to refer business to each other and guess what? Nothing happens. A successful strategic partnership requires a clear implementation plan – who is going to do what, by when, if there are costs involved who is going to pay? Learn to manage your strategic partnerships as you would any project and you will be successful.
9. TEST AND MEASURE AND REVIEW
Was your partnership strategy effective? How do you know? Just as with any marketing or business development strategy you MUST have measurement tools in place. What was the return on investment of time and money? Did it achieve the desired business objectives? If not why not? What can you change to make the strategy more effective? All good strategic partnerships are living projects, they should not be set in concrete, build in measurement and review stages so that you can ensure that the relationship is, and continues to be, a WIN WIN!
10. HAVE AN EXIT STRATEGY
That’s right – all good things must come to an end. Well not necessarily but businesses change, business objectives change, most strategic partnerships will have a limited life. Be prepared for it and “don’t get married”. Set up every partnerships so that both parties can walk away with their heads held high, their businesses all the better or at the very least none the worse for the experience and nothing but happy satisfied clients on both sides.