Ways Small Businesses Can Partner With Each Other to Sustain their Businesses
Starting and running a small business comes with many demands. Other than establishing a market for your products, you also need the best in human resources, suppliers, and financing. Attracting all these when starting is quite a task, which sees most businesses fail.
Small businesses are looking for partnerships with other like-minded companies to avoid such pitfalls. While it might seem counterintuitive for the independence of business, working together comes with the needed economies of scale.
This article looks into some of the ways through which small businesses can partner to sustain their ventures.
Purchasing Partnership
Procurement is one area where most businesses struggle due to a lack of financial power. To ensure sustainability, these enterprises work with other ventures to reduce the cost of acquiring resources. One of the widespread purchasing partnerships among small businesses is the one with suppliers.
A small business identifies one critical supplier to form a lasting relationship. The relationship helps cut costs on looking for other suppliers and even creates trust. The better the relationship with the supplier, the higher the access to discounts, more bargaining power, and the elimination of unnecessary costs.
The other form of purchasing partnership involves businesses in the same field forming a cooperative. Cooperatives allow businesses the purchasing power of that of the more prominent firms. It also comes with additional services like marketing, training, education, and networking opportunities.
Joint venture
The other way through which small businesses can gain a more significant market share is by sharing assets, knowledge, and other facilities with like-minded companies. The best way to go about sharing these resources is through a joint venture. In a joint venture, every business contributes assets and agree to share the risks and profits. All the companies also have an ownership responsibility because of their shared interests.
One of the main benefits of a joint venture is the ease of starting one. You can start with a simple gesture like a handshake or go the long way of creating ground rules with binding agreements. Running a joint venture comes with several benefits, like more resources and expertise. The joint venture also helps save money that you could have otherwise used in the advertisement and public relations activities.
The only concern that comes with running a joint venture is the high chances of failure. Up to 60% of joint ventures tend to fail within the first five years. That is not to say you should not give it a try. You only need[U1] to set your priorities right and have a clear working framework.
Competitive partnerships
Most businesses operate such that any customer gained is one lost by the competitor. The phenomenon has seen most companies working so aggressively to overtake each other for the broader market share. Giving the competition a different approach can be all the difference between gaining that market for good or keeping the follow, capture, and lose cycle. Some of the most successful businesses in the world today have leveraged the power of competitive partnerships for success. Some of these include Amazon with the other third-party sellers and Cisco and Microsoft in 2017.
The only concern with competitive partnerships is that you only enter one when you are sure it makes businesses sense. It also requires special occasions like when entering a new market. You can also join a competitive partner for the sake of economies of scale. The higher purchasing power helps both you and the competitor save costs of purchase.
One of the most successful competitive partnerships is for complimentary businesses. For example, companies that deal with SEO can partner with web creating and hosting businesses. Look for a complementary business that attracts customers of the same profile. Also, ensure that the other company provides high quality. It would not make business sense to partner with someone only to jeopardize your credibility.
Partnering with a Non-profit
As a profitable business, the most beneficial partnerships you will ever enter is one with a non-profit. Working alongside a reputable company on a public cause helps build your business reputation and recognition. It sets you apart as a business that cares for people more than just profits. It is also great for publicity as it you gain media coverage alongside the cause of the partner.
Allowing your employees to operate within the nonprofit also helps them learn new skills and people’s knowledge. Ultimately, working for an excellent public cause endear you to the market and the employees. Such partnerships are mutually beneficial as the non-profit partner also gains from you through increased funding, improved donor base, and brand recognition.
How to Ensure Successful Partnerships
Joining and running partnerships requires resources. Failure of partnerships to work can lead to general business failure. You, therefore, need to take precautions when joining one. The first consideration to make when entering a partnership is to have clear expectations. You have to analyze your goals and to help you find the most capable partner. Having goals will also help you in analyzing the success of the partnership.
The other useful trait in a partnership is patience. Even though you might have your goals, you must understand they take time. It requires some time to stop operating independently and start learning how to share resources. Allow the partnerships enough time to grow.
One primary concern that comes with partnerships is the lack of transparency and honesty among the partners. Businesses are prone to lying about their market position and resources. Before you partner with any company, take time to analyze their actual situation. Ensure they have the right market share, financial ability, and produce high-quality products.
Bottom Line
No matter how much you desire your independence as a small business, there are times when partnerships are inevitable. Partnering with like-minded companies comes with several benefits of economies of scale. It helps in saving costs and ensuring broader markets. Still, for the success of the partnership, you must do your due diligence before committing. Have clear expectations, ask questions, and allow the partnership time to grow.
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