Ready for a partner? Best to keep it simple and focused

Smart businesses are always trying to build partnerships. Their goal might be to extend their market visibility, or deliver a broader set of products and services, or to spread out risk.

In its simplest form, a partner is someone who is actively helping you achieve your goals, while you’re helping them. Even your suppliers could be considered partners, because they’re providing your products and you’re supplying their revenue. But usually we’d reserve the term for relationships that are based on more than just a transfer of money.

People often get scared by partnering, because they think of it as an all-or-nothing commitment. If you’re taking on someone as co-owner of your business, that’s going to deeply affect almost every decision you make until you exit.

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That’s a huge decision, a future-altering commitment. Fortunately, it’s not often necessary.

A simpler and more focused partnership is to work with another business to extend your visibility in the market. A coffee shop might give out coupons for the gift store down the street, while the gift store hands out coupons for the coffee shop. This can be wonderfully effective, because they’re targeting roughly the same customers – window shoppers – while not damaging their own business. When they tap into the growing “buy local” sentiment, they can grow its visibility beyond just a simple coupon-giving activity.

The risk in this is pretty low; there are no monetary commitments, and either partner can exit for any reason. Despite this, I rarely see this being done effectively. More often, a shop owner will have a board full of flyers and business cards, with no powerful recommendation for any of them. That’s much different than giving a customer a coupon with his change, and saying, “You might want to check these folks out.”

The true power from this kind of partnership comes from the strength of a referral from a partner who likes what you do, can connect you with the right people, and has an incentive to help you out. If it helps to have money change hands, fine, but that doesn’t buy peoples’ loyalty. After all, your partner’s own business will always matter more to them than yours will.

Another kind of partner is someone who helps supply products and services that your customers appreciate. When done well, together you’ll provide a much more complete customer solution than either of you can do alone.

Suppose you have an oil change business. Customers’ cars might come in with all kinds of issues, but it’s never going to be cost-effective to stock all the parts they might need. You’ll have wipers, perhaps, but not headlights or touch-up paint. The inventory costs would destroy you.

A powerful way to fix this limitation is to partner with the closest auto-parts store. They’ll appreciate the steady stream of customers that you might send their way. They’ll be glad to send maintenance services to you, because it’s not a part of what they can provide themselves.

Salvage yards developed a great solution to this decades ago. They have a powerful network which lets them search for parts all over the country. It’s self-sustaining enterprise because each participant gets to expand their inventory by orders of magnitude, to reach potential customers everywhere, without having to invest in a lot of marketing.

Partnerships aren’t just about selling, either. I see many creative models emerging where it’s more about sharing expertise. A great example is the Open Source movement in computer software. People contribute their designs and software to a larger community, who all agree to work together on its advancement. For free.

Carl Dierschow is a Small Fish Business Coach based in Fort Collins. His website is www.smallfish.us.