Partnerships to Help Your Business Grow
The advantages the average SME has over a larger corporate body include a degree of flexibility, a hands on approach to customer service and the ability to recognise and cater to a niche which might be overlooked by a company used to dealing with the bigger picture. Where SMEs tend to fall behind is in the ability to take advantage of economies of scale, the financial clout to absorb costs and deliver projects with significant upfront investment, and the simple size required to bid for larger contacts. By working in the right kind of partnerships, SMEs can fashion a version of the scale and bulk of larger businesses without sacrificing any of the features which set them apart as an SME.
Making Partnership Work
The key to any successful partnership lies in choosing the right partner. It sounds obvious, but it’s the kind of obvious thing which can sometimes be overlooked. The SME you work with should balance two things:
An offer of something you don’t have
Whether that’s a particular skill set, access to a marketplace or simply the chance to pool overheads and increase the bottom line.
A shared point of view
Whilst you won’t want to team up with a direct competitor (in most cases – see ‘Consortium Work’ below), you will want to work with people involved in a similar field who share your ethos and ambitions. If you specialise in piling goods high and selling them cheap, there’s little to be gained by working in partnership with a high end luxury product retailer. An example of a good fit would be a clothing manufacturer teaming up with someone who creates accessories such as jewellery, sunglasses, bags etc. Both SMEs might have access to suppliers useful to the other partner, by pooling resources they might be able to afford the rental on that pop-up shop which was just beyond their individual budgets and the products will complement and help to sell each other, with each SME basking in the reflected glory of the other.
Whilst, as a general rule, you won’t want to work in partnership with someone offering the same service as you, the exception to this lies in forming a consortium, perhaps between several SMEs, in order to bid for larger contracts to be delivered by the temporary larger consortium. A survey which took place amongst heads of procurement in the public sector found that 72% felt that arrangements of this kind allowed them to achieve better value for money, whilst allowing the SMEs involved to gain at least a percentage of contracts which would normally be cherry picked by larger companies.
It’s happening anyway
The chances are that anyone running an SME is already collaborating with other SMEs up and down the supply chain. After all, very few businesses operate in a complete vacuum. You may purchase materials from another SME, contact out particular office services or parts of a manufacturing process, or even buy and sell items and services directly. By formalising a partnership, you get to share advice support and resources, instead of simply undertaking a transaction then returning to your own business. People who run other SMEs will be able to offer tips on factors such as funding sources, export opportunities and the likes of day to day HR issues, as well as, sometimes, simply offering a shoulder to cry on. By working in partnership you create a situation in which your success is their success and vice versa, the kind of support network that can be hugely important, especially when you’re establishing yourself.
Working with larger companies often means having to alter your practices in order to fit in with the way in which they do things, and always have done. Another SME, on the other hand, will be small and flexible enough to meet you halfway, forging a new approach which blends the best of both businesses.
The key to successful partnership work lies in finding the right partner in the first place and then setting up carefully defined parameters for the partnership. The first of these is easier than it’s ever been, since many cities now offer either dedicated enterprise zones within which likeminded SMEs work in close proximity to each other, or small business networking groups which meet regularly to network and exchange the latest views and opinions.
Creating the structure of the partnership is something which can’t be rushed, and involves setting up the joint teams, formalising the assets and resources which can be shared and opening regular and dedicated channels of communication. One of the key points is to have an exit strategy in place, ensuring that, if a partnership comes to a natural end, the break up won’t damage either party.
Many SMEs, in the past, have tended to adopt an attitude which treated other businesses as competitors to be defeated. By embracing the right business as a partner to be embraced, there’s every chance you’ll be creating a whole that is greater than the sum of the parts.
You can read more posts within our business growth series here.