No man is an island; neither is a business.
The idea that independence and autonomy are signs of strength applies less and less as the business landscape evolves. While globalization shrinks the distance between us, technology is simultaneously giving birth to a more complex and decentralized business environment. Now, more than ever, it’s important to understand the value of business partnerships.
Let’s look at four areas where companies stand to benefit from partnerships with other businesse.
1. Expanding Networks
The potential to expand your network is a major incentive for many companies to pursue business partnerships. By network, of course, we’re not talking just about expanding your contacts list.
Expanding your network also means expanding your reach to generate more business. A business partnership can expand your reach geographically, helping to open the “fat” end of the marketing funnel and making potential leads more accessible.
Partnerships can be a good way to enter new geographic markets or industries where you might lack experience. The right partner can bring a familiarity with industry—with market-specific regulations and other particulars that can be invaluable for growing a business.
2. Adding Expertise
The simple act of bringing in outside expertise strengthens your business in more ways than one.
Both strategic and tactical decisions will benefit from gaining additional knowledge that you might not have had in-house previously. This is particularly useful if your company is expanding its offerings or you’re planning to enter new geographic or business markets. You’ll have more immediate access to that new knowledge base rather than learning as you go, which can improve your strategy and speed the process.
Partnerships also provide different perspectives that can enhance your business strategy, improve problem-solving, and potentially add creative capacity. The addition of outside expertise not only increases the probability of a positive overall business outcome, it can create education conduits for the less experienced members of each party.
When two companies form a partnership, the assumption is that it will be beneficial for both parties. Each company typically conducts due diligence on the other before making a commitment. When two reputable companies show confidence in one another and place a certain amount of responsibility for their success in the hands of the other, it creates the outward appearance of validity for the partnership and establishes even more credibility for both parties.
A business partnership compels both parties to be mutually accountable for the outcome of that partnership. Whether it’s the success of an investment or the creation and launch of a new product, each company has a stake in the success of the venture. Since they are relying on each other for their own success, there is an added responsibility for each party to act in good faith and fulfill their obligation to the partnership.
Many companies probably explore a business partnership to increase their tangible resources. Unlike networks, knowledge and credibility, the benefits of physical resources are much more visible and may be a little easier to understand and define.
You’ve almost certainly heard that “it takes money to make money.” That is the basis for the first (and probably most obvious) resource that can result from a business partnership—access to greater amounts of capital.
The addition of capital can benefit any type of business. But the benefit of additional capital is invaluable when it comes to investment-based firms like private lenders where it literally takes money to make money on an ongoing basis. For a lender, more capital can help increase market share, expand geographic reach as well as add to operational capabilities.
Partners often can avail themselves of the other’s technological capabilities. Whether they are in-house technologies or outside third-party technology platforms, access to a partner’s platforms may allow you to pool your resources, which can result in cost savings. In addition to cost savings, systems and platforms can increase the accuracy of your operation, speed your processes and add other efficiencies to make your life easier and your business more profitable.
You may also benefit from the marketing resources of a business partner. Perhaps a company you partner with has an in-house marketing department that can help you freshen your brand, build a new website or provide collateral to promote your products and services.
And it’s likely that, within a business partnership, your partner can do so at a cost lower than that of a third-party agency. Additionally, it is useful to pool marketing and advertising budgets with your business partners to stretch those dollars further than you might be able to with your own budget.
There are other in-house resources that can be particularly useful for private lending companies that create partnerships. Gaining an entire business division is one of them.
Your partner might have its own underwriting division or loan servicing division that is more experienced or more robust than your own and can accommodate a larger loan volume than you would be able to otherwise. Taking advantage of these resources can alleviate pressure on your own operations, increase your capacity for throughput and add substantial headroom for growth.
Such resources can also improve quality or expand your current services and product lines, creating a better overall experience for your clients.
Sum and Substance
There are many motivations for forging strategic business partnerships, and there’s a bevy of benefits to be gained. The modern business landscape necessitates a strategic advantage for almost any kind of business—perhaps even more so for businesses in the complex and sometimes erratic financial industry.
Whether you’re seeking access, expertise, credibility or other resources, the goal is the same—to grow your business. You can almost always strengthen your position in the market with carefully-planned strategic partnerships. It may take only a single person to build a viable company, but it takes a village to raise your revenue.