Strategic Partnerships aren’t just for Fortune 500 companies. They’re a way to leverage your network of business peers to mutual advantage, and they can help both organizations grow and get to that next level.

What is a Strategic Partnership?

A strategic partnership is a mutually beneficial agreement with another business formalized with a memorandum of understanding (MoU) designed to help both businesses grow faster or cheaper than they otherwise would. Strategic partnerships are usually about rapid expansion into new markets, adding value for existing customers, or reducing business expenses. For instance, Billie Bunker owns a new power washing business, and just added a new power washer and employee. Her friend and fellow Veterans in Residence (ViR) cohort member, Victor Veteran, runs a landscaping business. Billie approaches Victor with a pitch for a strategic partnership, where Victor refers his clients in need of a power wash to her business, and Victor gets a finder’s fee for every booked appointment. This is a good example of a simple strategic partnership that can be very useful for new and well-established companies alike. Both Billie and Victor benefit, and neither is investing too much time or effort outside their core business model. There are many different types of strategic partnerships. We’ll only be exploring a few of the basics here, and focus on big picture process.

Are Vendors and Lenders Strategic Partners?

While it’s going to vary depending on who you ask, vendors or manufacturers whose products and services you use to perform day-to-day business operations are typically not strategic partners. This is just a business partnership where you’re a customer. Now, it is possible for a vendor or manufacturer partnership to become exclusive to build a specific product, and exclusivity deals usually ARE strategic partnerships. Similarly, if what you want out of a partnership is a cash investment, that isn’t really a strategic business partnership in most cases. It’s probably some sort of capital access relationship. While some of these might get announced, promoted, and even nurtured like a strategic partnership, they’re generally better explored as separate topics of discussion.

So, Where do Partnerships Come From?

There are three basic ways people find strategic partnership opportunities. There are those that arise organically, those partners that come to you, and those partners you seek out. Each has its own upsides and pitfalls to look out for.

Networking

If you’re in a Bunker Labs program, you’ve probably experienced this already. You’re bonding with a fellow cohort member, someone you really click and connect with, and one of you says, “We should really do something together!” That’s it. That’s a pitch for a strategic partnership. The next step is to hash out how you can help each other to mutual benefit. The big advantage here is that there’s already a perception of trust and shared values between the two of you. These are huge upsides that can take time to explore or develop with other partners. However, this often leads to “handshake” partnerships or informal deals that can cause serious problems later. Put the partnership in writing with a formal memorandum of understanding. Build in a time 6-24 months from the start to re-evaluate the partnership and readjust or end it if necessary without burning bridges.

Partnership Offer

Once you reach a certain level where you’re well-known and respected among your target customers (especially if that target customer definition is incredibly narrow), you might start getting partnership offers from other entities. Some might be smaller than you, and those are pretty easy to evaluate based on what they might have to offer. The trickier offers to navigate are those from larger organizations. If a larger organization wants to partner with you, it’s usually because they want your expertise, or the trust you’ve built with your customer base. You need to be extremely careful in thinking through how they plan to leverage that, and consider if it might damage your reputation with your customers. For example, Bobby Bunker sells custom-built computers specifically for computer programmers, but is thinking about expanding into the gaming market. Chipset manufacturing giant PEAR reaches out, and wants to be an exclusive chip partner in exchange for three co-branded promotions and two events, in this case custom-build PC contests, as well as a fixed price on chips that beats what Bobby’s currently paying. It seems like a good deal on the surface, but Bobby needs to think about what switching to PEAR chips would mean for his business. Maybe his core customer base strongly prefers a different brand of computer chips, and he’d risk losing them over the deal. Bobby needs to be very careful about what PEAR is asking him to do on his end of the partnership, and ensure his commitment doesn’t tie up his capacity in a way that drags down revenue-generating activity. If Bobby Bunker needs to take a third of his sales and marketing team and reassign them as event planning staff for six months, that’s a problem. It can damage revenue, staff morale, and upset processes that have secondary effects downstream. Further, if the event doesn’t pay off as expected, he might find himself with cashflow problems. Bobby needs to be vigilant he’s not turning his profitable company into an unprofitable one. Mission creep is also something to watch for. Without formalizing a deal, it’s easy for what starts as a simple ask to evolve and grow into something much more labor intensive than you initially agreed to. When you’re creating a memorandum of understanding, ensure the scope of the partnership is clearly defined, as well as the responsibilities. Try and think through process ahead of time as best you can, and account for as much effort capital in advance. Work through it with the team that will be the boots on the ground. Ask yourself and your boots on the ground what happens if the partnership is wildly successful or unsuccessful, and define what that looks like, and what that means at the ground level. Put up some walls in the memorandum of understanding and any process documents to ensure mission creep doesn’t transform a beneficial strategic partnership into an anchor that drags down business.

Hunting for Partners

The final way to find partners is to seek them out yourself. You might attend a network event with the intention of seeking strategic partners, or you might have your sales team make calls. A partnership you choose and initiate is likely to get you exactly what you’re looking for out of a strategic partnership, because you get to frame the pitch. However, while the other two methods arise organically, hunting for partners requires time and effort, which means it costs money upfront. You need to do a lot of work ahead of time to figure out what you want, and who can provide that. That takes a lot of market research. Then there’s the sales process, which isn’t free, either. There’s a fine line between investing in the future and growth of your business, and just throwing money away. Try and keep your approach as simple and low-cost as possible. If you spend $25,000 in meetings and labor to conduct the hunt for a partner, you’re already in the hole before a single thing has happened to help business. You’re in the hole even more if you consider what sorts of revenue-generating activity your team might have been doing instead. Run your numbers twice, and be conservative about estimating the benefits of a partnership. Be wary of “if” statements when you run through the upsides on a partnership, because every “if” statement has an “if not” statement you need to also consider.

Define the Partnership Pitch

When you’re crafting a partnership pitch, be it for a fellow Bunker Labs cohort member you’re close with, or a relative stranger you just met at a networking conference, there are a few key details to be aware of. The most important thing is to be able to clearly outline the effort/benefit ratio for your side (so you can ensure the partnership will be a net positive for you), and have an enticing benefit to offer your prospective partner.

What Do You Want?

Know what you need. If you don’t have a specific goal or reason to be in a partnership, you shouldn’t be in it. Strategic Partnerships can help you get to a “need” faster and often cheaper than you otherwise might. Below are a few of the things people get out of strategic partnerships to get you started on figuring out what you want. It’s important to eventually refine what you want into something very specific and defined. Make sure what you want is really something you’re ready for. Don’t pretend to want 12 million social media impressions among target customers in New Mexico if you’re not ready to do the business in that state or at that volume.

Marketing

One of the most common elements in modern strategic partnerships is some form of marketing partnership. This could mean all sorts of things, from a social media post, to having them refer customers, offer a newsletter blurb or access to their email marketing list, or giving you a banner, booth, or other space at their event or on their platform. The bottom line is you gain some form of access to their customers for marketing purposes. Marketing partnerships work best when your partner has access to segments of your ideal customer base you’re unable or struggling to reach, or trying to expand into. Partnering with someone who can already reach that ideal customer can help spread the word about your company and give customers a positive first impression much more quickly than word of mouth or your own marketing efforts could on their own. In this way, a good strategic partnership can shrink the timetable for entering new markets. There are a number of real-world examples, including Redbull and GoPro’s Stratos marketing event/stunt, or this Bumble and TikTok marketing partnership that served to elevate both companies in European markets.

Expertise

Some partners might have a niche level of expertise you do not. Vicky Veteran has a business building custom cars, and she might seek a strategic partnership with Burt Bunker, who runs a business installing custom car stereos. Bringing in a subject matter expert like Burt to exclusively handle certain kinds of car stereo work as a sub-contractor allows Vicky to offer more services and expand into new markets without training her staff or hiring a new employee. You might be thinking “why doesn’t Vicky just hire Burt to her staff, and expand business on her own?” Well, in this scenario, Burt runs his own company, with his own customer base, and might not be open to being an employee. In this sort of scenario, Vicky also might not project enough of that business to justify a new full time hire. Finally, Vicky isn’t really after the new stereo business. She’s after Burt’s customer pool, and the leg up on the competition being able to advertise her company as having the added expertise affords over her competition. Expanding into the high-end car stereo market as a partnership mitigates a lot of the risk and cost of entry for Vicky. Any time you find yourself turning away customers for a certain type of service with noticeable frequency, you might consider taking on a strategic partner to handle that kind of work. That way, you at least draw some sort of benefit for answering the phone or an email for business you’re turning away. Also, you don’t want customers to associate you with being unable to solve their problems. They’re more likely to call back for services you do offer if you can solve their issue with a specific referral, or a new in-house service provided by a partner. Some real world examples of bringing in expertise that offers new services to customers might include the Tinder and Lyft partnership that enabled matches to offer their dates a ride, or, Uber and Spotify’s partnership, which allows rideshare users to control the music of their ride. The long-standing Nike and Apple partnership related to fitness wear, or the Taco Bell and Doritos Locos Taco also falls into this category.

Exclusivity

You can become an exclusive vendor or manufacturer for a partner’s company. If Benjamin Bunker manufactures spark plugs, and becomes the exclusive spark plug vendor for a car parts store, auto manufacturer, repair business, or even an event, he offers his spark plugs at a discount (or in some cases might donate them entirely in exchange for marketing opportunities). However, in exchange, Benjamin has a reliable, baseline amount of business, and the ability to advertise himself as an exclusive provider if he’s partnering with a known brand, which lends their brand authority with their customers to Benjamin’s business. Exclusivity only works if the Benjamin can keep up with his partner’s supply needs, and the price is competitive enough that his partner doesn’t feel like they need to get out of the deal to shop elsewhere, but is still profitable and sustainable for Benjamin, and is leading to growth by getting his spark plug company name in front of other customers in a positive light. Keep in mind exclusivity can be a double-edged sword. Getting locked into a long-term exclusive contract, especially if there’s a set price, can hamstring Benjamin from being able to adapt to market conditions. For instance, if an outbreak interrupts cargo shipments and disrupts the supply chain, the cost of raw materials might skyrocket overnight. Benjamin needs to make sure there are escape routes for him in the deal in the event market conditions shift and impact his ability to deliver. Similarly, Benjamin might seek an exclusive partner that is providing him something he needs to manufacture spark plugs. He might seek an exclusive provider of high-nickel alloy, for instance. He might get a set price on a set volume of high-nickel alloy, ensuring he gets a good price and has reliable access. In addition to peace of mind about price, it saves Benjamin a lot of time and effort constantly sourcing high-nickel alloy and running numbers on pricing and shipping. He can reallocate much of that time elsewhere in his business for a while during the terms of the partnership. Some high-profile exclusive partnerships include the Star Wars brand Target Exclusives, special toys or toy variants available only at Target stores. While there are other Star Wars toys available at other stores, other exclusive strategic partnerships can be much more extreme. Kylie Jenner partnered with Ulta Beauty stores as an exclusive brand, only available in Ulta stores.

Who Can Deliver It?

Once you know what you want out of a strategic partnership, you need to figure out who would be a good partner. If a prospective partner approached you, or it arose organically while networking, you might gloss over this step.

Make a List

The next thing to do is make a list of companies that can provide what you want in a partnership. Don’t just think about big household names—consider local and regional businesses, and other small businesses. Every business on your list should be uniquely positioned to provide the thing you’re looking for out of the partnership. This list might get pretty long, that’s okay. If you’re a newer company, you can stop after you get 10-15 names you intuitively think are the best partnership fits for you. Larger organizations, or those putting significant labor behind partnership hunting might make longer lists. The next few steps are aimed at trimming the list down to the best candidates.

Values Check

Now that you have a list of potential partners, you’ll want to revisit your company’s values and research and think about each company on your list. If there’s a values conflict, or some other reason you intuitively don’t want to have your company associated with theirs, scratch their name off the list. Values mismatches are cited as a major friction point in strategic partnerships. At best, the partnership devolves and ends without much benefit to either side. At worst, you end up doing an apology tour or damage control because a partner’s activity has violated a core value that has hurt your brand with your customers. It’s an unnecessary risk that can be mitigated with a bit of web searching and review reading.

What Can You Offer?

Now that you have a list of companies that are great values fits, it’s time to start thinking about what you might offer them. They might already have something in mind, but if not, it’s a good idea to think about what you might have to offer in exchange for what you’re asking for. Ideally, strategic partnerships are seen as a win-win, where both sides perceive they are getting a high ratio of value to effort from the partnership, ideally value that measurably converts into revenue. Do not pitch yourself into or accept a bad position just to get a potential strategic partner to say yes, hoping you can renegotiate better terms later. Similarly, don’t try and bully another organization into accepting poor terms. Long-term, sustainable partnerships mean both sides feel the terms are favorable at the outset. As far as what specifically you might offer, it’s generally the same as the list of things you might want listed earlier (marketing, expertise, exclusivity). Think very carefully about what you’re offering. Be able to express it as a deliverable, like one of the following statements: “We will make 20-25 customer referrals a month for 6 months in exchange for a 5% finder’s fee on appointments booked off those referrals.” “We will exclusively contract Burt Bunker to handle all SuperSound car stereo installations until July 2024, and use his company logo and name in four print ads and one billboard advertisement per quarter beginning Q1 2024 in exchange for a set labor cost of 275 dollars per installation, and a guaranteed availability for four installs a week.” “We will deliver a custom-built “Stars and Stripes” gaming computers by June 20th to give away as part of the Fourth of July Big Shooter Game summer contest in exchange for being tagged in 12 total social media posts from the Big Shooter Game social media accounts on Social Media Platform A, B, and C, and our logo on all content promotional materials.” If you can’t think of something to value to a name on the list, scratch the name off.

Run the Numbers

What you get from your partner has a value that can be expressed as a dollar amount. What you give does, too. It’s very important to find the balance point so it’s a win-win for both parties in the partnership. Run the numbers from your end. Figure out what it costs in time, labor, and materials on your end to do what you say you will. Find the minimum and maximum range band for what you can handle. Make sure you think about capacity in this equation, as well, and where the capacity breaking point is before you must hire and train more employees to expand. Think about that cost and what you’d need to get from the partnership at a minimum to make it worthwhile. If you need to (particularly if you’re partnering with a large, national brand), set up a guardrail for a maximum so you can account for capacity and ensure you’ll deliver your end. Adjust the numbers in your pitch accordingly. If there doesn’t seem to be a way to make the numbers work. Scratch the name off the list.

Craft a Value Proposition

You should already know how to do this; you’ve done it for your company. Basically, craft an elevator pitch around the problem you’re solving for your potential strategic partner, or the value you’re offering, and what they have to do to get it.  Craft your pitch, and deliver it in person, be it during a scheduled meeting, networking event, or conference, or pitch it via an email. It might take some sleuthing to find out when a potential partner is going to be available, but following them on social media is usually a good start. However you get it in front of them, the goal of the value proposition pitch is to get a meeting scheduled to discuss the particulars and go over the numbers. Get contact information and a date on the calendar.

What To Do When You Have a Yes

So, you’ve pitched your partnership, and they agreed in principle. Now what?

Hammer out a Memorandum of Understanding (MoU)

The first thing to do is hammer out the details of the partnership. You’ve already made your pitch, and hopefully have a general understanding of how the numbers relate to each other between what you want and what you’re offering. Of course, your partner probably has some ideas of their own.  Reconciling the two visions of the partnership is formalized in a memorandum of understanding, which should clearly define who is responsible for what deliverables, any deadlines, the frequency of check-in meetings, some means of accountability, and a point where the partnership can end or get renewed or renegotiated. Building in an end to the partnership up front is important. You want the flexibility to walk away or renegotiate at some point within 6-24 months. Market conditions change, your partner might have a failure to live up to their values, not be the partner you envisioned, or some other change to the business landscape. Build in an exit strategy that lets you re-evaluate the partnership.

Building the Process

Process involves the actual means of doing the work involved in the partnership. It’s the person making the referrals, making the social media posts, or whatever else is involved in the partnership. Hopefully, there isn’t too much new process on either side, and it’s largely adapting existing processes and adding a few new lines of communication. It’s a good idea to loop in the person or persons who will be doing or directly overseeing the actual work, and delegate defining the process details as early as possible. The people who will be involved in the work need to get to know each other on both sides, and letting the people engaged in the process define it is going to make for happier workers and a more efficient process.

Announce and Promote the Partnership

Once you’ve both signed a memorandum of understanding, and the process details are getting hammered out, it’s time to announce the strategic partnership. The point of such announcements is largely a marketing function, advertising what the customers of both organizations can expect in the way of new offerings or upgrades to the products or services they already enjoy from either of you. Press releases, blog posts, and social media posts are common means of announcing, but depending on your budget and where your customer base is best reached, it’s possible to look at streaming videos, social media, website, or even television ads, billboards, print ads, or wherever else your customers are. The point of the announcement is to make a big splash and push it across as many channels simultaneously as possible. This ensures that the customers of each company are aware of the other company, and the basic idea of the new strategic partnership. Of course, not all strategic partnerships need a big splashy announcement. A simple referral partnership or social media swap, for example, wouldn’t probably be worthy of the effort or resources a big announcement requires. Bigger announcements are typically reserved for when the strategic partnership is going to result in new products, services, or events, or when using the partnership to enter new markets. In such situations, customer awareness is an important element, and the partnership announcement can serve to draw interest.

Keeping Partnerships Healthy

You’ve got a new strategic partner, congratulations! The job isn’t done, though. You want to keep the partnership working well for both sides. That takes effort.

Schedule Regular Check-Ins

Whatever the initial length of the partnership is, be it 6 months or 2 years, space out about 2-4 check-in meetings once both sides have signed the memorandum of understanding. These should be executive/leadership team level meetings where each side can bring up any issues their teams haven’t been able to resolve, and communicate any other issues. These meetings might be informal over a meal, or they might be more formal in nature, or take an entire weekend, depending on the size, scope, and complexity of the partnership.

Ensure Clear Lines of Communication

If you don’t feel like you can pick up the phone or schedule a meeting with your strategic partner, that’s a problem. It’s an even bigger problem if the people you’ve delegated the work down to can’t reach their opposite numbers in your partner’s organization. When cross-organizational communication breaks down, the entire partnership breaks down. If your team is having problems, or your team isn’t being responsive enough for your partner’s taste, it needs to get addressed rapidly. If the teams just aren’t communicating well despite corrective measures, scheduling a joint meeting or a fun bonding event might be in order. If it can’t be fixed, then you might need to exit that partnership.

Sustainable Process

Whatever process the two teams build, it has to be sustainable for the length of the partnership. It can’t get so time-intensive it stretches labor to the point it makes the partnership unprofitable. When you ran the numbers, it should have included estimates about labor and resources necessary to hold up your end. Track the reality of those costs during the partnership. If your estimates were off, the process needs work, or you need to re-run the numbers and, if the partnership ends up being detrimental to business, you need to renegotiate or back out at the earliest opportunity. It’s not worth staying in a strategic partnership that is hurting your business, or your ability to do business.

Accountability

There has to be some mechanism to measure accountability. You need hard numbers that make it easy to tell if each side is living up to their end of the partnership. The best way to achieve this is to build it into your memorandum of understanding. It can also be built into process. However, you want to be very careful about getting into deals that have financial penalties enforcing accountability. Markets aren’t predictable with absolute certainty. You don’t want to put yourself in a position where the partnership is putting revenue in the red because of an unpredictable market shift. That said, if your end of a partnership involves investing a significant amount of money up front, you might build in some clause where some of that gets recouped from your strategic partner in the event they don’t hold up their end. But honestly, especially early on when your business is at its most fragile, it’s best to avoid those sorts of complicated partnerships if you’re able. The chief mechanism of partnership accountability enforcement should be through discussion at check-in meetings, or, if that fails to create change, exiting the partnership. This is why having end dates on strategic partnerships is so important, so you can reevaluate, renegotiate, or end things.

Find Your Next Strategic Partner in a Bunker Labs Cohort!

If your business is ready to start looking for strategic partnerships, and you’re a veteran or military spouse entrepreneur, then it’s time for you to join a Bunker Labs cohort. Joining Veterans in Residence connects you to the nationwide Bunker Labs community of veteran and military spouse entrepreneurs. Meeting entrepreneurs with a shared background helps build trust early, which can lead to lasting strategic partnerships. If you thrive on connecting people to create strategic partnerships, you might instead join us as an Ambassador. Bunker Labs Ambassadors help develop their local entrepreneur ecosystem, and help local members of the Bunker Labs community make the connections that take their business to the next level. If you’re in a position to connect veteran and military spouses with critical entrepreneurial resources and contacts in your city, we’d love to have you on our team!