Five types of strategic

partnership agreements to help

grow your business

joint partnership
agreement, Proposals,
Contracts,
Agreements, strategic
partnership
agreementTodd
Spear, March 6, 2014
“Partnership is the way. Dictatorial win-lose is so old-school.” – Alanis
Morissette

I have to admit that I sometimes regret that here at PandaDoc-

Quote Roller HQ, where we’re all about creating awesome
proposals, we never get to talk about one of the most common
proposals of all, the marriage proposal. I mean it sort of seems like
the elephant in the room, the litmus by which all other proposals
can be measured. But I know that marriage isn’t really like business,
so there’s never really a chance to tackle the issue.

Then again… It seems to me that there is one aspect of the modern

business that is a lot like a marriage: the strategic partnership. In a
strategic partnership, two businesses are intertwined either from the
marketing, supply chain, integration, technological, or financial
standpoint, or some combination thereof. Such an agreement might
exist between a digital marketing agency and a graphic designer, a
web designer and a database management firm, or an Internet
service provider and an email provider, just to name a few of the
many possibilities. Here at PandaDoc we have integration
partnerships with several vendors, including Harvest, Google
Drive and Nimble, among others.

Whether you’re a startup or a growth company, there are many

reasons to consider entering into a strategic partnership
agreement (wow, that really does remind me of marriage every time
I type it). At the very least, a strategic partnership will add value to
your product or service by increasing what you have to offer. A
strategic partnership can even be a proverbial match made in
Heaven, if the two parties involved reciprocate each other well
enough. Doesn’t that just sound matrimonial? Forsaking all other
references to veils and vows, let’s take a look at five common types
of strategic partnerships, as well as what goes into a typical
strategic partnership agreement.

Why a strategic partnership?

First, let’s consider why you would want to enter into a strategic
partnership agreement in the first place.

A strategic partnership is a mutually beneficial arrangement

between two separate companies that do not directly compete
with one another.
Companies have long been engaging in strategic partnerships to
enhance their offers and offset costs. The general idea is that two
are better than one, and by combining resources, partner
companies add advantages for both companies through the
alliance. Some good examples of strategic partnership agreements
between brands that you may have heard of include Starbucks’ in-
store coffee shops at Barnes & Nobles bookstores, HP and Disney’s
ultra hi-tech Mission: SPACE attraction, and Nokia and
Microsoft’s joint partnership agreement to build Windows Phones.

But that’s just the tip of the iceberg. Virtually everyone who’s
anyone is partnering in some way, even it’s not obvious to the
public. In an ideal partnership, you benefit not only from adding
value for your customers, but lowering costs as well. That’s why
every strategic partnership is ultimately an act of leveraging costs
versus return. Before diving into a partnership, size up the other
party and carefully evaluate the benefits and risks of entering into
the agreement. If you can satisfy your profit goals and customer
expectations through the partnership, then it’s the right call for your
business.

Now let’s look at each of the five types of strategic partnership

agreements.

Strategic Marketing Partnerships

The first type of alliance we’ll talk about is the strategic marketing
partnership. This type of agreement is most beneficial to small
businesses that have a limited selection of products and services to
offer their customer. Maybe you have a company that provides one
service, say logo design. You might do well to partner with a web
developer that will always refer you when graphics are necessary,
and vice versa.

Referral agreements are probably the most basic and informal type
of strategic alliance, but strategic marketing partnerships can be
considerably more complex. Case in point: pharmaceutical
company Abbott India’s agreement to market Zydus Cadila drugs
across India. An agreement like this one allows each company to
focus on what it does best. In this case, Zydus Cadila gets to focus
on manufacturing medications while Abbott India hones in on
marketing the drugs.

Marketing partnerships are extremely common in the automotive

industry, like the Toyota IQ also being marketed as the Aston Martin
Cygnet. The idea is that one company makes a product and another
adds its own marketing spin to it in order to tap into a new market.
The same logic can be applied to a variety of different products, so
it’s something worth considering in many situations. If you’re
interested in forming a strategic marketing partnership, you want to
look for either a referrer that you share a customer base with or a
company operating in a related field that can market your goods or
services to a new audience.

Strategic Supply Chain Partnerships

A popular (and extremely valuable) type of alliance is
the strategic supply chain partnership. One of the most obvious
places that you can see strategic supply chain partnerships in action
is the film industry. If you’ve ever noticed the opening credits of
most movies list various oddly named companies before the film
starts, it’s because movies are typically made in a supply chain
method. A comparatively small production house will handle the
filming and post-production, and a larger studio will handle
financing, marketing, and distributing the film. Think of J.J. Abrams’
Bad Robot and Paramount Pictures, which maintain such a
partnership agreement.

Other examples of supply chain partnerships come to us from the

technology sector. Intel makes processors for many computer
manufactures. Toyota makes engines for Lotus sports cars. Texas
Instruments makes chips for everything you can think of. These
companies are entered into strategic supply chain partnerships with
other companies. If you make a tangible product that you think
could benefit from a strategic supply chain partnership, the decision
to enter into an alliance comes down to cost. If you can make it for
less yourself, then you don’t need a partner. But if you can hand off
manufacturing to a dedicated factory and maintain profitability
without sacrificing quality, then by all means, do it. For those of us
in the service world, it’s often an even easier decision.

Companies usually enter into supply chain partnerships to cut costs,

streamline processes, or improve quality. Unfortunately, as valuable
as they can be, supply chain partnerships can also be among the
hardest types of alliances to maintain. According to Dr. Andrew S.
Humphries, supply chain partnerships run into problems because,
on the supplier’s side, the measures of success focus on time, cost,
and quality, whereas your perspective likely focuses on sales and
revenue. A supply chain partnership only works if each party
involved can meet with end customers’ expectations for quality and
price while remaining individually profitable.
Strategic Integration Partnerships
Strategic integration partnerships are extremely common in the
digital age, since it’s always great to have different applications
work together or at least communicate with one another. Quote
Roller gains main clients from our more than 20 strategic partners,
while these CRMs, accounting software and the like gain new clients
from our pool. And both sides get to offer a more streamlined
service to our customers. Strategic integration partnerships can
encompass agreements between hardware and software
manufacturers (like how ASUS computers ship with Trend Micro
security suites pre-installed), or agreements between two software
developers who partner to have their respective technologies work
together in an integral (and not always exclusive) way.

In some cases, integration flies under the umbrella of “bundling.”

That’s not always the most popular option for your customers
through, because it often involves stripped down versions of full
products and services. If you’ve ever bought a new PC loaded with
trial programs (called “bloat ware”), then you know exactly what I’m
talking about. This is something that should ideally be avoided. If
you’re going to bundle partner products and services, make sure it’s
a value add-on for your end customer. Otherwise, you’ll just be
insulting them.

Strategic Technology Partnerships

Another type of alliance is the strategic technology partnership.
This type of strategic partnership involves working with IT
companies to keep your business afloat. This can be a partnership
between your web design firm and a specific computer repair
service that you always call in exchange for a discounted rate on
services. It could also include partnering with a cloud-based storage
platform to handle all of your file storage needs. Basically, any kind
of technological expertise that is necessary for your business and
that you cannot provide in-house can be relegated to a strategic
technology partnership. Choosing a technology partner has to be
based on an assessment of your needs and the identification of a
positive benefit from entering into the agreement. You don’t need a
monthly retainer on printer servicing if you’d save more money by
moving to a paperless documents platform. So again, assess the
situation before signing up for any strategic partnership. Never
enter into an alliance just for the sake of being able to say you have
a strategic partner.

Strategic Financial Partnerships

Many modern companies wholly outsource their accounting to
strategic partners. Strategic financial partnerships are helpful
because when you use a dedicated company for accounting, for
example, they can monitor your revenue with greater focus than
you might be able to do in-house. Because finances are critically
important to any business, strategic financial partnerships are
among the most important relationships you can foster. Dedicated
finance professionals offer rock solid expertise in managing cash
flow and are able to report your current revenue position readily
and objectively. And that can be of paramount importance to your
business.

What’s in a strategic partnership agreement?

Once you’ve found a strategic partner to ally with, you’ll want to
create and sign a proposal, or strategic partnership agreement,
with them. This type of document can range for relatively simple to
utterly complex, depending upon the scope of the partnership, the
terms of the agreement, and the scale of the businesses involved. In
all cases, a basic strategic partnership agreement should
include the following:

• The parties involved in the agreement

• The services to be performed by each partner

• The terms of the agreement (percentages of profit, method of

billing, etc.)

• The reporting structure, person of contact, etc.

• The duration of the agreement

• The signatures of company officers or their designees

Like I said before, it can get quite a bit more complex than that, but
you’ll always see these types of things on a strategic partnership
agreement. You want to lay everything out in print, so there’s no
questions of who does what later. Many companies opt for quality
control and auditing clauses in their partnership agreements to help
maintain the integrity of the products or services that result from
the partnership, so that’s something you might want to consider
when creating your own agreement.

Would a strategic partnership help you grow your business?

It seems like every company has at least one strategic partner these
days. That being said, some are certainly still totally insular. (Look at
Dell.) The decision of which way to go with your business comes
down to your needs and goals. If you can perform every function in-
house, maintain quality and make a profit, then your company
might not get much out of a strategic partnership agreement. But
there’s almost always an opportunity to either reduce the costs
column or otherwise increase the bottom line in any business, and
that’s where strategic partners come in handy. If there’s an
opportunity for your company to improve, chances are there’s a
partner that can help you do it.

One more thing to bear in mind is that strategic partnerships can

also mitigate risk. That means, for example, if you choose a strategic
manufacturing partner that operates a factory and insures its
workers, you are removed from the liability of operating a similar
facility yourself.

Likewise, many accountants and financial advisors are bonded and

insured. By partnering to fulfill those roles, you again remove the
need to incur the costs of operating those types of businesses
yourself. Ultimately, two really are better than one. I guess that’s
part of why marriage is such an enduring institution in our society.

That’s also why the various strategic partnerships that I’ve

mentioned throughout this article exist between some of the
biggest names in business. Joining forces in a strategic partnership
has worked for major players like Nokia and Microsoft, and, with
careful planning, it can work for your business, too. It all comes
down to taking the plunge and saying, “I do” to a strategic
partnership agreement.