A strategic partnership is defined as “a long-term relationship between two or more partners to develop and execute one or more business strategies”. This is when two companies come together in order to work on an idea that each would not be able to do on their own. In most cases, Fintalent’s strategic partnerships consultants agree that this strategy may also include merging with another company for them to gain better visibility with their product. Strategic partnerships are key to understanding the financial world. They help modernize and make transactions more efficient, which is essential for the economy. The problem is there are many different types of partners, meaning it can be tough to know which one you need or if you even need one at all.
Types of Partners that Necessitate Partnerships
The first type of partner is the strategic investor. This is someone who invests in a company for the long-term with the goal of improving it. They may choose to help expand the company, introduce better technology, or make it more efficient. When companies need an infusion of cash or are strapped for resources, they may turn to this kind of partnership. Finance agreements like these are also good for investors who want to be part of a growing business without having to put in too much money. These partners don’t necessarily expect any sort of return simply because they’re using their money to boost another company’s value rather than trying to sell products that will earn them back.
The second type of partner is the strategic executive. This kind of partner is similar to an investor, but it differs in terms of how long they’ll continue to support you. These partners may work together for years without ever selling their stake in a company, which can help empower a small business with a major national budgeting organization.
A third type of partnership is the strategic advisor. This is someone who helps a business achieve its goals but doesn’t invest money in it or run it day-to-day. Many advisors specialize in areas that are part of a company’s operations or finances and will help with things like strategy and finance, but they don’t actually operate the business.
The last type of partner is the strategic partner. This is someone who partners with you to operate or own a business in some way. They may be an employee, an employee’s partner, an investor, or a vendor. In some cases, they can even buy a company from another strategic partner who is selling it.
In many cases there’s no requirement for partners to get along or even get along well, which can make it difficult to make decisions about the kind of partnership you want with them. In other situations there are partnerships that will end amicably if one partner wants to leave but needs money before they’re able to leave and another partner has the cash necessary to pay them off without losing theirs.
With recent studies showing that one in five organizations are in the process of trading or considering trading in some form, it’s important to understand how to implement strategic partnerships when building your company and business through expanding networks.
Fintalent Expert Tips on Entering Partnership Arrangements
- Partnering is a mutually beneficial relationship. A partnership will often create mutual value regardless of which party introduced it, especially on how each party benefits from using the other as a resource on what they do best. It is crucial to define what success looks like for both parties.
- Maintain integrity and be open. Transparency is key in any good partnership. To maintain integrity in the industry, banks should only partner with reputable fintech companies that pass certain criteria
- Be prepared to invest in your partnership. By investing in relationships, you remain committed and develop long lasting partnerships with your partners
- Be realistic with what you can offer and what you can expect from your partner. Understanding the difference between providing a service and selling a product helps both parties understand their role in the partnership.
- Know your goals and stick to them. Understand your goals for the partnership. Define what you want to achieve and what you are willing to give up.
There are many different types of partnerships that can be formed between companies, regardless of the size, industry, or location. However, regardless of the type or scope of strategic partnership to be formed between two companies, there are several safeguards that should be set in place in order to ensure it’s successful and will last for years to come.
Key Steps Towards Forming Lasting Strategic Partnerships
- Put pen to paper. To ensure teamwork and collaboration throughout the process, it is crucial to set out clear policies and policies that can be adhered to throughout the relationship. For example, what is the preferred manner of communication (face-to-face meetings, phone calls, video conferences)? How will each party be compensated (cash vs. product/service), how often will compensation be paid out, what are the factors that affect compensation, etc?
- Create an “agenda” for each meeting. To ensure both parties adhere to defined rules when meeting with each other prior to any meetings taking place. This agenda includes everything from basic information such as who shall present their ideas for trade discussions in meetings
- Set measurable goals and tie them to compensation. In order to ensure the strategic partnership is a success, it is crucial to set absolute goals and tie them to compensation. What are both parties willing to give up in order for them to receive benefits? For example, what can a bank expect in return for investing in a fintech startup?
- Keep communication lines open and honest. One of the most important elements in a strategic partnership is communication. Keeping all communication channels open and honest will only help the partnership grow. Miscommunication can lead to mistrust, which will then undermine the relationship.
- Be open with each other. It is crucial to keep communication lines open and honest between both parties. With both parties being transparent with each other, it helps create a healthier environment for collaboration between them
- Be patient and communicate often. Patience is an essential ingredient for any long term or strategic partnership. Communicating frequently not only helps build trust but will show both parties that they are being taken seriously as well as are valued by their partner(s) if desired compensation is offered.
- Communicate clearly and understand where you’re headed. Ongoing communication is essential in any strategic partnership. By sharing ideas, opinions, and suggestions for improvement with each other allows both parties to understand where the other is coming from. This will help create solutions that satisfy both parties at the end of the day.
- Maintain integrity and be open. Transparency is key in any good partnership. To maintain integrity in the industry, banks should only partner with reputable fintech companies that pass certain criteria
- Be prepared to invest in your partnership. By investing in relationships, you remain committed and develop long lasting partnerships with your partners
- Be realistic with what you can offer and what you can expect from your partner. Understanding the difference between providing a service and selling a product helps both parties understand their role in the partnership.
- Know your goals and stick to them. Understanding your goals for the partnership. Define what you want to achieve and what you are willing to give up.
Though partnerships can be great, there’s no need to rush into one. Most companies will operate just fine without waiting for the right partner and if you do start a partnership with someone it can help to clarify any expectations so things go smoothly and don’t cause problems in the future. Whichever course a business chooses to take, it is prudent to check in with an expert where his capacity is lacking. Fintalent’s freelance M&A Consultants can help determine the suitability of a partner and the viability of any future partnership, set up a proper Transition Management Team and Forecast the most likely outcome of the business’ partnership.
