The secrets of profitable external partnerships
It's a typical scenario for many small business owners: you've got a great idea, but you don't have the resources or capabilities to execute it in-house. Finding a like-minded partner could be the answer – and a good partnership can trigger true innovation by putting together different ways of thinking.
So what should you consider before formalising any agreements?
Richard McHutchison, Personal Banking Relationship Manager with Macquarie, has been involved in many of Macquarie's own third-party relationships, including Hollard Group's recent launch of Real Home Loans. He explains that for any growing business, the key issue is leverage.
"A new business starts with a niche idea or service but it won't always have all the skills it needs to really grow. A partnership lets you concentrate on your core capabilities but reach a bigger customer base."
As an example, he says Hollard Group wanted to leverage the success of Real Insurance's technology and call centre capabilities across financial product distribution, to introduce an innovative home loan product, which would to meet customer need for convenient home loans (and shorter waiting times) over the phone. "So our partnership enables them to manage the sales and distribution, while we take care of securitisation and funding."
It's a model that has worked well in the past – Macquarie has also partnered with Aussie Home Loans for more than 20 years.
Finding the right partner
McHutchison says any third-party relationship is like a marriage. "Both parties need to be like-minded and working towards similar goals. You need to be honest with one another, and always look for the success of both parties. If one party is getting a better share of the deal, it can be challenging for the relationship."
"Finding someone you can trust takes time – but it's certainly worth putting in the effort," says Macquarie Head of Business Banking, Dean Firth. "Trust is the foundation, it will get you through any potential issues."
Lean on me
Sometimes a partnership can solve a business problem, rather than develop a new product to market. McHutchison suggests small businesses should consider partnering with technology providers if they're struggling to keep up with the pace of change.
"Technology is the way of the future, so if your business doesn't have the scale and capability to keep up, you need to find someone that does," he says.
"Business owners need to be able to tap into a broader network – no one has all the answers," says Firth. "The wider your network and sphere of influence, the greater diversity of thought you can access." This can help you unlock new opportunities in the market, and discover the best approach to doing business.
Critical success factors
"Every relationship is unique, so you need to tailor an agreement to the situation and check everyone's needs are met, and you need to be prepared for it to evolve over time," says McHutchison. You could consider a fee-for-service or commission arrangement, or profit sharing, as long as mutual success is recognised and rewarded.
He says it's important to recognise that if negotiations become difficult, you need to know when to walk away. "Don't do a deal for the sake of it, as it's rarely worth it in the long term."
"And always remember the end game. You may have a great agreement but the end product needs to be something the customer actually wants."
He defines a successful partnership as one where "the whole becomes much greater than the sum of all its parts."
Finally, he emphasises that trust and honesty are critical. In any business, relationships create value – and trust creates confidence. A true partnership can sustain mutual business success, over many years in the future.
5 success factors
- Use your gut instinct – don't work with someone you can't trust, and make sure you feel comfortable with them both personally and professionally
- Always work towards a win-win situation for both parties
- Be open and honest, so you can work as one towards shared goals
- Develop resilience, so you can work through potential problems
- Make sure you're doing this to solve a real customer or business need – and that the end product will meet those needs.