Revenue Sharing in Strategic Partnerships

June 23, 2021

Many business owners have a hard time delegating and end up doing everything alone. Not only does this attitude result in stress and overload, but it may also stop them from finding good opportunities to grow their profits with the right strategic partnership.

Leveraging strategic partnerships and revenue sharing can be a great way of achieving your goals, from:

  • Getting new customers
  • Lowering prices
  • Multiplying revenues

But what exactly is a strategic partnership? And revenue-sharing? How do they work? What are the advantages of having this kind of alliance?

In this article, we’ve gathered some useful information on how to create win-win strategic partnerships. And, we will go over why you should consider this alternative if you want to leverage costs versus return to your business.

What Is a Strategic Partnership?

It’s a mutually beneficial agreement between two non-competing companies, with the mission of achieving more success and growth for both, by combining their resources and efforts to improve a certain area of their businesses, such as:

  • Marketing
  • Supply chain

When done the right way, with a reliable partner, they can bring incredible results, as they:

  • Create value
  • Lower costs

Strategic partnerships may exist between companies from a variety of industries, such as:

  • Technology
  • Finance
  • Law
  • A combination of them

Partners may be from totally different or complementary markets, such as a digital marketing agency with a graphic designer.

A potential strategic partner should offer you some expertise that your company doesn’t necessarily have or that could cost you a lot. This way, you’ll have access to a whole new market or services to improve your business that you wouldn’t have alone.

It’s even right to say that a successful strategic alliance can actually be as beneficial as adding an entire salesforce to your company at no extra cost. This is because your business can expand into new markets and customers, increase brand awareness, among other competitive advantages.

Whether the main intention is to expand into a new market, lower costs, increase profit and visibility, or any other, a strategic partnership agreement will always work towards a goal that will benefit both partners. And that’s why it’s very important to choose the right partner.

Building a Win-Win Strategic Partnership

When considering this growth strategy for your business, the first thing to have in mind is to identify your key goals and which company or market could help you achieve them. Remember, the whole point is to add value to both of you.

If you’re considering entering a new industry or exiting from your current one, make sure you find potential partners representing the market you are interested in. They should be reliable, competent, and willing to commit resources and capabilities as much as you are.

Before signing any agreement:

  • See what’s on the table
  • Set boundaries
  • Define individual and mutual value
  • Be clear on your reasons
  • Understand the reasons of your potential partner

You should both have:

  • A good relationship with each other
  • Mutual trust
  • A shared vision
  • Expectations of growth

How About Risks and Costs?

As strategic partnerships aim at mutual growth, it’s just natural that risks and costs are also shared.

The main risks of this kind of alliance are concentrated in:

  • Financial difficulties
  • Loss of competencies
  • Disrespect to the original agreement

But if we consider cost-benefit, we would certainly advocate for a strategic partnership to mitigate risk and offset costs. For example, by partnering to fulfill pricey roles that your company doesn’t have the expertise in, you are stepping into a safer environment than trying to do the same on your own.

For example, if your strategic partner is a financial advisor or a lawyer, you avoid the cost of operating those types of businesses yourself or hiring a qualified employee for that.

Now Let’s Talk About Profit and Revenue Sharing?

Revenue sharing may be a part of a strategic partnership agreement, and it’s a document signed by the partners to outline the criteria to be followed on the distribution of the profits and losses.

In practice, a company pays its partner a percentage for recommending customers and helping it to do business, like a referral program.

We consider it a cost-effective strategy because it incentivizes partners to bring businesses into your company since a portion of the revenue is shared.

It also enables the different parties from a strategic alliance to develop efficiencies or innovate in mutually beneficial ways.

Let’s Talk!

Still don’t know if strategic partnerships and revenue sharing are good for you? 

At Azul Corporate Advisory, we have the expertise, knowledge, and experience to help business owners make the best decisions to achieve their goals and become better leaders. We offer strategic insights for business transformations, and we can help you find the best solution to take your business to the next level.

If you want to know more about strategic partnerships or revenue sharing and the advantages that this kind of partnership can bring to your business, we are ready to help you. Get a complimentary consultation today.


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