How to Evaluate Partners

As a small business, you have to be very good at a small number of things. By definition, this means that you will be less good at many other things. But, of course, there will be other small businesses that will be good at those. As a result, it often makes good sense to join other small businesses in more or less formal partnerships.

In the course of operating your business, other businesses will often ask to join you or you will think another business could help you. The key to evaluating such opportunities or requests is to refrain looking at the immediate benefits which you or your business could gain from such partnerships. Instead, it must be evaluated what benefits your customers could gain. If a partnership results in high profits or more convenience for you, this is not necessarily a good thing. What it means is that there is an imbalance, you're charging too much or you're not pulling your weight. This might be great in the short term but in the long term it means that your customers are paying too much or that your partner will take over your business. Either way, you won't be in business much longer.

Instead, you need to look at what benefits your customers will derive from your potential partnership. Will they have lower costs because you can charge them less or because you can do more for the same amount of money? Will they have better service because of your increased resources? Will the quality of the product be higher because something is being done better?

As a large corporation, you don't have to pay attention to customer value as much - your customers are far away, isolated through layers of distributors, wholesalers and managers. As a small business, your main preoccupation must be customer value and any partnerships have to be evaluated only on that basis.

As a small business, you are utterly dependent on your customers. If you accept this fact and base your business on it, it becomes a competitive advantage because you then serve your customers better than anyone else.

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