Larger Australian companies are looking to small businesses when it comes to collaboration; and those collaborations can lead to significant returns on investment.
The 2017 American Express Business Collaboration Index found almost half (48 per cent) of mid-sized businesses wanted to work more closely with smaller businesses in areas such as sharing infrastructure, knowledge, and marketing and sales activity.
The Index found that mid-sized businesses – those with annual revenue between $2m and $300m – that invested in collaborative efforts, achieved a profit 1.4 times their investment. This equates to average savings of more than $319,000, or an average increase in sales of close to $430,000.
The research found that, on average, businesses collaboration initiatives delivered a return on their investment within the first six months of the partnership. For 42 per cent of mid-sized companies and 21 per cent of small businesses, this ROI was faster than they expected.
Martin Seward, Vice President, Global Commercial Payments, American Express said, “The small and mid-sized business sector could gain billions of dollars through effective collaborations, and these partnerships can be profitable for all parties. Small businesses bring a different range of skills, insights and capabilities that complement larger businesses, helping make both more competitive.”
Small businesses also saw the benefits of collaboration, averaging a total benefit of $50,000 per partnership. Those small businesses that collaborated most effectively tended to look outside their industry (42 per cent) or overseas (19 per cent) to find opportunities to collaborate.
Other key findings from the Business Collaboration Index included the fact that highly-effective collaborators were likely to partner with more organisations, more frequently, reporting 5.5 partnerships in the past 12 months, compared to the average of 3.4 collaborative efforts.
It also found that businesses that had relatively low levels of collaboration also had lower commercial expectations for the coming year. Around half of these businesses weren’t expecting any growth in the next 12 months and very few of them had looked to bring any new products or solutions to market.
The research revealed that businesses rated around three quarters of their collaborations as successful – 77 per cent of small businesses and 71 per cent of mid-sized businesses reported a successful outcome.
American Express’s top tips for successful business collaboration are:
Know what you want to get out of a partnership before you get into it.
Make sure you have the fundamentals right. You really need to make sure your processes and systems are aligned.
Measure the return throughout the process – in as many different areas you can. For example many businesses told us they went into ventures to improve sales but found the biggest benefit was improved operational efficiency.
Finally, don’t be constrained in your thinking about what a collaborative partner should ‘look like’. Challenge yourself to look outside your industry or even country to find a business whose goals match your own.