Cost-sharing is a process wherein two or more organizations work together to secure savings in one or more areas of business operations. Such partnerships may also be pursued to realize other business advantages – increased marketplace exposure, access to technology, etc. – but cost savings is usually a central component of these arrangements. Cost-sharing partnerships can be implemented in any number of operating areas, from marketing to transportation to research and development. It is a favorite tool for many small business enterprises that have limited financial resources.

Relatively few cost-sharing arrangements have been implemented for the actual manufacture of goods or execution of services. Instead, the majority of cost-sharing plans are in the area of marketing and advertising. Today’s direct marketing partnerships achieve impressive cost-benefit results. 

There are three primary advantages associated with cost-sharing partnerships in this operational area:

  • They enable marketers to address the competitive challenges of the rising cost of direct marketing essentials, such as postage and paper.
  • They help marketers reduce direct mail expenses because are shared.
  • Their effectiveness is enhanced by the development of technology tools and media outlet alternatives.

The latter factors are particularly important for businesses seeking to engage in effective cost-sharing. Computers have transformed the marketing industry and given birth to partnership opportunities. Today’s computer-driven partnerships empower us to target qualified recipients and segment lists as never before. Many of our alternative direct marketing programs have traditionally taken a broadcast approach – reaching broadly defined segments. Now, partnerships offer qualified segmentation, targeting narrower, clearly defined lifestyle and demographic segments. Technical advances in imprinting and inserting also offer enhanced ability to customize the package and the offer.

Finding a Cost-sharing Partner

There are no rules, standards, or boundaries that should restrict your vision when seeking a partner. Rather, shared goals should guide your “vision quest”. Partnership can be formed in the profit and nonprofit sectors, in the same or different industries, within different divisions of the same company, and in similar market segments/demographics in noncompetitive industries. 

Many small business owners seek out allies for the exclusive purpose of registering savings in their operation costs. This is a perfectively legitimate course of action, but entrepreneurs should make certain that the final agreement is a fair one that explicitly delineates the terms of the agreement. Indeed, written partnership agreements that define each partner’s spending obligations should be insisted on. In addition to discussing cost-sharing matters, these documents can also provide details on agreed-upon procedures and work flow, parameters for responsibilities, and mechanisms to measure results both during and after the project.

Carefully crafted proposals will help you mitigate concerns about loss of control and structuring the partnership for mutual benefit. When a partnership fulfills the consumers’ needs with a new, exciting, or value-added offer or program, risks are minimized for all involved.

In addition to ensuring that cost-sharing agreements are sufficiently documented, business owners should weigh possible other benefits associated with partner alternatives when making their decision. For example, a larger company might be able to provide a small business with valuable access to technology and training, while a smaller business might be blessed with a much-coveted contemporary market image.

Ideally, a small business owner will be able to find a partner who not only can help him or her secure savings in one or more aspects of business operations, but also provide additional benefits.

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