No business stands alone. Besides the customers or clients that you deal with on a daily basis, there’s a good chance that your partnerships with other businesses around you can play a big role in your success. From vendors and suppliers to service providers and marketing partnerships, who you do business with is important.
When you get it wrong, it can have severe impacts on your own business’s success, from the reputation of your brand to the work environment of your team.
Here, we look at some of the consequences of bad partnerships and what you can do to avoid them.
One of the most common forms of third-party contracts nowadays is in outsourcing. Either to individual freelancers or an outsourced service provider, many business owners do this in an effort to cut costs. However, the truth is that outsourcing can have an impact on your team, as well.
For instance, if you start outsourcing duties that would normally fall under the responsibility of a certain team or permanent employee, it could suggest to them that their job is at risk because you may have found a more cost-effective way to replace them.
This often isn’t true, as outsourcing tends to only be cost-effective in the short-term. However, it’s important to communicate how existing employees are going to work with outsourced teams, if at all, to assuage any potential fears.
The legal implications
If a business is delivering services or products through you, you could be legally liable for some of their business practices.
Partnering with a business that isn’t above board could be riskier than you might imagine. You could face fines and other legal action because of shady practices they have carried out, even if you and your team haven’t personally done anything wrong.
Implementing processes like Lexisnexis due diligence can help you ensure that you’re only doing business with those who bring the least possible legal risk. By looking at thousands of public records and risk analysis reports, you can make sure your company is as protected as possible.
The reputational risk
Another reason that risk assessment of third-party relationships is crucial is to ensure that the business you’re partnering with won’t affect your reputation negatively. There are a few ways they might do this and a few ways you can prevent it from happening to you.
For instance, if they have been in the press for negative reasons or are under any investigations or lawsuits, it can make your customers think twice about dealing with you. The other way that they might affect your reputation is by simply failing to meet the goals you set out with them.
Though your team might do everything, if they deliver a bad product or service which you then present to the customer, it will reflect on you more than it will on them.
Naturally, the lesson to learn here isn’t that you should avoid any contracts or cooperation with third-parties. Instead, it’s about learning to do your research and understand the risk before you take on any partnerships.
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