Prosper Through Partners

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Digital Library > Building and Inspiring an Organization > Joint ventures"Prosper Through Partners"

Partnerships can leverage your resources and tap new opportunities.

Corporate partnering is nothing new. However, technology has elevated it to a new level.

"Today there are so many technologies being introduced, it's simply not possible for one firm to understand them all. We need to focus on where we can be strong and differentiate ourselves," says Dave Steeves, founder of Steeves and Associates in Burnaby, British Columbia. Launched in 1992, the IT-consulting company now has 60 employees and more than $18 million in revenues, and partnerships have been instrumental to its success. "Partnering helps us offer more complete solutions to our clients and find new ways of adding value," says Steeves.

Partnerships can also help a company:

  • Gain credibility in a new field.
  • Expand market presence.
  • Gain access to technology.
  • Diversify offerings.
  • Share best practices.

Partnerships leverage resources. You're trying to join forces with someone who does something better or cheaper than you or offers something for which you don't have time or capital. Because partnerships can save money, they become an alternative to traditional financing.

Alliances can be with smaller or larger companies: customers, distributors, suppliers and competitors.

However, many people use the term too loosely, calling everyone a "partner." Just because you're doing business with someone doesn't automatically mean you've established an alliance. A partnership is a relationship where each party takes certain risks and each stands to benefit from the union. It doesn't have to be the same goal, just a compatible one.

Strategic partnerships allow one or both parties to reach a new level. Case in point: Four years ago, Steeves established a strategic alliance with two Canadian companies, one in Montreal and one in Ontario. "Each of us were highly respected in our regions, but our alliance helps us compete better at the national level," says Steeves. "It allows us to serve clients with an expanded geographic footprint that otherwise we couldn't reach as easily."

Formulating a game plan

Whether you seek a strategic partnership or a more general alliance, four ground rules apply to both:

  1. Think strategically. Don't approach partnerships in an ad-hoc manner. Determine what you want to do before you look for a partner to help you do it.
  2. Determine the value you bring to the table. How you position your company's value will change depending on each partner you're trying to attract. Remember: Your value isn't necessarily your product; it may be the market you command or your technical expertise.
  3. Be specific. When pitching to a prospective partner, give detailed goals: We want to increase market share by 25% in the next year. Remember to pinpoint your partner's objectives; the relationship only works if both companies win.
  4. Know your boundaries. Otherwise, in the heat of negotiating, you may agree to something that later ends up being a big mistake, such as giving away exclusive distribution rights or something that may be important to the company's future success.
Assessing prospective partners

It's also important to conduct due diligence on prospective partners. Do they have the financial wherewithal or technical expertise that you require? What about distribution channels and rights to intellectual property?

Consider how long it takes to reach an agreement. Is the prospective partner returning your calls promptly? A slow response may be reason to reflect. Perhaps that's just how the company operates. But it's probably not going to get any better after you sign an agreement.

Don't partner with someone you don't like or trust. Because a partnership isn't operating exclusively under your roof, you don't have the same management controls. If members from the other team slip up on a deadline, you can't discipline them.

"It can be tempting to run off with anyone who presents an opportunity. However, you've got to be careful when other people want to work with you," points out Dan Gould, CEO of Synergy, a Framingham, Mass.-based consulting firm for energy and lighting retrofitting. Gould launched Synergy in 1994 and has grown the company to more than 25 employees and $12 million in revenues.

"Once we hit $8 million in revenues, we came onto a lot of people's radar screens. But you have to watch where you invest time and energy with partners," says Gould.

Synergy typically works as a subcontractor of energy service companies (ESCOs) and has long sales cycles that run six months to a year. "We try to partner with ESCOs who will be the winning organization on a bid — that may sound obvious, but it can be very gray to figure out which organizations will succeed in the long run," explains Gould. "At the end of the day, if they've lost the job, we've lost it — and we've wasted a lot of time on free estimates without compensation."

Gould values partners who are savvy at qualifying. "Before we get involved in a presentation, I want to know if the true decision-maker has been identified and what the buying criteria is," he explains. "You could be dealing one level down and not know it. Until you get buy-in from the right people, the project never moves forward."

The relationship

A partnership runs smoother when you work out details in advance. Try to nail down deadlines, marketing plans, when and where meetings will be held, the cast of characters — and what to do if something goes wrong. Because it's difficult to forecast problems, agree to a system for resolving disputes.

Put it on paper. Partnerships are open-ended relationships, so it can be tough to craft a formal agreement. But it's still important to document the scope of the partnership and specific responsibilities.

"If you're partnering with a larger company, they may already have a boilerplate contract. Don't let that intimidate you. Just because a prospective partner hands you a contract, that's not the one you have to sign," says Jeff Stevenson, founder of SmallBizManager, a Chicago-based B2B Web-portal company.

"I'm not a lawyer, and I hate contracts, but I spend a lot of time going over them," says Stevenson, who has piloted more than 150 partnerships. "I don't think I've ever had one presented to me that I didn't raise at least some questions on and many that I've sent back with changes. And doing so never squelched a deal."

As you progress in a partnership, things may come up that need to be changed. "Make sure you document it," advises Stevenson. "I usually send an e-mail that sums up what we discussed. Granted, it's tedious, but if you don't document, it's too easy for something to slip through the cracks."

Communicate regularly. It's key to stay in touch with partners on a regular basis. "If you take them for granted, they can start interpreting events on their own," says Steeves. A couple of his strategies:

  • A weekly electronic newsletter brings partners up to date on what's happening at the company, including new projects, awards and new employees.
  • Bimonthly social gatherings help nurture the relationship. "It's good to see people as people," says Steeves.

Go above and beyond. "There are a lot other things that can be done to enhance a partnership that aren't necessarily outlined in the contract," adds Stevenson. "You could include your partner in press releases that you send out about your company, giving them visibility without the work. It could be referrals. It could be participating in so me promotion that they put out."

Surprising dividends

Rodney Capron Jr., founder of Synthenet Corp. in Northborough, Mass., initially embraced partnering as a means of outsourcing, but he's encountered some unexpected benefits.

Capron's Web-development company, which has 12 employees and generates $1.5 million in revenues, focuses on complex, Web-based solutions (CRM, e-commerce, Intranets). When two key free-lancers who Capron relied on were suddenly no longer available, he began to cultivate relationships with local ad agencies, which allowed him to tap graphics expertise without the overhead.

Not only have the partnerships brought in new business, they've also given Capron new insights. "Partnerships have helped us learn to charge more appropriately," says Capron. "As a smaller company, you often become very friendly with clients and may not be charging for all the time you put into a project. By working with our partners, we've seen how larger companies are very accurate and methodical in the way they track their time. It was a big eye-opener for us."

Capron has also gained perspective in determining market value: "When you're a smaller company, you don't want customers to get the impression your prices are exorbitant, yet you still want to earn their business. So nine times out of 10, you charge less than you should. Larger companies better understand their value — and how to present that value back to the client."

Granted, a partnership is never smooth sailing. "The first couple of projects you do together can be frustrating and challenging," observes Capron. "But when you get it right, it's amazing how powerful a partnership can be. It's like doubling the size of your company overnight in terms of your resources."

Writer: T.J. Becker

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