Missouri native and businessman J.C. Penney entered his first business partnership in 1902. With an initial investment of $2,000, he grew his stake in a one-room store in Wyoming into a global retail chain. More than a hundred years later, Penney’s observation on partnerships is as relevant as ever: “Growth is never by mere chance; it is the result of forces working together.”
If you’re looking for distribution muscle, new markets or new buyers, developing a strategic partnership with another company can be a viable growth option. Joining forces requires pre-approach planning to ensure a mutually successful relationship. Ask the right questions before you make your approach, and you’ll be positioned to make the most of a strategic partnership.
How Large a Partner Should You Target?
It’s easy to think that the bigger the partner, the bigger the revenues—but that’s not necessarily the case. Approaching an industry powerhouse can be enticing, but it also may result in your being directed to a supplier program. Be prepared to complete an application process and to compete for promotion and distribution attention within a pool of possibly thousands of products and services.
A mid-sized player may be a viable alternative for a partnership approach. These partner candidates may not have the internal product development resources or the supplier network of a large player, and your products or services could be an efficient way to expand offerings. Look for potential partners within business, professional and trade associations, as well as among the companies that sponsor these organizations.
What Value Do Your Products and Services Bring to the Table?
Offering your products and services through a partner’s sales channels is not a one-way process. Research your potential partner’s offerings and clarify the motivating forces for a partnership. The results of your research will yield areas to explore with a potential partner.
» Look for alignment in the problems your company and your partner candidate are trying to solve.
» Define how your offerings and markets complement your partner’s offerings and markets.
» Consider product and service combinations and ways to co-market or bundle offerings.
» Identify and quantify new or expanded revenue streams that are possible from a partnership.
Are You Willing to Share in the Responsibility for a Partnership?
Business owners often think a large partner will pay for all the product launch expenses and ongoing marketing and sales support of a partnership. Don’t assume that your potential partner will assume all the financial or market risks of the relationship. Partnerships include the expectation of mutual contribution to marketing and sales efforts, although it’s sometimes possible to provide in-kind support for at least some of these expenses. For example, if your company has a significant, quantifiable presence on social media, it may be possible to trade a co-marketing contribution for visibility through your social media channels.
Like all relationships, partnerships require a good fit, clearly defined terms and mutual effort to yield mutual success. Choose wisely.