During the first few years of operating a new business, most entrepreneurs begin selling the product as more or less a one (wo)man team, generating leads from any and all channels and diligently working with each client. If you’re able to power through the struggle of the first few years—a feat that over 40% of your fellow business owners will not manage to do successfully—you’ll soon need to find a sales strategy that allows you to rapidly, predictably increase your sales. At this point, you want to scale; not from 100 to 200 customers, but from 100 to 10,000. But how do you accomplish this without exhausting all of your capital?
Every entrepreneur finds him/herself struggling at these cross-roads—trying to find the balance between time, money, and the need for additional marketing and business development. Marketing expenses are notoriously one of the largest expenses for any company, and businesses must quickly identify which channels have the ability to develop predictable lead generation and consistent revenue streams. Building partnerships with strategic business allies is one way to tap into new markets, boost innovation and reduce the cost of new customer acquisition.
You are probably already working with someone you would consider a partner. Maybe a friend or business who sends you a referral every three months. But are you really doing everything you can to leverage these relationships? If you think you can do more, consider building a formal partner program to share resources and expertise to help realize greater returns. To be successful, you’ll need to take a structured approach, following a few key steps and asking yourself fundamental questions about what you want for your business.
Understand your client profile
If you haven’t already done so, you’ll need to define your client profile prior to building your partner program. Think about the type of client who uses your product and why they chose you over the competition. What makes your product or service stand out, and what keeps your clients coming back? It’s also important to understand the size of your ideal client and the specific markets in which they buy. Defining your client profile by answering these questions lays the foundation for finding and securing a business partner that will help you grow in the right way.
Know your end game
Strategic partnerships come in a variety of forms, but not every business is the right fit for collaboration. To weed out partners that won’t help you achieve growth, you must define—and stick to— the objective of the partnership. Do you want to acquire new customers in a specific market or simply extend your geographic reach? Maybe you want to add a new recurring revenue stream to your current business model? Or you could add new options to your product portfolio and enhance the solutions sold by another business? Using these guiding questions to determine what you want out of a partnership will save you time and effort in the process of pinpointing and solidifying partners down the line.
Identify ideal partners
Once you’ve clearly defined the purpose of a potential partnership, you can work on identifying the businesses that are the best candidates to help you achieve your goals. Creating a list of ideal partners starts with asking who else provides value to your current or prospective clients and who works with those clients during their time with you. Think distributors, resellers, accounting firms, marketing agencies, staffing companies, OEMs, software providers, and any organization that offers a complimentary product or service to yours (even competitors…:)). Do your Google research, and keep in mind that these should be well-respected names that will augment your brand and ultimately, your clients.
Dedicate adequate resources
Before reaching out to ideal partners, take the time to allocate resources for the program. You will want to have a dedicated point person to handle the partnership process – from bringing new partners on to monitoring the progress of each collaboration. Building a partnership program does not always require a new hire, but it can be beneficial to do so. If current employees are already stretched thin or working diligently on other growth projects, bringing in someone to focus time and energy on building and sustaining partnerships could generate a significant return on investment.
Solidify your value proposition
Business partnerships only work when both parties benefit from the relationship. You cannot engage with potential strategic partners without first understanding what you bring to the table for their business. Think about what makes your business model, product, or service stand out and how that relates to the partner’s business and their clients. Do you fill a gap in their product offerings, optimize servicing costs or have the ability to bring them more clients? Make sure to hone in your pitch and highlight why you would make a better partner than others in your industry. Most importantly, focus on the advantages you provide to the end customer, as they are the one’s who ultimately benefit from your strategic thinking.
Successful partnership programs are built on relationships. Cold calls to businesses you have no connection with will rarely result in a partnership. Instead, use your current network of contacts to get introductions with businesses who will understand your objective and see the benefit in collaborating. Do your research on the company before reaching out to ensure its client base, products and services and mission align in some way with yours. Remember to be patient throughout the process, as the most successful partnerships often take time to get up and running.
Create a plan
Once you’ve done the legwork, you can start building your partnership strategy. Every business partner will be different from the next, but having a framework to guide the relationship will be beneficial. Determine how clients will be referred—such as a dedicated landing page—and who will be responsible for working with those clients. Also, successful partnerships have clear marketing initiatives, including the metrics used to define the success of the program. You also need to consider any legal restraints that may hold up the progress of the partnership as well as how compensation will be structured as new clients are added.
Get it in writing!
Taking the steps above should produce a strong strategic partnership to catapult your business growth, but without a signed agreement, you’re leaving yourself vulnerable to spending time and resources on a relationship that is a one-way street and has no allure for reciprocating benefits. Having a formal agreement promotes accountability among the parties involved, and it helps solidify objectives of the program for the immediate and long term. Start with a term sheet or Heads of Agreement—which both parties endorse—and use this to negotiate before you begin drafting the final legal documents. It may seem like overkill but it will save you lots of time and legal fees in the end. Also, keep in mind that not all alliances require a brand new set of terms; make your life easy by creating a template which covers the objectives, compensation, and division of work. The goal is to motivate others to grow with you, and thus the agreement should entice all parties to work hard for each other.
Strategic partnerships are a smart and efficient way to grow your business, reaching new clients and lowering front-end costs of acquisition. However, it is imperative to have a plan of attack as you embark on this journey. Take the time to work through the steps above, and you’ll be on your way to a fruitful growth strategy that adds value to your business and your brand.
Jeremy Putka is the Director of Partnerships at P2Binvestor, a Denver-based marketplace lender, that provides working capital to growing businesses. He loves talking about emerging tech and is pumped that Colorado is on its way to having its own Silicon Valley.