Business is risky but that is nothing new. Growing a business is challenging. Also not a new concept.
There are plenty of opportunities to grow that are risky, challenging or both. But one of the worst things to do in business is to “leave money on the table”.
So you must choose: do you build capabilities and capacity to get that money, or do you partner with someone who can do it for you?
If you decide to go in with another partner, there are many landmines on the battlefield. Business relationships are very delicate in nature, regardless of how strong they seem. As a small business operator, I have experienced many successful partnerships, as well as seen a few sink below the waves before leaving the bay.
I have identified six dangers of partner-to-partner relationships that work in all directions: vendor to reseller, partner to partner, and reseller to vendor.
1. Sing from the same songbook
Make sure that your sales and marketing teams are connected, that they know what each other does and that they have the same messaging. If this isn’t the case, there are several risks. A salesperson in the other partner might undersell your services. They may disqualify a valid lead or undermine the desired solution.
Leads or opportunities may not be generated in the first place because your capabilities and services have not been clearly articulated and documented. I’ve heard stories where a single salesperson has torpedoed an entire business relationship by undermining the partner’s solution to a prospective client.
A simple way to avoid this is to have regular sales and technical team get-togethers where they present to each other, and regularly review the progress of the relationship.
2. Define clear commercial terms
If you worked with a partner on a deal, how would you feel if they slipped in paperwork to make sure the commissions went to them? Shocking, but not uncommon. What if that single piece of paper resulted in you missing out on tens of thousands of dollars?
In recent times, this has become quite a big issue in the cloud world, where traditional licensing and services revenues are being replaced with “partner-on-record” fees (such as in the case of Microsoft).
In some cases, there are only a few ways to go to market and in a world where margins are squeezed, everyone is looking for other ways to make money. “What’s in it for me?” – or WIIFM – reigns supreme. Partners are looking at every dollar being extracted from the customer. So sometimes you have a choice, sometimes you don’t and sometimes you do but it’s like choosing between a bullet in the left shoulder or right shoulder.
This is also important for your sellers. Commission fee hijacking, no or minimal pass-through of referral fees can quickly diminish the chances of them bringing the partner in again.
Here, the WIIFM factor can then lead to the partnership becoming devalued and the solution undersold – which doesn’t help anyone.Reckon this doesn’t happen? I know a partner that employed just one technical person so they could claim deployment fees, instead
of their partners legitimately receiving those fees for actually performing the work.
3. Retain ownership of the customer or vendor
As you jointly enter an engagement, it is important to understand who owns the relationship. It’s not an uncommon scenario where the newly introduced partner treats the relationship as their own and throws out the rule book.
This can lead to scenarios where the customer calls you in confusion asking why ‘Partner X’ is now introducing another partner that does the same thing you do. The scenario is not that common, nor does it happen quickly. But when it does, no amount of bullets fired at a practice target will relieve the anger.
I have seen a curious scenario where the partner had a longstanding relationship with the customer, and the vendor also had a separate relationship with the same customer. When the customer approached the partner for a solution, the vendor was furious that they were not involved in the conversation or considered. The partner wants to appease the vendor for general relationship health but has no reason to involve them because they didn’t originate the business nor do they offer any value. A tricky situation.
4. Watch out for that bus!
Many of us have felt the experience of being thrown under the bus by a partner or – more likely – by a vendor, as the other party tries to save their own relationship with the customer. There’s no simple way around this, and it can happen for many reasons.
There are two primary ways to avoid this: continual involvement and engagement with the customer, keeping on top of any issues that may arise; and continual involvement and engagement with the other partner and/or vendor, keeping them in the loop of any issues that may arise.
5. Avoid competition
Before forming a relationship, ask the other partner whether their business crosses over with any of your capabilities, skills or services. If yes – run!
While I don’t need to describe the risks of partnering with companies that potentially compete with you, here’s one any way: think of a partner who says, “Oh, yes, we do that but not in your market”. How much of a stretch would it be for them to start doing it in your market?
For this reason, I have a number of friendly relationships with partners with which we avoid doing business even though it may benefit us both. I don’t want to pull the pin on that grenade.
6. Transparency is key
Don’t lie. Don’t withhold truth. Deceptive behaviour doesn’t endear you to anyone. The best conversations about new partnerships feature the term “in the interest of transparency” in MANY sentences. It’s a way of saying, “this piece of information may bother you or may express how you won’t get business from us but I’d rather you know than not know”.
The opposite end of the spectrum is the used-car salesman who says there are no foreseeable issues. Putting all your cards on the table shows the other partner that you trust them and invites them to do the same. Sometimes, a simple explanation of reasoning may alleviate concerns.
I was privy to a recent situation where a business development manager from the receiving partner did not articulate the commercial and logistical reasons for not wanting to engage on Project 1 from the primary partner. Instead, they accepted Project 2 from the same partner, then chose to engage with another partner on Project 1. Trust was destroyed in an instant. The relationship was in tatters and it remains to be seen if it will ever recover.
In conclusion, you need to ensure your partners are truly partners and not just outsourced resource or lead referrers. Partnerships are bidirectional and must be nurtured with mutual understanding or the handshake isn’t worth the calories burnt to perform it.
Loryan Strant is the founder of Melbourne-based cloud integrator Paradyne