|Corporate partnering is
nothing new. However, technology has elevated it to a new
"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,"
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:
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.
- 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.
- 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
- 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."
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
"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
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 some
promotion that they put out."
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
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
Kolkowski owns a legal consulting practice in Leroy, Ohio,
specializing in intellectual property and technology for small
businesses. E-mail: firstname.lastname@example.org.
Dorothy Langer, president of Langer and Co., a
Boston-based consulting firm specializing in strategic
alliances and financing strategies. E-mail: email@example.com.
Related Information: Click on www.lowe.org/elr for
recommended articles, books and sites.
|CEO in Action|
Pumping up sales
Earlier this year, Architech Corp., a Reston,
Va.-based software-development company with 30 employees
and $5 million in revenues, embraced its first
partnership. "We wanted to grow revenues and develop
some products that would expand us beyond project-based
consulting," explains founder Joe Tedesco:
Before we approached anyone about a possible
partnership, we first analyzed growth opportunities in
the marketplace and what our organization lacked, which
was a sales and marketing program that extended beyond
referrals. Then we picked 20 different ad agencies in
the Washington, D.C., area and did a road show of sorts,
presenting our company's strengths and how we might be
able to partner with them.
One agency, ROI Advertising, became interested in one
of the products we demonstrated — a software program
that distributed e-mail and tracked how many people
responded to the message.
The attraction: The Bullz-i software would
enable ROI to offer their clients a new product, setting
them apart from competitors. ROI would give us the sales
infrastructure we lacked to market Bullz-i.
Sizing each other up: It was important to us
to assess the potential partner's culture and make sure
our values matched. Our priorities included customer
satisfaction even at the expense of profitability, as
well as a team-based environment. We wanted to make sure
that any partnership wouldn't change who we were and
what had already made us successful.
Another consideration was whether ROI had the
capacity to grow with us — a concern because they were
about half our size in terms of employees. If this took
off, would they be able to support the growth? How many
clients could they handle? What was their level of
To address this, we had a series of meetings. I
visited their offices first, and then their CEO came
over to Architech. Then we had a social gathering with
about five key managers from both teams. The idea was to
see how we interacted and to make sure everyone felt
comfortable with each other. Within a month after our
initial meeting, we decided to go forward with the
Establishing parameters: One thing I think we
did well was to clearly delineate our respective roles
and responsibilities at each phase of the
client-development process. We decided that ROI should
be in charge of initial client contact — that's what
they're good at — although I go on every prospective
sales call. Architech handles the operational side: The
software is a turnkey product, but there is a small
amount of customization that needs to be done for users.
We also elected to comarket ourselves, which proved
to be a wise decision. Prospective clients said they
were pleased to see two companies working together,
instead of one company doing everything. That was a
surprise for me.
Challenges: The biggest hurdle so far has been
managing costs and splitting revenues — difficult
because we're on different planes. I had a huge fixed
cost in the software development, whereas ROI's
investment has been time and energy. We've talked about
a licensing agreement, but it didn't really give
Architech control over pricing and allow us to
participate in the success of the product. Right now
we're pricing on a per-client basis, but we expect that
to change and become more standard.
Payoffs: For ROI, Bullz-i has substantially
increased its volume of business with existing clients.
For Architech, the partnership is bringing in new
clients without investing in a salesforce — something
that's saving between $200,000 and $300,000 per year.
It's also very enlightening to see how another company
Although the partnership is still new, we've
considered it so successful that we're thinking about
Your peer connection: Joe Tedesco, CEO, Architech
|Swimming in a bigger pond
It used to be that large corporations weren't open to
alliances with smaller firms; their growth was
internally focused. But since the '90s, things have
loosened up. Large corporations are actively seeking
partnerships with smaller players.
That's good news, but there are some nuances to
working with a big fish.
Figure out the food chain. For a smaller
company, one of the major roadblocks is the slow
decision-making that's typical of large corporations.
Get a handle on your potential partner's decision-making
structure from the get-go; it will not only lower your
blood pressure, but can help you present and pilot a
project more effectively.
Accept calculated risks. Smaller companies
usually don't have in-house legal counsel. They hire
outside attorneys who may be fine advocates, but often
argue in the extreme for their clients, which is a
turnoff for the other side. It's better to accept some
risk if it helps you move the deal forward. That doesn't
mean accepting foolhardy chances, but rather knowing
your real boundaries. Think of the worst-case scenario
and play out your risk from there.
Splitting control. Partnerships often may
split operational control right down the middle. But
when you're working with a larger company, that 50-50
split isn't always the best recipe; directors from the
larger firm may be distracted by other ventures. It may
be wiser to have a majority of directors from your
company, which is more nimble. Look at the strengths of
both parties. Try to find someone who's been involved in
similar ventures to review the proposed structure and
give a second opinion.
Kolkowski, owner of a legal consulting practice in
Leroy, Ohio, specializes in intellectual property and
technology for small businesses. E-mail: firstname.lastname@example.org.
|Partnering pays off
Getting a foot in a better door: Steeves and
Associates, an IT-consulting firm in Burnaby, British
Columbia, had been working with a client at the IT
level. PriceWaterhouse-Coopers, one of Steeves'
partners, had been helping the same client at the
executive level and brought Steeves in to help with
strategic planning. "Partnering with a complementary
partner brought us in at a higher level where we could
provide more leadership," says CEO Dave Steeves. "Being
at that level paves the way for larger initiatives and
gives us a bigger role than we would have had with any
projects coming from the IT department."
Closing more deals: Synergy, a Framingham,
Mass.-based lighting consulting firm, partners with
several of its customers, energy service companies
(ESCOs), to make joint presentations. "ESCOs
historically haven't sold the benefits of good
lighting," explains Dan Gould, Synergy's CEO. "They're
usually just selling energy savings, which is purely a
financial sell. By participating in presentations for
new projects, Synergy makes sure potential clients are
aware of other benefits of a lighting retrofit, such as
increased worker productivity or increased sales for
retail spaces. By involving our team, we present the
entire project in a much better light — no pun intended
— so the closing ratio is higher."