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- Welcome. I am Anita Campbell. I used to work as an executive in a NYSE-traded company, called Bell & Howell. While there I had the opportunity to work on numerous strategic alliances, and mergers and acquisitions. I’ve learned on the job and through the school of hard knocks about what it takes to make a successful strategic alliances and partnerships.Today I run my own small business, Small Business Trends. Its an online and consulting business, and I have a couple of partnerships that have been extremely valuable to growing my business. Over years I have spent time on partnerships that haven’t paid off, and so I’ve learned to spot what works and what doesn’t. Hopefully I can save you from making some of my mistakes.Today I will be covering the “why” behind partnering – what partnering can do for your business. It can help you grow, and I am quite serious when I say partnering can save your sanity as a business owner. None of us can go it alone or do it all. Neither can our businesses.Today I also will give you specific tips about how to decide when to partner, how to choose partners, and how to persuasively convince another party to enter into a partnership.One of the most important things we will cover today is when it does NOT make sense to partner. Because half of success in business is knowing what NOT to do. A colleague of mine is fond of saying that most alliances that small businesses enter into are a waste of time. I have to agree -- up to a point. I see many partnerships that are vague and without clear goals – often they are in the name of “marketing”. There is only so much time as a small business that you can afford to spend in the name of “marketing”. One of the things I would have done differently in the early years of my business was not spend so much wheel spinning on marketing partnerships – looking back I would have been better off spending that time cold calling or on direct mail or something else. So you will hear this kind of straight advice.Today’s session is interactive. Just raise your hand or shout out your questions. Interactive sessions are the best, don’t you think?Feel free to take notes if you wish. However, the presentation is online and you can access it afterwards, download the entire thing if you want.
- We’re going to talk in equal parts today about strategy and tactical moves -- both.First strategy: a strategically thought-out partnership can put your business on the map.Have you all heard the story of Microsoft and how it entered into a partnership with IBM? (Tell the story if blank looks.)At the time, IBM was THE big tech player. Microsoft was a band of geeks who didn’t really even have a product – they had to buy the DOS operating system from someone else!That one partnership put Microsoft on the map – and it started Microsoft’s founder Bill Gates on the path from being a consummate geek to the world’s richest man, with an estimated net worth of $53 Billion today.Think that couldn’t happen to your business? It’s not an everyday occurrence, that’s true. There is only room for one richest man in the world!!!But in our spheres, in our own markets, equally big things – things that are big to us – can come out of partnerships. The right partnerships truly can put your business on the map.
- (Go down the list and compare /contrast)Point to resources:- Andy Birol – local expert on advanced referral marketing – lots of free articles on his site andybirol.com - MarketingSherpa and Marketing Profs for co-marketingReveNews for affiliate marketing (Cleveland’s own Jim Kukral runs ReveNews.com – one of world’s authorities on affiliate programs)The following typically involve (or should involve) a lawyer to set them up properly. More highly structured, and once created can be difficult to untangle:Joint ventures – legal structure. Usually an actual company set up, jointly owned by two or more parties. Partnerships – a legal partnership is a distinct type of company – usually means two or more people actually in business together and running one company that together they own. This differs significantly from a business partnership, which is more ad hoc type of arrangement where two parties come together for a specific market opportunity or individual piece of business.
- Another type of partnership you may see, or may even participate in, are formal partner programs. In the technology industry partner programs are commonplace. These include reseller programs, where the partner has a contractual right to re-sell a manufacturer’s or provider’s product. They also include formal programs of professionals who assist end users in using the provider’s product. The QuickBooks and Microsoft programs fall into this camp.They also can include online affiliate programs. The largest and most famous affiliate program in the world is the Amazon Associates program, in which tens of thousands of smaller websites drive traffic to Amazon.com and receive a small commission for each resulting sale. The Amazon Associates program was one of the first of its kind and is one of the reasons that Amazon is the largest online retailer today. Online affiliate programs have grown to become a $6.5 Billion industry in 2006 – that’s how important affiliate partnerships are.All of these programs are a two-way street. To the providers who sponsor them, your involvement as partners is crucial to them reaching the marketplace. For you as small business owners, keep in mind that these programs bring valuable benefits, in the form of increased credibility and access to special training and tools, being listed in the provider’s partner directory with access to a broader market, and other benefits. Partnerships are a two-way street. In formal programs, there is a specific commitment to do certain things for the other parties.
- Today I want to focus for the rest of this session on the general category of business partnerships. (not legal partnerships, but business partnerships) Because that is the category most of you will be dealing with.The best business partnerships are like two pieces of a jigsaw puzzle. Each party brings something to the table that completes the picture. Just like you need both pieces of a jigsaw puzzle to complete the puzzle, both partners are necessary.You bring something I don’t have. I bring something you don’t have.Let me give you an example. One company I know maintained high-traffic informational websites and wanted to break into the Hispanic market in the U.S., but had no Spanish-speaking personnel. It partnered with a Mexican media company that wanted to break into the U.S. market. The Mexican media company provided the content for the sites. The U.S. company generated traffic to the sites, sold advertising, and so on. Together both companies were able to tackle a new market. Neither party was equipped to do it alone. Each would have had to add personnel and spend considerable money to break into a new market. Plus, that would have taken them a long time, because they are both small businesses. By partnering they could move much much faster, before larger competitors got in.
- Start by deciding whether you need a partnership. Look at the picture strategically. Do you know what a SWOT analysis is? (Explain strengths, weaknesses, opportunities and threats)A SWOT analysis does not take any special tools to do. You already have the tools. You and key members of your staff. You sit down and evaluate your business. The SWOT analysis is a tool that sometimes identifies a big hole in your business. Something you need, but don’t have today.It can do double duty in helping you identify what YOU have to offer partners. When you identify your strengths, you may be identifying something of great value to the right partner. So be sure to look at both sides of the coin.Let’s look at some specific questions to ask as you evaluate your own business:Try not to think too linearly about your business. When evaluating what customers need, think broadly. Let’s say for example that you are a Web design firm. You design websites. That’s fine. But your customers need more than a website. They might need matching corporate identity print documents (letterhead, business cards). They probably need to know how to optimize their website and draw traffic to it, so they need SEO and marketing. Rather than asking “what kind of websites do my customers need?” ask “what kind of Web presence do they need?” and “how can we integrate their website and their offline presence?” That may help identify the need for partners who are more expert in other areas, that you need to partner with to serve customers. Or maybe a simple referral relationship will do in some cases. But think it through.Look also at your competitors. Are they outstripping you? Is it because they offer a better product or service set? Be careful though that they are not unfocused. If they are doing something wrong, don’t follow!And look at the market and the opportunities. Should your business be offering certain services, or offering them in a certain way that you are not doing today? What would it take? Do you need access to a partner to get there?
- Let me ask you a question: how many of you have all the employees and all the money you could use for your business? Anybody? We NEVER have enough!!! Partnering brings you speed. It could take years growing organically to get the resources to pursue an opportunity. Or you may be forced to take out hefty loans, and I am not a fan of going into big debt for your business. Partnerships position you to move faster. Before someone else does.Focus: just because you can doesn’t mean you should. There are only so many things that each business – and business owner – with limited resources can focus on and do right. Even large businesses today are much more likely to outsource highly specialized functions, and not try to do them in-house. Why should our businesses be any different? In fact, because we are smaller that’s all the more reason not to try to do it in-house. How do you decide what to focus on and what not? Focus on only core functions. What is it at the core of your business? Everything else is unnecessary. (add example)Make vs Buy: While you may not technically be “buying” when you enter into a partnership, in a sense you are. You are deciding that someone else will provide a piece of the pie, instead of trying to do everything internally. If your employees have a NIH (not invented here) attitude, then I suggest you make it your top priority to help show them the light. If they can’t see the light, then show them the door. Because you can’t afford to have staff that want to do things the hard way because they feel threatened or don’t see the bigger picture. They will hold your business back, and it holds all the rest of your employees back. Make sure your people are aligned and on board with the partnership.Finally in some situations you have no choice but to partner. Consider, for instance, government contracting. Partnering is the norm. (explain – sm biz set asides, minority, veteran) Being a subcontractor as part of a larger proposal may be your only realistic way to break into government contracts.
- A study by Vantage Partners found that 78% of mergers and acquisitions fail, and 70% of strategic alliances fail. For purposes of this slide I have combined the two figures and split the difference. But you get the picture: most will fail.That’s a sobering statistic.The best advice I can give you is to make sure you really need – NEED – a partner. Because the odds are against the partnership working. Partnerships take time and effort. For anything to work, you have to put enough attention on it. It will sap resources from other endeavors, so consider that before you enter the partnership. And make sure you are willing and able to commit to your side of the partnership, too.As small business owners, we don’t have the luxury of extra people or time for mistakes. We have to minimize our mistakes as much as possible.
- We’ve been talking about strategic issues, about deciding when to partner and how to choose a partner. Now let’s dig in to some of the tactics of creating partnerships.Kare Anderson is an Emmy winner and former Wall Street Journal writer. She has written a book about “smart partnering.”I had the honor of having Kare on my radio show recently, and I have to give credit to Kare for this YUM formula for broaching the subject of partnership. She says one of the big mistakes that people make is to talk first about what’s in it for them instead of for the other party.Keep in mind to distinguish between your internal decision of whether to partner – and the actual process of approaching a potential partner.If you are internally evaluating the decision whether to partner, it’s all about me – you have to think, “what’s in it for my own business.” But once you make the decision to partner, then you must go into sales mode. Because this is a selling job. This is about approaching the other party and convincing them to partner.First YOU – say to them, “you will get…”Then US together – “together this is what we will achieve.”Then ME comes last – but it’s important so don’t forget to bring it up.
- How do you negotiate a partnership? By (1) knowing your bottom line – what you need out of it and what you have to give up to get it;(2) Knowing what the other side needs; (3) being as clear and specific as possible on terms – nothing is more likely to fail or lead to disagreements or even lawsuits, than being vague and unclear, or with each side having different expectations. Here’s a framework for negotiating a partnership. I use the acronym PESD to describe it.(explain each step).
- (continuation from previous slide)Finally, remember to document the partnership and move quickly. The level of documentation should be commensurate with the value of the partnership and how much you have to protect on your side. The more at stake, the more strategic the deal is, the more likely you need a formal contract. For something smaller in value or that is easily replaced, a letter of understanding or even a detailed email exchange might do. Anyone who does a lot of deals for a living will tell you there is such a thing as deal momentum. Deals die because they take too long to put together. Make sure the documentation process is just that, too: documenting. When it comes to legal agreements, focus on documenting the main terms. Don’t try to use a contract to drive out every last ounce of business risk. Risk will always exist, and it is unrealistic to expect your attorney to address every risk. Just being in business is a risk. Consult your attorney, ask your attorney to give you reasonable protection in the contract from the biggest risks by documenting the terms, and then move forward.
- There are many reasons to partner, but here are seven good reasons that come up again and again: (go through the list one by one, with examples)Suppliers: Fast growth can bring a cash flow crunch to a small business. Here’s the problem: big order + more up-front expenses = less cash to run the businessTry to find suppliers that are willing to advance inventory or supplies without requiring upfront payments. Or find ones willing to accept payment in stages or “just in time,” or finance orders at low interest rates. This means you and your supplier can grow at the same time. And you may not need to resort to expensive bank financing or credit cards for operating cash.New markets: (earlier example)Training: Big companies with partner programs often have valuable sales and merchandising training that you can benefit from. They may have technology systems you can use to make your business more profitable and efficient. You may have to trade higher prices to get access to these valuable productivity enhancers – but then, it may be worth it. This type of program can also help your credibility in the marketplace.Strategic expertise: Round out offering: Find a supplier without a good Web presence, and become their Web arm. Many suppliers – especially small suppliers or those in staid markets – are baffled by the Web. One fishing tackle etailer I know had extensive Web technology and marketing expertise – not to mention 500,000 monthly visitors. They were able to leverage those assets to get an exclusive to their supplier’s line of goods and a sweet drop-ship contract.
- Warren Buffett, the second richest man in the world, has a company, Berkshire Hathaway, that basically invests in other companies. That’s what the company is all about: they buy up, or buy stock in, other companies.You’d think a man in this kind of business would have so many deals going in, he’d need a roadmap and a compass to keep them straight.The reality is very different, however.Warren Buffett personally writes his letter to shareholders each year. Some are very funny. All are interesting. You can find them on the Web. As you read them, you find that he sometimes went the entire year without buying a share of stock or buying a single company. He has remarked several times about the skill of being able to sit quietly and NOT do anything -- that sometimes it is wiser not to act than to act. He has even pointed out how by sitting quietly he has avoided making what would otherwise have been disastrous acquisitions.Warren Buffett is very choosy, and so should you be when it comes to partnering.
- Here are some reasons to be choosy and NOT partner:Always measure a partnership against whether it is revenue generating, and how much revenue you can generate directly as a result of it. As small businesses, let’s face it: cash is king. It’s all about how much money you bring in the door, and if a partnership can’t be tied to bringing in money in some way, then as a small business you don’t have the luxury of it.We’ve talked about vagueness: if a partnership is worth doing, it is worth being specific about. If you can’t be specific, then it means you haven’t thought it through adequately. And if you haven’t thought it through adequately, then you can’t negotiate with the other side. So either go back to the drawing board and get specific, or find something more fruitful to spend your time on.If you sense any faction on the other side is not committed, run don’t walk in the other direction. Don’t count on your champion to bring them around. Maybe he or she will, but maybe they won’t. Can you take the chance?
- Thank you. Any other questions?
Strategic Alliances - The Art and Opportunity of Creating Them
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Slideshow Transcript
- Slide 1: The Art and Opportunity of Building Strategic Alliances Presenter: Anita Campbell How to grow your business faster and save your sanity with business partnerships 1 www.smallbiztrends.com
- Slide 2: Today’s Partnering Agenda What is a strategic alliance? Criteria for successful partnerships Who should you partner with? How to establish partner relationships 7 Good Reasons to Partner 3 reasons NOT to partner 2 www.smallbiztrends.com
- Slide 3: The Power of Partnerships $53,000,000,00 0 In 1980, upstart Microsoft partnered with then-giant IBM. The Microsoft DOS operating system was distributed with IBM’s new personal computers. 3 www.smallbiztrends.com
- Slide 4: What is a strategic alliance? Means many things to different people Can describe: • Cross referrals • Outsourcing to 3rd parties • Co-marketing • Online affiliate arrangements • “Business partnership” arrangements • Joint venture companies • Legal partnerships 4 www.smallbiztrends.com
- Slide 5: Formal Tech Partner Programs 5 www.smallbiztrends.com
- Slide 6: Definition: Business Partnership Today we will focus mainly on “Business Partnerships” Criteria: • Each side brings something to the table the other doesn't have • Each made strategic decision not to spend the time or money to do it alone, or can’t do it alone • Together, you are better equipped to meet a market opportunity 6 www.smallbiztrends.com
- Slide 7: Do You Need A Partnership? ASSESS YOUR NEEDS Evaluate your situation – do a SWOT analysis if necessary Walk in your customer’s shoes • What do they need? Versus what you offer Observe competitors • If they are ahead, how do you catch up fast? Evaluate market opportunities • Do you have everything you need to capture a market opportunity? 7 www.smallbiztrends.com
- Slide 8: Do a Cost Benefit Analysis Evaluate partnering against not partnering Speed Focus Make vs buy Sometimes partnering is the ONLY option 8 www.smallbiztrends.com
- Slide 9: Do You … REALLY … Need A Partnership? 75% OF ALL PARTNERSHIPS AND ALLIANCES FAIL 9 www.smallbiztrends.com
- Slide 10: Establishing Partnerships - You Us Me YUM Method: Broach a partnership with another party in this order: You – what’s in it for the other party Us – what can we achieve together Me – what I get out of it comes last 10 www.smallbiztrends.com
- Slide 11: PESD to A Partnership P = Paint a picture of the partnership opportunity and potential • Example: “There is an opportunity for you to extend your reach into XYZ market by ….” E = Explain the mechanics of how you see it working • Example: “If you can advance more inventory without requiring up-front terms, our company can accept more big orders. Require a 20 deposit, and allow the remainder to be paid out over time. In return we will ….” 11 www.smallbiztrends.com
- Slide 12: PESD to A Partnership (cont’d) S = Sell the benefits • Be prepared to demonstrate with hard numbers, such as “… this deal would double sales on your XYZ line.” Remember to focus on the benefits to them, not you. D = Document the relationship • Partnerships may involve formal arrangements such as contracts, or in other cases something less formal. At the very least there should be an email or letter outlining the arrangement. – Tip: document it fast. Deal momentum can die. 12 www.smallbiztrends.com
- Slide 13: 7 Good Reasons to Partner Partner with suppliers to finance the growth of your business Open up new markets Get access to valuable training and tools Establish credibility Strategically add specialty expertise Round out your product or service offering Meet governmental contracting requirements 13 www.smallbiztrends.com
- Slide 14: Be Choosy When Partnering “All man's miseries derive from not being able to sit quietly in a room alone.” -- Warren Buffett, the world’s second richest man, adapted from Blaise Pascal, 17th century mathematician 14 www.smallbiztrends.com
- Slide 15: 3 Warning Signs NOT to Partner No compelling goal: You don’t have a specific business goal to pursue jointly • Use the “revenue measure” Vagueness: Your partnership is vague • Small businesses don’t get much out of vague “marketing” partnerships – better off selling instead No Commitment: Your partner (or some faction within it) is not committed • The “kiss of death” 15 www.smallbiztrends.com
- Slide 16: Thank you! Anita Campbell anita@anitacampbell.com 330.242.1893 www.smallbiztrends.com Credits: Slide # 9, various industry studies including Vantage Partners Slide #10, Kare Anderson, www.sayitbetter.com, as stated in a Small Business Trends Radio program © October 2006, Small Business Trends LLC 16 www.smallbiztrends.com
