The words ‘partners’ and ‘partnerships’ are bandied about a lot in business; but rarely are they used to describe what a dictionary defines as “an undertaking with another or others with shared risks and profits”. One example of a partnership is a marriage (or at least it should be) and so is a joint bank account, or a joint venture - each partner will have their share in good times and each will suffer in bad; legally its called joint and several liability.
But this is not the kind of partnership that many businesses aspire to have. They want to share the good times but they want to walk away if things get bad. I think that it would be more accurate to describe this kind of alliance as a ‘brief affair’ or ‘fair weather friends’ and not partnership. But why does this matter?
It matters because businesses need alliances so that they can maximise opportunities throughout their business cycle; from raw materials supply chain through to end user sales and support. No business is so vertically integrated that it can thrive without alliances; but do they need partners? Well I say yes, and here's why.
Continuing my dating analogy, if I were ever to have been looking for a ‘brief affair’, and nothing more, I might well have attracted a ‘partner’ - probably one with a similar mindset. We might have been happy for a while, and happy to walk away too. Investment in the affair, either emotional or financial, would be limited. Little thought would have put into future plans. In fact, you could say, that its the lack of future planning and the failure to find the right long term partner which leads directly to the search for a dalliance in the first place.
I know that my analogy has several flaws, most notably that a business need to have many alliances at the same time. But I thought it useful to point out that casual alliances are invariably self serving, short term and have little invested in their continued success. When I compare those attributes to virtually any business plan there is simply no match; planning, investment and assembling the right team are the cornerstones of any business that wants to thrive. Alliances can be good, but real partnerships can be a lot better for your business.
I have spent over 30 years of my career working in and with ‘the Partner Community’ - specifically in the IT and technology channel. I have been involved as a manufacturer, distributor, reseller, solutions provider, software vendor and (of course) consultant. I have seen these relationships from all sides; I’ve seen what works and what doesn’t; I’ve grown partnerships from nothing to over $100M, and I’ve closed others down. So what have I learnt?
What kind of Partners?
Like I have already said, businesses have alliances and partners throughout their workflow. It seems entirely natural and commonplace to seek partnerships with your suppliers; and these are often long term commitments in which you agree to forego the absolute lowest cost in pursuit of more valuable goals such as guaranteed supplies, quality and possibly exclusivity. And its no surprise to find that some of your customers seek similar relationships with you. Like I said, these partnerships are commonplace.
But these partnerships are not the ones that I most interested in. And when companies talk about their ‘partners’ they are not usually talking about a group of their suppliers nor a group of their customers. What they mean is their sales partners, or sales channel partners. So who are they and what are they for?
What is a sales partner?
I have discussed this with many companies, and interestingly the answers are very different from executives in companies who’ve never had significant sales partner channels. They want Partners to ‘drive more sales’. And the model they are thinking of is a simple as it is ancient - essentially they (the manufacturer) have a finite sales force and anticipate that if they give a sales commission to a ‘partner’ then the partner might find some additional customers and win them some incremental sales.
This is true and it happens all the time. But look again at the dynamics at play here. The manufacturer wants to sell more, and will pay a commission. But they want incremental sales without incurring extra sales costs, apart from the commission. The partner, for their part, probably already has access to a customer, who is buying other products from them and, who has expressed an interest or need in the manufacturer. The partner is interested in keeping their customer sweet, and getting a commission for little extra effort. The partner has little interest in representing the manufacturer to there other customers unless further success can achieved without effort.
This all works well if the product is a commodity or staple, but doesn’t work well when its technology or software or the like. The reason is simple; when the product or service is complex, its needs to be sold, and selling it takes time and skill. The manufacturer has the skill but doesn’t want to use it, and the partner doesn’t have the manufacturer’s knowledge in in the first place.
In practice this simplistic kind of relationship results in paying commissions to ‘partners’ for passing sales leads, or for a simple introduction. Yes it will lead to extra sales, but not in any significant quantity or relevance. Worse still it becomes impossible to forecast what partner sales will be, or even to see if its incremental revenue at all. This is a common hurdle and some manufacturers simply never get further than this. Of course, in reality, its a problem with their partnership model is not a partnership at all; ‘Fair weather friends’ is a more accurate description.
So a real sales partner is not someone who gives you a sales tip off, or someone who allows you to sell to ‘their’ customer - a real sales partner is someone who finds customers and directly sells your products in a way, and into a market, that complements your other sales channels. What’s more, just like a regular part of your sales force, the sales partners can foresee and forecast opportunities and sales.
What is a sales partner for?
Those manufacturers who see sales partners as a sustainable source of sales and a real part of their sales channels can start to look at how to deploy them for best effect. Typical scenarios include;
The most common and obvious answer is to achieve scale, you simply can’t keep adding more sales people every time you see a new opportunity - you will need to find a new approach to get higher yields or get someone else to do the selling. Strategically selected sales partners can cover geographies or markets that you don’t.
Great sales managers should always be looking to increase the yield of their sales team. If you consider your sales team the best, reduce the time when they are not selling. If there are accounts that absorb time, but generate less revenue you should ask whether they should be handled by a partner instead.
Regional partners can do more than just add scale, they can take your products to localised markets in the way that you can’t. Just consider for a moment a typical sales person for US/UK technology company. They may be great sales person but they won’t join your company or enjoy success if they fail to have one essential skill - to speak English. Partners are able to unlock local markets, and don’t insist on English.
Specialist partners tap into niche markets that they understand far better than you.
- Extended solutions
IT systems, data, software are usually combined, integrated and otherwise modified before they are used by their ultimate end user. The manufacturer may believe that they sell a complete solution, but usually its further integrated and turned into an extended solution, often by a partner.
- Embedded Solutions
In fact the manufacturers product may be so well integrated its become invisible, an embedded part in another partner’s solution.
Training is expensive
It should have become clear that for any sales partner channel to be really effective they have to be able to find and close sales themselves, and to do that they need to be trained and credible and capable of selling the manufacturers’ products as part of their overall solution. In fact partners need to trained just as intensively as a manufacturer’s own sales force.
And yet, training is expensive.
Just about the most expensive thing you can do in business is to stop selling, and sales people have to stop selling when they are being trained. Even if you are funding the training course and it is free to the partner, their opportunity cost is high. Therefore to get a properly trained and effective partner sales force you need to convince the partners to invest time and resources. How do you do that? Show them the money. This is a partnership remember, its about risk and reward. The more training that need the more reward you will need to show. You’ll need to articulate clearly where and how they will make lots of more for their investment.
I have been a helm of a number of very successful partnerships. The most successful started as conversation which uncovered an under-tapped market niche. It took several months to negotiate a 3 year partnership contract as it was all new to this manufacturer. My company, the new sales partner, had to meet stringent quality, investment and staffing and revenue goals, while the manufacturer ceded to us some existing business in the niche and assisted us to generate new business. But most of all we had to build trust, and trust is a two way thing.The first 6 months were as tough as we all thought they would be, but in that period we developed a deep understanding and trust, in the products, the partnership and each other. Our success was dramatic, and by 18 months in we had hired a dedicated sales and support team 3 times larger than we’d planned with revenues 10's millions above where we planned - now that's what I call success!