Want to grow your small business or entrepreneurial start-up without spending a pile of money expanding to new locations, manufacturing new products, or hiring a slew of new salespeople? Then it’s time to find a strategic partner.
Typically, when someone says the word “partner” in small business, they mean a person who owns a piece of the business and participates in running the company. That’s not the type of partner I’m talking about. Instead, I want you to consider a “partnership” with a company strategically aligned with yours that can help you achieve your business goals and grow your company.
Strategic partnerships aren’t mergers. Both companies in a strategic partnership remain independent. They have their own management, finances and operations.
Rather, a strategic partnership involves one company providing critical core business services to another on an ongoing basis. They agree to share income on sales or pay commissions on sales. In some cases, one partner pays the other an amount regardless of sales, but that’s less typical.
Of course, it’s highly recommended that these partnerships are secured by contracts clearly spelling out all the terms, including responsibilities, payments, protection of trade secrets and who owns the intellectual property, customers and inventory.
Let’s say you have a company in the hair care products industry. You could team up with strategic partners for these types of services and business needs:
• Sales representation: You could engage an individual sales representative (“rep”) or a sales team that’s already in the business of selling hair care products to salons and retailers, typically from more than one manufacturer. They then take a commission on the sales they make for you. It’s up to you to fulfill these orders.
• Fulfillment: To avoid having to do the warehousing and shipping of all the hair care products you make, you could engage a fulfillment house to ship product to customers you secure yourself. Typically, you pay an amount per shipment.
• Distribution: Some companies provide both sales and fulfillment services, especially in industries where retailers don’t want to deal with lots of small manufacturers. Your hair care products could be distributed, sold and fulfilled, by a distributor to salons.
• Manufacturing: Who said you had to make your shampoo and conditioner yourself? You could engage another company to produce some or all of your products, to your specifications and formula, which you’d sell under your brand name. Contract manufacturing is widespread in many industries, especially in electronics.
• White labeling: Instead of, or in addition to, selling your fabulous hair gloss under your own brand, you might allow salons to sell it under their own brand. The omission of your branding — hence the term white label — is common in many kinds of manufacturing businesses, such as consumer goods and appliances. For instance, major appliances, such as refrigerators and televisions, are often made by only a handful of companies, and various brand names are then attached.
• Licensing: Perhaps another company (or celebrity or hairdresser) that doesn’t have a line of hair care products would grant permission to allow you to use their name or “brand” on your products. Examples abound in the entertainment industry where, for instance, toy manufacturers will license a movie’s brand and create toys around the movie’s main characters. Professional athletes often also license their likenesses for promoting consumer goods — think of all those shoes.
• Marketing and promotion: It’s expensive to try to sell your hair care products all on your own, so you could team up with one or more companies to jointly advertise or participate in trade shows.
To look for strategic partners, start with your industry or trade association. For hair care, for instance, it might be organizations like the Professional Beauty Organization, the Salon Association, or Personal Care Council. They’ll often know the major distributors, sales organizations, contract manufacturers and the like.
A strong strategic partner can reduce costs, increase sales and help you reach new customers. And securing a well-known or major company as a key partner not only gives your company specific competitive advantages, but also adds credibility with customers, vendors and funding sources.
In your small business, remember, don’t try to do everything alone.