Multiply Our Revenue Through Strategic Partnership (But There's One Problem)

[jonahsr]

I realized that we could multiply our company's revenue with a strategic partnership with another, much larger business in a bordering industry. However, I'm not sure how to approach this.

The company we're looking to partner with offers a different service to what we have, so they're not a direct competitor. However, their customers are EXACTLY the ones who would use our service as well.

For example, a company that sells expensive rugs partners with a specialized cleaning company to provide ongoing rug cleaning & provide the best service for the client.

Through the partnership, the rug company might earn a 25% commission on the cleaning contracts & the cleaning company benefits from the business the rug company brings them.

This is not our industry, just an example.

Now back to our business: In the best-case scenario, we could build an easy integration with their e-commerce site & clients that request our service would be able to place their order within their system.

Here's my concern: If the partnership goes well, what if they take the service we offer in-house & compete with us on a national level as a competitor (maximize their profits)? Right now, they're doing around 30m in revenue from their service & if they took the service we offer in-house, that would add about 2-4m (with our partnership, they would make 500k-1m approx).

How would you approach this? Is this a valid concern given the above? Would you try to create a partnership anyway?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Jobless]

Do you have some unfair advantage that would prevent or disincentivize replication?

Do their customers know / trust your brand? Or will the service be done in their name/brand?

 

[Kung Fu Steve]

I realized that we could multiply our company's revenue with a strategic partnership with another, much larger business in a bordering industry. However, I'm not sure how to approach this.

The company we're looking to partner with offers a different service to what we have, so they're not a direct competitor. However, their customers are EXACTLY the ones who would use our service as well.

For example, a company that sells expensive rugs partners with a specialized cleaning company to provide ongoing rug cleaning & provide the best service for the client.

Through the partnership, the rug company might earn a 25% commission on the cleaning contracts & the cleaning company benefits from the business the rug company brings them.

This is not our industry, just an example.

Now back to our business: In the best-case scenario, we could build an easy integration with their e-commerce site & clients that request our service would be able to place their order within their system.

Here's my concern: If the partnership goes well, what if they take the service we offer in-house & compete with us on a national level as a competitor (maximize their profits)? Right now, they're doing around 30m in revenue from their service & if they took the service we offer in-house, that would add about 2-4m (with our partnership, they would make 500k-1m approx).

How would you approach this? Is this a valid concern given the above? Would you try to create a partnership anyway?

I LOVE that you're thinking this way.

At the moment it's a win-win-win situation. They'd be silly not to take advantage of your offer.

But any influence is all about showing them the heaven if they do and the hell if they don't.

I have a buddy who used to have contracts for several big retail stores here in the U.S. providing a similar partnership "buy from them, we'll service it" ... I think that business got up to about $12 million/year (they were mostly regional but started to go national).

THEN the stores decided they were going to take the service in-house so they canceled their contracts. Almost put his business under. He goes from 12 down to 2. Has to lay off most of his staff.

Shortly after the retail chains realize how difficult it is to set up the in-house servicing. The infrastructure of employees all over the place, etc., etc. -- and they end up contracting it out again about 2 years later (after they've lost a ton of money).

I'm not sure how employment is in Portugal but here in the U.S., it's VERY challenging to get employees right now. The HEAVEN if they do this partnership with you is that you have the infrastructure built to service it. Employees you can trust. A team that gets the job done right every time.

You'll have to show them how YOUR business fits THEIR brand (and how they want to be seen to the end customer). White glove service.

They make more money without doing anything. But maybe you should do a test with your local group and then have a plan to roll it out nationally with them?

To answer your question:

It's a valid concern.

But how about instead of focusing on what could go wrong... you focus on what could go right?

Do you have some unfair advantage that would prevent or disincentivize replication?

Do their customers know / trust your brand? Or will the service be done in their name/brand?

This is a great question too.

 

[Andy Black]

I have this often with clients taking over work we do for them.

If they want to leave then I walk them out and leave on good terms. They weren’t looking for a partner so I’ll keep going up the road till I find a better fit.


Some other thoughts:

1) You’re probably not going to help their competitors, but you could casually bring that up next time you speak to them.

“So we’ll do, A, B, and C for you, and of course we’re more than happy to have a non-compete clause in the contract and not work with any of your competitors.”

Meaning you’ll work with their competitors if they stop working with you.


2) “The only problem that can’t be solved is the one under the table.”
(Blaise Brosnan)

Bring up your concerns with them? They’ll have concerns about using a service provider who could go awol and leave them in the lurch.


3) Show them all the high level tasks that you’re doing, without going into all the details how.

Let them see how busy you are.

“Date/Time: Spotted ABC issue and fixed by doing XYZ.”

We let clients see screenshots of what we see wrong, our analysis, and the after screenshots when it’s fixed.

Full visibility. If they see all the work we’re doing and want to do it themselves then they’re welcome to it.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[jonahsr]

I LOVE that you're thinking this way.

At the moment it's a win-win-win situation. They'd be silly not to take advantage of your offer.

But any influence is all about showing them the heaven if they do and the hell if they don't.

I have a buddy who used to have contracts for several big retail stores here in the U.S. providing a similar partnership "buy from them, we'll service it" ... I think that business got up to about $12 million/year (they were mostly regional but started to go national).

THEN the stores decided they were going to take the service in-house so they canceled their contracts. Almost put his business under. He goes from 12 down to 2. Has to lay off most of his staff.

Shortly after the retail chains realize how difficult it is to set up the in-house servicing. The infrastructure of employees all over the place, etc., etc. -- and they end up contracting it out again about 2 years later (after they've lost a ton of money).

I'm not sure how employment is in Portugal but here in the U.S., it's VERY challenging to get employees right now. The HEAVEN if they do this partnership with you is that you have the infrastructure built to service it. Employees you can trust. A team that gets the job done right every time.

You'll have to show them how YOUR business fits THEIR brand (and how they want to be seen to the end customer). White glove service.

They make more money without doing anything. But maybe you should do a test with your local group and then have a plan to roll it out nationally with them?

To answer your question:

It's a valid concern.

But how about instead of focusing on what could go wrong... you focus on what could go right?





This is a great question too.

Thank you for the insight! It's great you sharing a story of how things can go here. When proposing a partnership like I described, do you think the other business we would partner with is fine with sharing their customer data with us & us being able to use our brand name?

How did your buddy do it? Of course if we get the customer data & brand recognition that would be best...

 

[jonahsr]

I have this often with clients taking over work we do for them.

If they want to leave then I walk them out and leave on good terms. They weren’t looking for a partner so I’ll keep going up the road till I find a better fit.


Some other thoughts:

1) You’re probably not going to help their competitors, but you could casually bring that up next time you speak to them.

“So we’ll do, A, B, and C for you, and of course we’re more than happy to have a non-compete clause in the contract and not work with any of your competitors.”

Meaning you’ll work with their competitors if they stop working with you.


2) “The only problem that can’t be solved is the one under the table.”
(Blaise Brosnan)

Bring up your concerns with them? They’ll have concerns about using a service provider who could go awol and leave them in the lurch.


3) Show them all the high level tasks that you’re doing, without going into all the details how.

Let them see how busy you are.

“Date/Time: Spotted ABC issue and fixed by doing XYZ.”

We let clients see screenshots of what we see wrong, our analysis, and the after screenshots when it’s fixed.

Full visibility. If they see all the work we’re doing and want to do it themselves then they’re welcome to it.

Thanks Andy for the insight. I love the idea of bringing up the non-compete agreement in the negations. I appreciate it!

 

[Two Dog]

Thank you for the insight! It's great you sharing a story of how things can go here. When proposing a partnership like I described, do you think the other business we would partner with is fine with sharing their customer data with us & us being able to use our brand name?

What advantage would they gain by sharing their customer data? You're talking about a partnership that could potentially bring an extra 5 - 10% in annual revenue. That's hardly a game changer for their world. The problem I've always encountered in trying to establish such partnerships is complete lack of marketing interest and/or ability by the other company.

Since you're suggesting a profit split, it's pretty likely you're expecting them to actively market the new feature / integration to existing customers. Unfortunately, they'll have little idea what that involves or won't be interested in assigning resources to make it happen. If you're doing all the marketing and fulfillment to sell to their accounts, there doesn't seem like much benefit to having a partnership at all.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.