Profit margins are thinning. New pricing models such as freemium subscriptions with high thresholds are compressing already tight budgets in many industries. Entrepreneurs have to become increasingly resourceful to punch through into new markets. How can we butt ourselves in when the price of entry is so high?
This is when good entrepreneurs wheel in partnerships like catapults during a siege. The role of a good relationship between a new company and an established one is essential; without the partner, the entrepreneur cannot break through the barrier and start seeing success.
But what makes a good partnership and how can entrepreneurs find them? And why are they less prevalent today than in the past?
First, a good partnership resembles any other relationship.
We have mentors, we have friends, we have peers – each of these relationships demands a level of trust and cannot be totally self-serving. With a partnership, there has to be a significant give to make the relationship not only mutually beneficial but also valuable for future growth on both sides.
One thing often overlooked in these relationships is the level of personal connection. Being demanding or coming off as entitled will often get you in trouble. Conversely, demonstrating a positive mental attitude and a genuine interest in the person on the other side will develop a real connection, leading to a better business relationship. Don’t discount your charm and charisma! It’s invaluable.
Now, you might want to do everything yourself as a new startup, but that’s not always the best option. Good partnerships arise as a result of needing something from somebody else that you cannot do, at least not quickly or as well as those already doing it. Even though we are wary of outsourcing or giving away margin to get our businesses up and running, we must seek help in areas where we lack skill or capabilities (the “gaps”) to get where we need to go.
In an article on Entrepreneurship.org, Donna Peak suggests that entrepreneurs ought to “fill the gaps with partners” in order to get into business faster and more effectively. What you give away in margin or control is far outweighed by the huge uphill battle you might face developing a product from scratch, for instance, or creating the infrastructure necessary to deliver to customers. That’s why it’s always a good idea to find the right partner to help you succeed early and quickly.
Once you establish the gaps, finding the right partner is almost never about the lowest cost to the entrepreneur. When choosing a partner, finding a balance of quality, availability and location are important, but the most important factor is how willing and available they are to work directly with you as you set up your business and work the ins and outs. This factor is built on one common theme – the potential for shared benefit as a result of working together.
A good example of this would be to find a vendor that is willing and able to work directly with you to find an area of common benefit. Whether you succeed or not, they will profit from your business either way. Your use of their services is exchanged for cash. However, expressing line of sight to even higher revenue as a result of a partnership with your company will never be overlooked. This will entice them to not only do business with you, but also invest in you and your vision.
Therefore, establishing mutualism rather than a commensalism at the beginning of an engagement opens up the possibility of the established partner customizing their offering for you and even adding new features and opportunities that are tailored for your specific business. Engage early and offer something; you will often get more as a result.
But are partnerships as easy to create now as they once were?
Mike Peterson, a data architecture specialist and enterprise technology expert at NeuStar, Inc., saw firsthand how partnerships have been squeezed over the last few decades.
“Many vendors used to overcharge for their products because they were the experts and had little competition. When there is lots of money going around, partnerships overall flourish.”
“But trends in offshore labor, open source software availability and new subscription models have all led to price depression and everyone trying to keep as much of the pie as possible.”
These trends discussed by Peterson show an overall burden on the availability and eagerness of partners. While there may be multiple partners available, prices tend to be so elevated that the barrier to entry with most of these partners is too high to make a startup business profitable. In technology-heavy industries, freemium models with high thresholds also have a compressing effect on businesses, and their ability to share profits is diminished.
With factors like these in today’s markets, real relationships between people are what end up truly defining successful partnerships and successful businesses.
Entrepreneurs are men and women of vision; direct contact with a potential partner allows you to convey your vision of mutual success. If they buy into your vision, you’ll be able to establish a meaningful partnership that is just as special as any other relationship you have in your business or personal life.
If you treat every partnership like that kind of relationship and continue to build on trust and mutual interest, your business will have fewer barriers and more open doors.