Whether it’s in my own daily activities or those of the clients I work with, I constantly come across businesses that exist in a space populated with a seemingly infinite number of “strategic partners”.
It is easy, as an entrepreneur, to get excited about the opportunities these partnerships could provide. We begin to think of the endless possibilities available to us if we could only leverage each other’s account lists and put together some kind of co-marketing program.
In all of the excitement, it is totally understandable that many of us miss the opportunity to ask ourselves a few key questions. Some of these include:
- Of the seemingly infinite number of partners, which 5-10 should be a focus?
- How much incremental revenue could these 5-10 partners realistically drive?
- Do our products/services really propose an enhanced offering when combined? And is the story coherent or forced?
Jason Lemkin wrote a great article titled “The Law of Attach Rates, And Why Partners Can’t Really Move the Needle For You (Directly)”. Using some quick math, Lemkin provides a way for companies to get a rough and ready estimate of the revenue opportunities available from partnership efforts. Now, there are a few details to be consider outside of direct revenue contribution, and the types of questions we should be asking are:
- Besides direct revenue, is there value to my company in the brand I associate with?
- Does my partner interact with, but not necessarily sell directly to my target market? And does that represent an opportunity for me?
- [For really early stage companies] Am I missing out on much needed revenue by not leveraging every partner I can?
- Is there value for both parties in this partnership?
The point being that partnership decisions balance two separate lines of thought; the tangible (cold hard calculations like Lemkin’s) and the intangible (partners impact on brand).
When it comes to partnerships, I like to use the “let’s try just one and see how it goes” approach. This means the two parties approach one of each of their clients with their combined offering to see whether the message resonates. This not only gives them a chance to work together and see if the other party is really as action oriented as they say, but it also ensures they don’t go blowing a bunch of resources trying to set up partnership documents, co-marketing plans, and partnership announcements that could be a total waste of time and money!
Partnerships are not a perfect science, but using a combination of analysis (as Lemkin suggests) and the “just try one and see how it goes” approach, we can avoid spending valuable resources on a partnership that never made sense in the first place.