Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9pm ET. This is excerpted from my recent interview with Joel Bush @LeverageBox. Joel is VP of Business Development at Shoeboxed.com. Joel has been creating and managing strategic, technology-based partnerships for more than 13 years. Prior to joining Shoeboxed, Joel was VP Marketing of Near-Time, and founder and President of Leverage Factory, a trade book and content syndication company. Click for more information about Shoeboxed.com.
SmallBizLady: What are the potential benefits of small businesses partnering with industry giants?
Joel Bush: Partnering with large companies has the potential to drive massive growth for small businesses. If you have a unique, valuable, and complementary offering a well constructed partnership can help you grow exponentially and tap into a large customer base who would not have heard about you otherwise. Partnering with large companies can also help you explore new markets and new product ideas faster and more efficiently than you can do it by yourself.
SmallBizLady: Are there any disadvantages to partnering with large organizations?
Joel Bush: Yes, there certainly can be. The experiment of working with a new partner works both ways. While you may see your large partner as a great way to scale faster, they may see you as a great way to experiment on a new product or service for free (or worse, on your dime). This disconnect presents a risk of upsetting your priorities and draining your resources.
To help avoid this it is important to establish trust with your partners and be honest about your capabilities and resources before kicking off a partnership. It is also helpful to understand your partner’s motivation for working with you and to define “success” before you begin doing any of the work required of the partnership.
SmallBizLady: Why do industry giants partner with small businesses?
Joel Bush: While you’ve been busy innovating and building your business, your giant partner has been busy playing defense, trying to hang on to their market share, and sitting through a lot of meetings. Partnering with you allows the industry giants to leverage your innovation and risk to move their product, service, and company forward.
SmallBizLady: What types of deals are realistic when working with organizations much larger than yours?
Joel Bush: This is a difficult question without more details. In vague terms, it is realistic to attach your product or service to a large company’s product or service in a meaningful way. Generally this starts as a pilot project or as an optional “add-on” for your partner’s customers. With success the pilot can grow into a full-blown partnership.
SmallBizLady: What kind of deals should you turn down as a small business?
Joel Bush: As a small organization it is very easy to be on the wrong end of partnerships. I would stay away from deals where the larger organization does not have skin in the game. I would also stay away from deals that significantly change the direction of your company, unless you intend to pivot in that direction with or without the partner. The cold hard fact of partnering is that most partnerships do not work. As a small business it is critical to understand the risks and potential benefits of a partnership before you dedicate time or resources to making it work.
SmallBizLady: Before you even contact a giant, what homework should you have done?
Joel Bush: You should know as much about their customer and their product or service as they do. Large companies are constantly approached with “lottery ticket ideas” by small companies who don’t really understand how or why it the project will be interesting to their larger partner.
There is a lot of “selling” throughout the partnership process. It is important to understand your potential partner’s value proposition and why partnering with you will help them move closer to their organizational goals. When you have an audience with the appropriate contacts it is vital to speak to them in specific terms about how a partnership with you will help them achieve their departmental and organizational goals.
SmallBizLady: How do you figure out whom to approach inside a large organization?
Joel Bush: This is also a tough question without more details. In the most general terms, there are three approaches to get to the right person.
First, and most effective, network your way into your prospective partner. Give your connected contacts a glimpse at what you’re trying to accomplish and ask them to introduce you to their contact at ABC Corp. Once you are introduced ask good questions and have a plan as you work through the organization to find the right person. Having a respected mutual contact introduce you will get a conversation started faster than almost anything.
Second, is the “Start at the Top” approach. Reach out to the highest level person you can and try to get their buy-in. If you do, they will likely introduce you to the appropriate contacts inside the organization. There are risks with this approach – if you do not get their buy-in it can be very difficult to motivate others to join your cause.
Third, is the “Start at the Bottom” approach. Admins and receptionists know a lot more about the organization they work in than you might imagine. Make friends, let them know what you’re trying to accomplish, and ask for their suggestions on finding the right contact.
From a technology standpoint, there are some truly amazing tools that can you help identify and track down the right person. I am a heavy user of LinkedIn (very helpful when looking for an introduction), Data.com (formerly Jigsaw.com), and other tools like Hoovers to educate yourself and try to identify the most appropriate contact.
SmallBizLady: You got through to someone! How do you prepare for that first call?
Joel Bush: Whether you realize it or not, this is a massively important sales call. While you are probably not selling your product or service as-is, this is your chance to sell the concept and your vision for the partnership.
Know your stuff and learn as much as you can about the company you’re pitching and the people you’re pitching to. Then, have a plan, and to the extent that it is possible, have data to back up your assumptions. Present your plan with confidence and focus on the benefits that will come to their company if they agree to partner with you.
Present the high-level benefit of the partnership, then justify your position (and your “ask”) by filling in with the details. If you’ve done your homework and there is a legitimate partnership opportunity this should help get the ball rolling.
SmallBizLady: Are there any questions you should ask early on in the process?
Joel Bush: Yes, a lot of them. Between getting buy-in on their side and signing a contract it is fair for you to understand everything about your partnership. Some of the more important things to clarify and understand before sealing the deal are:
- How does your company typically work with partners in situations like this?
- How often does your team meet its partnership launch timelines?
- How will this partnership be supported in other areas of your company (marketing? channel? other partners? finance? product development?)
- How will you and your team define success for this project?
- What sort of resources can you pledge to this partnership?
SmallBizLady: What red flags / warning signs should you be on the lookout for?
Joel Bush: Partnerships are typically one of the possible answers to the “Build vs. Buy” question. While it is great to work with big partners, there is a risk that they could be using early discussions to simply understand your space before becoming your competition. Share enough to position yourself as a potentially valuable partner but don’t give away the secret sauce until the ink is dry.
Schedule creep is very common at large companies. If they tell you they want to launch on February 1, there’s a good chance it won’t actually happen until July or later.
SmallBizLady: Should lawyers get involved? When and how?
Joel Bush: I like to use email or an online document to frame the partnership Terms and Conditions. This gives both parties a chance to agree on the shape the partnership at all levels. Once this is done, and everyone agrees on the framework, it’s time to pull in the lawyers. Share the framework with your attorney and talk through what you’re trying to accomplish in order to get the deal done.
SmallBizLady: What are the most common mistakes small businesses make when putting together a deal?
Joel Bush: Sometimes small companies think they’ve won the lottery when they land a partnership with a large company. To be honest, this is probably a lot closer to buying a lottery ticket than actually winning. Don’t get stars in your eyes until the money starts to roll in – you don’t win the lotto until they call YOUR number.
Keeping your priorities straight and keeping the rest of your business running while the partnership grows up is probably the single most important thing to do once the deal is done.
If you found this interview helpful, join us on Wednesdays 8-9pm ET follow @SmallBizChat on Twitter. Here’s how to participate in #SmallBizChat: http://bit.ly/S797e
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Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of Quintessence Multimedia, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine named her #1 woman for entrepreneurs to follow on Twitter. She writes a social media column for the New York Times and hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs. She also publishes a resource blog http://www.succeedasyourownboss.com Melinda is also bestselling author of Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works.