When we think about the multitude of players in the market, we tend to think about competition. This would however imply that we are the only ones pursuing our goals. If we slightly changed our mindset, we would realise that we are not alone in our pursuit. Competition can indeed be very healthy, especially because it motivates us to be the best we can and to do the best we should, however, having business partners can help us achieve our objectives much quicker.
Evaluating business partners can be somewhat similar to evaluating a M&A transaction. Ideally there is something beneficial for both parties and they are somehow complementary, either in product or client base.
Understanding yourself and the counterpart
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” ― Sun Tzu, The Art of War
One of the key lessons Master Sun Tzu tells us in The Art of War is that we should understand ourselves and the enemy. When looking for business partners, we should understand our own business and that of the potential partner.
The questions to be considered are easy to ask, but hard to answer:
- About your business:
– What’s your differentiation, what makes you unique?
– What do you need?
– What can you offer?
- About the partner:
– What problems is the potential partner trying to solve?
– Why do they want a partnership with you?
– Who is the decision maker?
Among the factors that both you and your business partner might looking for are:
- Market access: If your company is small, you are most likely looking to increase market share through a well-established partner who already has a supplier number within the purchasing department of your customers.
- Technology: Many companies search for state-of-the-art technology. When I worked in M&A, most Chinese companies were interested in German companies because of their technology.
- Brand: A brand has become an extremely valuable intangible asset. If you can gain exposure through a well-known brand, you do not need to position yourself from the beginning.
Defining the target
Besides understanding your circumstance and having an idea of the general profile of a potential partner, you need to get into the details and nail down names of potential partners. Two major considerations in this process are size and location.
The smaller the company you are looking for, the quicker and easier it is to get an agreement, because there is less bureaucracy. There are numerous exceptions though, particularly if you know decision makers well enough or are as persuasive as to convince them to an agreement in a few meetings.
If we classify potential partners in 3 categories, we have small, medium and big companies.
- Small – Are small companies worth your time? Can they provide you what you need? If all you care about is speed and flexibility, you might want to consider this kind of partner.
- Medium – It is relatively easy to get in touch with medium-sized companies. They might have some position in the market and be a good partner to leverage your capabilities. In fact, these kind of companies should support each other mutually in order to survive in a market often dominated by a few big players.
- Big – Big companies are hard to get into, but also have the most to offer: not necessarily in terms of attention or interest, but in terms of financial and market resources.
A second important consideration when considering potential partners is location. Broadly said, there can be local and international partners.
Local partners are often the first choice because they are:
- Easy to find
- Easy to reach out to
- Easy to understand
Most likely your business already knows them well and has developed partnerships without actively seeking them out.
Despite the helpfulness of local business partners, there are times where you want to go international. Germany is a country where export plays a significant role and even companies with as little as €1 million sales are often exporting to a variety of countries. In such circumstances, seeking out international partners might be the correct decision.
There are several benefits of entering into international partnerships beyond the simple “culture” a country might have of “going-out”.
- Entering a new market with new customers: The local market is not necessarily the best market for your product or solution. Other countries might value them much more. Just as a cup of water is much more valuable in the desert than in a city with appropriate basic services, your product or solution might have a higher value somewhere else.
- Gaining market intelligence: Business nowadays has gone global. Even if you do not plan to enter a new market, it is essential to understand players in the international field to avoid potential risks, e.g. competitors, and/or to benefit from new opportunities. The gained market intelligence can also help refine your product, service or strategy.
- Testing new ideas: Ideas that do not work in your local country, might work out in a different one and vice versa. The only way to prove whether an idea works or not is to test it. Talking to people in a completely different environment can also inspire new thoughts and give room to new ideas.
Beyond corporate benefits, it can also be beneficial to you on a personal level.
- Avoid boredom: Doing business with people in a different timezone means that you can keep yourself busy all day long with no room for boredom.
- New mindset: By talking to other people, you start to think about business and life in a different way.
- Practice languages: You get to practice other languages, especially English.
- Travel: Your chances of travelling increase substantially.
- Widen network: You get new connections everywhere.
Once you are convinced that you should seek out international partnerships, the next question is to ask yourself what market are you interested in? When advising German companies for M&A deals, the favourite countries were usually USA and China, both of which have a huge market and are rewarded by investors with good valuation multiples. This could, of course, be different for your business.
When taking actions to find international partnerships, you might get the impression that in contrast to local partners, they are more difficult to find, to reach out to and to understand:
Difficult to find
Because international companies might not be next to you, it might take some more work to find them.
Consider the following options:
– Online research: Search for directories, articles that list and categorise companies, sector specific news, analyst reports.
– Introductions: Get introduced to some companies by people who understand your business. These people often know a couple of names you should consider.
– Going to well-known companies: Big well-known companies are the most easily found.
– Getting found by partners: You can use marketing to get yourself found, but this could take a while. If you consider using this method, plan in advance and allow yourself enough time.
Difficult to reach out to
While international partners can be somewhat more difficult to reach out to than local partners, the same contact methods can still be applied:
– Internet: Be it e-mail or social networks, you can keep in touch with international partners. In the latter case, it would be important to know which is the best platform. For example, in China, Renren is used instead of Facebook.
– Phone Calls: Sales people and investment bankers like to use the phone. Things can be communicated much more easily than with written communication.
– Instant messaging: If there is already some trust, instant messaging can deliver messages quite quickly. Depending on circumstances, text can also be more appropriate than voice.
– Face-to-face meetings: Take the plane and meet your potential business partner personally. While I am very open to online interactions, I am still friend of face-to-face meetings. The mere presence can often clarify lots of doubts.
Difficult to understand
The message can be hard to understand because of two aspects, language and real meaning.
Language can be translated or learnt before dealing with international partners.
The real meaning, which goes beyond language, also needs to be translated and is best achieved through people who understand the cultures of both parties. With time, you will also get to understand the real meaning by your own.
Just like in a job interview, the more you prepare your answers for a partner discussion, the better you can perform. You will need to know what the typical questions are and prepare the answers accordingly.
Have some material ready for sending. People are very likely to ask you to send some kind of document. It can be out of interest, or just an excuse to delay reply, however have something handy if they ask you to send something. The documents can then be easily circulated inside and outside partner companies. While preparing written material, you also make your thoughts and strategy much clearer.
Know whom to contact, sometimes it can be someone who does not have direct decisional power but huge influence on the decision taker. For example, CEOs are often too busy, but their direct subordinate are more open to deal with issues and if they are willing to help you, they can report and prioritise your issue accordingly.
It is helpful to set realistic expectations, especially regarding the time length it can take until an agreement is reached. A partnership agreement will most likely not close when you just meet the counterpart. Expect to have several rounds of meetings, during each of which you get to discuss the cooperation in more detail. The first meeting might just serve to get introduced. The larger a company, the longer the process can be. In this case, it is essential to be persistent in the follow-up process.
Looking for business partners is almost like a sales process. There will be people who will reject you. However, just as in sales, the rejections here are like a numbers game and you should not let any rejection let you down. If you get a 10% reply, it is already a small success.
Other times, you might not get a response at all. With so many e-mails being exchanged nowadays, it might be possible that your e-mail just got forgotten or landed in the spam folder. In this case, consider using a different channel. People who do not react to e-mails might react to phone calls, LinkedIN messages, Tweets, letters and viceversa.
What to do when stuck?
The mushroom theory
This was one of the most important theories used at CMC Consulting. It is related to how you go about finding mushrooms. If you go into a field and find no mushrooms, you have to return again and again and some day, they will be there.
Using this theory, we approached and sent mailings to potential customers on a regular basis. The same can be done when seeking for business partners. Approaching partners on a regular basis can be a beneficial long-term measure.
In Chinese culture, three factors present in our life events are: Time, place, and people. A different combination of these factors can give a different result.
If the results that you get now are not ideal, it might be that the timing is wrong. Or it might be the second factor that is not good: e.g. change a location. Finally, if it is the people factor, maybe you just need to talk to the next person to get what you want!
While the search for business partners, as in everything else in life, will most likely not be smooth, it is an invitation for us to open up our creativity. The more obstacles we get, the more potential we have to get creative. If you have one stone that blocks your way, you can step on it and get higher. If you get two of them, you can go even higher.
Have you ever had trouble when looking for business partners? If yes, what creative solution and/or way did you take? Share your thoughts below!
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