94 CHAPTER 5 KNOW THE WORLD
Business partners
Do not underestimate the extent to which business partners can help you. Your most impor-
tant partners are your channels to market (those individuals and companies that help you
find customers, make sales and provide ongoing customer support) – and your suppliers.
SUPPLIERS
Suppliers provide you with raw materials, components, part-finished and finished goods,
and services. It is in their interest that you do well. Form good relationships with your sup-
pliers and you can both win. Do not try to cheat them, or they will do the same to you.
Of course, you need to watch competitive pressures among suppliers to ensure that you
are buying from the best sources and that their products are not being outmoded by, for
example, technological developments elsewhere. In other words, be careful not to fall for
their marketing hype. You can get advance warning of changes in the price and availabil-
ity of your supplies by watching what is happening to your suppliers’ inputs (including
raw material prices and labour costs).
CHANNELS TO MARKET
Channels to market include simple re-sellers such as wholesalers and retailers, value
added re-sellers (VARs) who enhance your product as it passes through their hands, and
independent service vendors (ISVs) who use your product in the support or pursuit of
sales of their own services. In the new economy, affiliates who act mainly as re-sellers or
VARs have grown in significance. These channels are very important. Not only do they
have customer relationships that often achieve product acceptance more rapidly than if
you go in cold, but they also multiply your sales effort.
Deal with a single distributor and you might be reaching millions of end-
users of your product. Great leverage.
BUSINESS PARTNERS 95
INTERMEDIARIES
Other partners, sometimes called intermediaries, include:
warehousing, haulage and shipping companies that help you physically move
your product to market;
marketing services – including market research, advertising and marketing/media
consultants;
financial intermediaries including the banks that might be the target readers of
your business plan; and
other professional advisers including accountants, auditors and lawyers.
Look for ways that you can use business partners to share your load. In addition to the
sales and marketing benefits described above, you can leverage skills, use someone else’s
economies of scale, cut capital costs, or benefit in many other ways. For example, rather
than hiring an in-house attorney, look to see if a law firm can provide you with access to
a vivarium of many specialists for much the same cost. Rather than making a big capi-
tal outlay buying your own fleet of trucks, explore whether you could sub-contract to
another company that can do it for you more cheaply and more reliably.
Look back at your value ladder (see Chapter 4) and consider which parts could be
effectively outsourced. Identify which business partners and intermediaries you do or
could work with and how. Then assess the associated opportunities and threats, such as:
the advantages that you can gain by leveraging their skills, experience, contacts
and financial might;
your vulnerability (for example, if a partner goes out of business or its employees
strike).
‘All things being equal people will buy from a friend. All things being not quite so equal,
people will still buy from a friend.’
MARK MCCORMACK
You can help your cash flow by extending your period of trade credit from
suppliers while invoicing and collecting early from distributors. You might
not be able to do this for long, but business partners can provide assistance
during your start-up phase if you help them perceive that you will be a valuable
partner in the future.
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