You should be using partnerships early and often in your small business. Partnerships accelerate product development, increase market penetration, extend marketing efforts and infuse operating capital into business. And sometimes, a partner becomes an investor or acquirer.
This weeks issue of Time headlined a shortly about Google "bulking up on partnerships" in order to fend off its foes of Yahoo! And Microsoft. CEO Eric Schmidt admitted, "Partnerships had not been a core part of the way we were running the company." In other words, Google´s strategy was to build or buy its way to market leadership. Now it has to partner to get to the next level. That means transitioning from the do-it-alone-approach to leverage the assets of others.
Many firms aren´t so fortunate. They had no choice but to work with partners to get off the ground and grow.
Take SimplyShe, a firm founded in Los Angeles by Maria Peevey who´s privately held firm has products sold in 8,000 boutiques and 23 countries worldwide. She started out with an accidental private-label partnership with Fred Segal. It started like this. She created a handful of fun cards using materials from a local paper company, wrote sassy phrases inside, and walked into Fred Segal. The girl at the counter laughed out loud, called over the store manager, who purchased all the cards on the spot. The cards sold out in a day, but the manager quickly asked for the cards to be branded Fred Segal. Peevey said yes, created a new batch and was on her way.
Armed with this initial success, Peevey then addressed the question of direct sales-and keeping the SimplyShe brand, or private-labeling her product line(s) for established brands. Rather than go it alone, she decided to take it on a case-by-case basis-private labeling for some well-known, high-end brands while retaining the SimplyShe brand. Why? Here is the list of pros and cons for any small business:
Pros: faster time to market through an established (and trusted) brand, easier push through the retail outlets thanks to the established brand for faster, and often, a higher retail price
Cons: Lower margins-the private label deals provide the lion´s share of margin to the private labeling firm. You, the manufacturer, doesn´t build brand recognition
Proven Tips for the Dual Private-Label and Branded Strategy
If you have an idea, product or prototype, consider the following dual approach strategy to saving cash as you kick-start your business.
1) Create a prototype,
2) Get an immediate purchase,
3) Take the concept immediately to other retail organizations
4) Create a private-label distribution agreement and
5) Quickly expand the product line
Weighing the options is important at every stage of a company´s life. Going back to Google, they likely considered the same options. To go it alone with direct search under the Google name, or to private-label search for their partners. They went direct, but had the benefit of tens of millions of dollars in venture funding to back their firm until they hit profitability. Small businesses in the real (non-tech) world rarely have that luxury. For the majority of small businesses like SimplyShe, private-labeling is an excellent way to get to the market quickly, recover initial investment time and money, while keeping the door open to building a brand over a period of years.