Our firm has developed a promising new technology, but we recently learned that a competitor is developing a similar product and plans to enter the same market. We feel confident our offering is better, and we have the advantage of being first. However, our competitor is larger and has been around longer. Should we attempt to establish a partnership?
Arbutus Software, Bothell, Wash.
Joining is almost always preferable to getting beat, and competitor alliances can pay benefits beyond the whole not-drowning-in-the-other-guy's-wake thing. For example, a large company can help diminutive partners handle jobs that might otherwise be too big for them, or lend them the kind of A-player luster that opens doors--as the Jelly Belly Candy Co. learned in 2003 when it teamed with Hasbro's Capp Candy to release Bertie Bott's Every Flavor Beans, a Harry Potter tie-in. "The partnership allowed us to grow incremental distribution in places where normally our products would be deemed secondary, like bookstores," says Pete Healy, vice president of marketing for Fairfield, Calif.'s Jelly Belly.
But, like Bott's Beans, which come in flavors ranging from blueberry to vomit, business partnerships vary widely in their appeal. "It's only a good bet for a smaller player if there is trust, a clearly shared goal, and separate but complementary strengths between two companies," cautions Healy. The other perspective is provided by Shawn Eldridge, director of product strategy at PostX, a software company based in Cupertino, Calif., that made its name by partnering with the U.S. Post Office to make a virtual stamp but went solo on its latest product: "There are almost always tradeoffs--like sharing equity--which can negate the benefits."
Before deciding how to meet this threat, check the soundness of your grapevine to make sure you're not overreacting to rumors. "At a minimum, have a conversation with your competitor to find out what the company is doing," recommends Scott Williamson, VP of sales at Iconixx, a business consultancy. Of course you'll want to be circumspect. Say too much about your product's features, and you risk spilling your leverage along with the beans.
What method is best for approaching new homeowners about purchasing a home-security system? We are currently cold-calling and knocking on doors with about a 2% to 3% return.
24/7 Security, Lubbock, Texas
We'll start with a dose of irony: What many homeowners want protection from these days is door-to-door salesmen. State attorneys general, Better Business Bureaus, and AARP warn consumers about latter-day Harold Hills ringing their bells, particularly now that telemarketing restrictions are forcing some vendors off the phones.
That means honest businessfolk are encountering new resistance while grappling with the age-old inefficiencies of the door-to-door system (knock-spiel-slam, knock-spiel-slam). Fortunately, there are better ways. One is to get into homes through businesses. Pat Cavanaugh, CEO of Pittsburgh-based promotional products and marketing company Cavanaugh, suggests working with existing corporate accounts to set up programs offering discounts on security systems to their employees. That way you do a nice thing for your business clients, your business clients do a nice thing for their employees, and their employees do a nice thing for you. "Instead of going door to door," says Cavanaugh, "you are going to 20 doors at once."
Another way to approach homeowners is through the community. Local events and associations can be hospitable networking environments. For example, Marty Berling, sales director at Defender Security, a home-security business in Indianapolis (and a 2003 Inc. 500 company), suggests sponsoring or participating in Neighborhood Watch groups. You can also generate goodwill by contributing to block parties and the like. "Donate 10 packs of hot dogs," says Berling. "Set up a booth and be there for anyone who wants to talk. It's about creating awareness."
My 12-year-old electrical contracting company has grown 300% a year for the last three years; in 2003 it generated $2.8 million in revenue. Now I'd like the capital to take things to the next level. I have talked to some local banks, but because we have been funding our growth through cash flow without outside assistance, I think they're reluctant to help. Any advice?
MB Electric, Cleveland
A bank may love you more than you realize. Yes, borrowing signals commitment, but a corporate checking account is still a relationship. So long as your account is in good standing, your current bank should consider you a serious suitor. "Loyalty goes both ways," notes Michael Zenk, president of Venture Bank, based in Bloomington, Minn., which specializes in small business. "I'll always work harder to get my existing customers financing." You can also ask others to plead for you. Three or four references from vendors or subcontractors go a long way. Still being rejected? Ask them why. Maybe you lack collateral. In that case, you may be able to borrow against your home, assuming that you own it.
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