Choosing Partnerable Customers

There are four questions to answer about your current customers in order to determine which of them you should partner with.

1. Whom are you growing right now? Some of your growth partners are customers you are already growing. You may not be aware of your contribution to their growth. You may think you are merely selling to them. But they are actually partners without portfolio. In order to determine whether any one of them should be selected as your partner, you have to answer three more questions.

2. How much more can you grow them? Growth takes place in the future. What is the most likely projected rate of improved profits you can plan for in the growth of their business over the next three years? If the projected rate of growth is static or in decline, you may not have a true growth partner. Instead, you may have a mature customer to whom you can continue to vend products at competitive prices, whom you should sell to and profit from but not partner.

3. How much are they growing you? You may be unable to know the full extent to which you are bringing growth to a current customer. But you can much more easily calculate the profits by which you are growing as a result of the customer's business with you. There are four standards by which you should measure profits: their absolute value, their comparative value ranked against your customer list as a whole, their rate of growth, and the trend of their growth rate over the past three years.

4. How much more can they grow you? Because growth partnerships must be reciprocal, you must evaluate the most likely projected rate of your own profit growth over the next three years to see whether it is increasing, becoming static, or entering decline. If the projected incremental rates of growth are increasing for both your customer's and your own business, you have the ideal basis for growth partnering.

There are three questions to answer about prospective partners in order to determine which of them you should partner with:

1. Whom else can you grow? Growable businesses that you are not currently growing are your source of consultative expansion. In order to qualify as a growable customer, a business must meet two criteria. Its business function problems must be susceptible to significant cost reduction by the application of your expertise. In addition, your expertise must be able to increase the customer's own profitable sales opportunities.

2. How can you grow them? For each growable customer that you determine is potentially partnerable, you must plan a growth strategy. The strategy will set forth the precise means by which you will add new profits to the customer's business. You will need to specify how much profit will accrue from reducing business function costs, how soon its flow will begin, and how long it will continue. You will also have to specify the amount and flow of profit from new sales opportunities that you can make available and the markets they can be expected to come from.

3. How much will they grow you? A business that you can grow must be able to grow you in return if it is to be partnerable. Its contribution to your profit volume and its projected three-year rate of growth must meet or exceed your company's minimum growth requirements.

When it comes to gainsharing, not all partnerships are created equally conducive. Gainsharing represents the essence of partnering, where rewards are shared in proportion to risk and contribution. Relationships that, for one reason or another, stop short of profit sharing are stopping short of full partnering.

"Full Monty" partnerships of total comity meet selective criteria. These criteria allow partnerships to be assessed with a good deal of predictability. Some criteria are personal to the customer partners: Are they natural sharers by personality or self-aggrandizing nongivers? Are they predisposed to think in terms of benefits or their costs? Are they dealmakers or traditionalists about price being the sole basis for transactions?

"Know your customer" means to know these things. Over and above them are situational factors that may modify or nullify personal criteria. They include:

• A business that wants or needs to be first to apply a new technology, either because it is a leader and wants to stay that way or because it must get closer to the leader.

• A business that is cash poor and cannot pay for the benefits it needs.

• A young business that must conserve cash for growth but needs every accelerant to growth that it can get its hands on.

• A business whose industry is in an economic downturn and can use gainsharing as a form of barter to trade present uplift for a future payment.

• A business in a highly competitive industry that cannot risk a negative impact on its stock price from a major cash outlay on its balance sheet.

For businesses in any of these situations, selectively used gainsharing can be an incremental growth strategy. Depending on a customer's position in its industry, its market, or its life cycle, partnerability may be more dependent on the speed with which gain can be created than by its total amount. Fast gain can make fast partners. It can also predispose negotiations to yield a favorable share for the consultative seller