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Simple Rules For Partnering With Another Business

By Andrew Pollack on 09/01/2011 at 09:06 AM EDT

Forgive me readers, for I have sinned. It has been two months since my last submission, and I have committed the sin of omission. Mae Culpa.

Over the last few months I've been deeply saddened to watch more than a few generally good partnering relationships go sour. I suppose its the economy right now that has really exacerbated what are normally fairly small and unusal problems, but in my opinion it is even more important than ever that good working relationships are maintained rather than abused. Those relationships are what will see a small shop through to better times.

I've been fortunate to have the opportunities to work with so many other business partners in our community over the years, and nearly all of those relationships have been positive and successful. I credit this to working with good people, and following a few simple rules.

1. Dance with the one that brung ya

This sounds like a trite catch phrase from a bad country and western bar song, but there is a lot of truth in it and it is the foremost thing I consider when I'm deciding how to work with someone. At it's most important, it means that if someone brings you in as a third party to a client you keep in mind that the person you work for is the primary. Everything you do reflects back on the primary. If there is problem, you bring it to the primary first and plan how to resolve it with the client. If there is another opportunity at the client, you bring it to the primary and give them the chance to explore it first -- if they're smart they'll include you but even if they decide not to, your business relationship and reputation is more important than any advantage you'll gain by trying an end-run. The client isn't a fool. If they see that you're willing to bypass the primary they won't respect it. You may get a short term win and you may not, but more likely you'll end up forever being played off in a you-said/they-said game that results in a lot less success for everyone; and you'll probably never be brought in by that primary or anyone they know ever again. It's also just a really lousy thing to do.

2. Resellers are not Lead Generators

This one is related to the one above, but something I see in cases where the partnership is more one sided and one partner is reselling or adding value to the products of another. If a reseller brings you in as the manufacturer it is a nearly unforgivable breach of trust for you to then assume the business relationship directly with the client. The client will frequently ask if this is possible and its your responsibility, ethically, to explain that you're happy to help the reseller meet their needs. When you bypass the reseller or undercut them on a proposal, you're breaking a huge trust. This is why so many partners have stopped sharing their client lists with software manufacturers. In my opinion, if you have a sales person who works for you that is bypassing your resellers they should be disciplined and possibly fired. For all the time and money you spend on building a reseller network, one salesperson who violates that trust can destroy the whole program.

3. Subcontractors are not your bank

This one angers me more than almost any other and I'm seeing it more and more lately. If you bring in a third party to help you do work for a client, you are reselling their service. It is your responsibility to pay them on time regardless of any other issues you have going on at the client. Failure to pay your subcontractors on time is stealing. They have their own bills to pay, employees to support, and families to feed. There is no excuse for it.

I stipulate in any agreement I make that has me subcontracting on a job that I am working for the primary and not the client. My responsibility is to the primary, the work I do is subject to the approval of the primary and at their direction. I have no billing relationship with the end client and cannot be calling them to chase down a late payment. Therefore, my invoices to the primary are not at all dependant on when the primary gets paid by the client.

If your subcontractors do the work you've asked them to do you are responsible for paying them on time and on whatever terms you've agreed. If you're not getting paid by your client, that's your problem. The subcontractor is not empowered to do anything about it and should not have to suffer as a result. While this is usually something that a subcontractor can win in court, it is usually far too expensive to do so and subs don't like to sour a relationship this way. In nearly twenty years of independent consulting, I've had this happen to me twice. In both cases, I had to threaten to contact the end client directly -- in one case I actually did and the matter was resolved.

The absolute worst abuse of this - and one I've seen recently in at least three different partnering relationships - is when the primary is paid by the client for work done by the subcontractor and the sub is STILL not paid on time (or at all). This is just plain theft. If you're guilty of this, you should be ashamed of yourself. If I had my way, anyone guilty of this would be named and shamed publically.

4. Don't be a chazzer

Treating a partner well means making sure that both sides of the partnership are happy with it. You may find yourself in a position where you have all the power in a partnership. When that happens it is more important than ever to make sure the people you work with on all sides are happy with the arrangement. If you take advantage of the uneven power structure it may work for you once, but everyone you're working with will be looking for the chance to do the same to you the minute they can.

Chazzer is a Yiddish word that means "Pig", but like almost all the Yiddish words we adopt, it means a lot more than that. It implies greed, gluttony, and selfishness more than any particularly porcine image. I learned this rule from my grandfather. He ran a successful auto body shop for most of his life, first in New York City, then later in Phoenix, Arizona. That's a business sector which in the past wasn't known for its straightforward business dealings and general ethics. The industry was rife with insurance fraud at a level that is hard to even imagine in today's business world. I'm not saying he was involved in any of this directly of course, because I would never even hint at such a thing, but let's say it was there around us to be seen and leave it at that.

The interesting thing about an environment rife with under the table deals and questionable ethical practices, is you end up with a lot of strange partnerships that all have to be managed with nothing more than a handshake. If you agree (just for a hypthetical example) to inflate an estimate and pay off an insurance company representative who views the car to agree to that estimate, its not the sort of thing anyone wants written about in a partnering agreement. In fact, contracts mean very little in that kind of environment. Your word, your reputation, and personal trust between parters is actually more critical than in a more open and above board world. That's a world where if you don't treat your partners well, you will very quickly find yourself frozen out.

While the IT industry isn't much like the auto body business and it certainly isn't anywhere near as rife with fraud as that industry used to be, the opportunities still exist where a primary has far more control in a relationship than a third party to that relationship. If you're the primary, you should be very careful to make sure that your subcontractors are happy. If you fail to do this your results won't be as good. You'll end up working with subcontractors who may be of less quality, who may be less interested in protecting your interests, and who don't care so much if you get future work with your client.

5. Don't Pretend Knowledge You Don't Have

If you're bringing in a contractor because you don't know something, tell your client. They'll respect you more for it and it will empower your contractor to do a better job when you name them the expert. If you're a contractor, don't take a contract you can't handle. You make the primary look bad and that's just about the worst thing you can do. You won't get return business and word will quickly spread through the industry that you don't know what you're doing.

We All Judge

When someone says they "don't judge", they're lying . We all judge. Its our nature to judge. When I see a business partner out there who can't abide by these simple rules, I judge them pretty harshly. If you, reading this, think I may be talking about you you're right and wrong at the same time. I'm not talking about anyone in particular here, but I am talking about several people at the same time. If you feel that twinge of guilt when you read this, maybe its time to rethink what you're doing. Be honest and do good business.

There are  - loading -  comments....

re: Simple Rules For Partnering With Another BusinessBy Akbar Ghaswala on 09/01/2011 at 09:55 AM EDT
Excellent article! This should be incorporated under "Ethics Training" in all
MBA schools.
re: Simple Rules For Partnering With Another BusinessBy Paul Mooney on 09/01/2011 at 10:00 AM EDT
Well said Andrew. In this increasingly small world reputation is everything.
Im amazed some people forget this.
re: Simple Rules For Partnering With Another BusinessBy Theo Heselmans on 09/01/2011 at 10:19 AM EDT
I regularly work with subcontractors too. I agree with all you are saying, but
want to add that, when I select a subcontractor, I usually ask for a particular
person I've worked with before, and had good experience with. I've been bitten
a few times when the subcontractor company offer me an 'equally qualified'
person, whom in the end does not perform to my standards.
re: Simple Rules For Partnering With Another BusinessBy Keith Brooks on 09/01/2011 at 10:36 AM EDT
Good post Andrew. Only thing I will add is when we sub out work, we specify
that they will get paid when we do given we have seen over 90 days delays in
payments over the last few years. One client took a year to pay, but that was
on my dime.
re: Simple Rules For Partnering With Another BusinessBy Andrew pollack on 09/01/2011 at 12:37 PM EDT
You'll never get me then. If I don't have a direct billing relationship with
the client to chase down, I am not dependant on yours. If you're that close to
the edge then I want nothing to do with you
re: Simple Rules For Partnering With Another BusinessBy Keith Brooks on 09/01/2011 at 06:43 PM EDT
Andrew, it is based on what we experienced a few years ago which we do not want
to go through again.
re: Simple Rules For Partnering With Another BusinessBy Andrew Pollack on 09/01/2011 at 10:15 PM EDT
You can justify it all you want. Its still wrong unethical.

What if you never get paid? Do you think that would make not paying your subs
the right thing to do? Of course not, that would be theft, and would make the
person doing it a thief.

A contractor doesn't control any of the things that can make a project fail, or
make a client not pay. They don't control a poorly scoped project, a badly
written contract with the client, a poor deliverable overall (assuming theirs
is just one piece), or anything else that kills projects. A contractor has no
ability to affect when the client pays you.

You are paying a contractor do a job. You expect them to answer to you, to
meet your requirements, and to perform the task you've given them. They expect
you to pay them. There is no equivocation here....and yes, I am sitting in
re: Simple Rules For Partnering With Another BusinessBy John Turnbow on 09/01/2011 at 05:20 PM EDT
Keith... About paying people, sub or not... General rule I followed when I had
my business.

1) Pay your people

2) Pay the IRS

3) Pay yourself if there is anything left over and still have some in the bank
for next 3 months...

4) if someone can't pay within 90 days, then why do anything for them?
re: Simple Rules For Partnering With Another BusinessBy Keith Brooks on 09/01/2011 at 06:46 PM EDT
I agree with you, the problem was in contracts and previous businesses that had
been reliable that no longer could be counted on to pay, like some government
entities in specific states.
re: Simple Rules For Partnering With Another BusinessBy Andrew Pollack on 09/01/2011 at 10:07 PM EDT
That's not the problem of your contractors, that's your problem. YOU are
paying them to do the work and even if you NEVER get paid, you still hired them
to do something and they did it. Not paying them on time is unethical, not
paying them at all is theft. Plain and simple.
re: Simple Rules For Partnering With Another BusinessBy John Turnbow on 09/01/2011 at 05:21 PM EDT
Great Article....!
re: Simple Rules For Partnering With Another BusinessBy Ben Poole on 09/08/2011 at 08:52 AM EDT
An excellent, thoughtful piece, thank you. Sadly in my experience many types of
business seem to be taking longer and longer to pay, with the "big boys" at the
top being the worst culprits (this then trickles down).

As you point out though, if it happens a lot a lesson is learned and we move

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