Probably the biggest advantage any start-up can have is strategic allies. These are the folks who get rich when you get rich. It’s that simple. It’s not so simple to identifying who they are and to develop the kind of relationships that are built on trust. Trust takes a while to establish!
But when they trust you, they can extend your terms and your credit limits. They can warehouse your goods or provide other free services. They can open doors and promote you and your products to their associates. And they can buy your products and become loyal advocates. All this reduces your need for capital.
Strategic allies have to believe that if they make concessions for you that you will be loyal to them when you’re “rich and famous.” They have to believe they are not just another stepping stone you will turn and burn on your way to the top. They have to believe that your success is their success.
Here are 4 ways you can identify and build trust with those invaluable strategic allies:
- Identification. Start out by taking a good look at your accounts payable. Identify who you are paying the most to. For us at Barefoot Wines, we produced and sold wine. It was in glass. And we bought more glass that most wineries because at $5.99, we had to sell 200,000 cases per year just to break even! That’s a lot of glass! It’s also a lot of corks, foils, labels and bottling services. For us, these suppliers were natural strategic allies. When we grew, they grew!
- Trust. Their question was, could they trust us? When it comes to building credit (or credibility), it is your positive behavior over time that is being evaluated. It wasn’t enough for us to say, “Give us more credit and longer terms and we will help you build your business.” No, we had to prove that we were dependable – and loyal!
Dependability is judged not so much by how well you do when everything is going right, but how well you do when things go wrong. If our cash flow report indicated that we couldn’t make a supplier payment on time, we didn’t go dark and become a beg pay. On the contrary! We immediately alerted them about the situation and presented a plan showing the incoming funds that were earmarked to bring our account current within 30-60 days.
Most of our suppliers said, “Wow, nobody’s ever called us in advance of missing a payment! We usually have to hunt them down – we hate that!” We showed empathy for their predicament of not being able to pay their own bills with income they depended on from us. We gave them a timely heads up so they could rearrange their funds. And we gave them a plan to become current. They, in response, increased our terms and credit limits.
- ROI. How did they know that we would provide them with a return on their “investment?” We negotiated a long-term contract. Period.
- Communication. This is probably the most overlooked part of cementing a solid strategic alliance. We met with our key suppliers (and bankers) once per quarter. We shared the challenges and opportunities we faced growing our business, and by extension, their business. They were interested in what they could do to help move the noodle forward. Basically, we treated them like business partners.
Beside suppliers, there’s lots of room for many other types of strategic alliances, including non-profits, out-sourced services, customers, and, yes, even your own people! There truly is safety and savings in numbers when you add up your strategic alliances!
Who Are We.
Having built and sold a bestselling national brand, we appreciate the value of brands and everything it takes to make them successful. Companies are valued by their brand equity. Achieving and maximizing brand equity requires tremendous respect for all your customers, from your wholesaler to your end user.
Starting in our laundry room with no money and no knowledge of the industry, we built the famous Barefoot Wine brand. We learned a lot they don’t teach in school and much of it the hard way. Although our success was in consumer products, our real world experience will be helpful to anyone looking for information and advice about brands.
We have written the New York Times Bestselling Business Book, The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand, which chronicles the history of the famous brand from its inception through its acquisition. Our book is now required reading in schools of entrepreneurship across the country. We hope this book will provide inspiration and encouragement for all those contemplating starting a brand or wanting to improve their existing brand.
Michael Houlihan and Bonnie Harvey
-Barefoot Wine Founders