Adapted from “Sell Better: How to create a sales system to grow your business” by Dave Kahle
One of the most powerful strategies for B2B sales organizations is to intentionally and methodically develop and nurture a handful of ‘partners.’ These are customers who are so committed to you that they form the foundation of your revenue. Let’s unpack this.
What’s a partner?
A partner is a customer who has developed an exceptional degree of trust in you, relies on you, and expresses that trust and relationship by buying almost everything from you. Partners typically comprise about 5% of your total customer base, but they provide about 50% of your total revenue.
In some industries, partners evolve as a natural part of the ebb and flow of sales. Naturally, some people are a better fit for your products and services than others. And some just naturally like doing business with you better than your competitors. If all the conditions are right, a few customers will, over time, develop into partners.
The strategy comes in when you understand the impact that a partner can have on your business and so decide to intentionally and methodically pursue them. Instead of allowing partners to evolve, you decide to proactively create them.
That’s what I’m talking about today.
How do you know one if you have one?
They aren’t necessarily the biggest customers. In some industries, you know you have a partner because they sign a contract. In my last employment, I was part of the negotiating team that negotiated a “systems contract” with the organization that was my biggest customer. I had a $5 million-dollar territory prior to this. When we finally signed the contract, the client had contractually agreed to buy $7 million dollars a year, more than doubling my sales territory. They were, clearly, a partner. We knew it because they signed a contract.
In some cases, then, the way you determine that you have a partner is by signing a contract.
In most industries, those cases are rare. If you are going to create a partner, you must have a way of knowing when you have been successful. In my seminars, I have people list characteristics of a partner for their business. While the details vary, the principles remain the same. There are subjective factors, like trust and communication, which are difficult to measure. If you could somehow measure trust, you’d find that your partners trust you far more than just other good customers do. If you could measure communication, you’d find that your partners communicate in far greater quantity and quality than the average customer. Add in relationships. You have more relationships and deeper and broader relationships with your partners than you do with other customers. Those three subjective factors are a major characteristic of a partner.
Then, there is always one objective factor which should be measurable – a partner buys almost everything they can from you. While it is difficult to have 100% of a customer’s business, I’ve always used 75% as the threshold for defining a partner. In other words, if you have less than 75% of a customer’s business, they may be a great customer, but they are not a partner until they trust you with a larger commitment.
Unlike the subjective issues of trust and communications, you can measure your penetration of the account. In order to measure that, you need to know two numbers: the potential in that client for purchases of your goods and services and then the percentage of that potential that you have obtained.
I call the measurement of potential QPC. That’s an acronym that stands for Quantified Purchasing Capacity. QPC answers this question: “If this account bought everything they could from me, over the next 12 months, how much would that be?”
Imagine what could happen if you were able to capture QPC for every account. This exercise can be an eye-opening, transformational initiative for a selling organization. The amount of potential, when it is quantified and verified, is almost always far larger than almost anyone anticipated. Even seasoned sales reps routinely overestimate the percentage of a client’s business they actually enjoy, typically because they underestimate the QPC.
When you have collected QPC for your customers, you then compare that to the total amount of business each did with you in the course of the year. If anyone is buying 75% of their QPC from you, they may be a partner.
(Note. For a complete description of measuring potential, see Chapter Five of “11 Secrets of Time Management for Salespeople.”)
There is a process.
Just like with every other step in the sales process, the challenge of creating and nurturing partners is best accomplished by creating and implementing an effective process.
It begins with first creating a definition of what a partner is in your business. Be guided by the subjective and objective criteria mentioned above. Develop a precise definition and commit it to paper.
When you have defined what a partner is for your business, then determine how many you have and who they are. You’ll find they are the most profitable of all your customers, generally providing about 50 percent of the gross profit, and almost all the net profit. Not only are they most profitable, but they are the easiest to deal with, and the most committed to you. In a sense, they are the backbone of your revenue stream, providing the revenue and profit that allows you to do almost everything else.
That realization can inform the entire thrust of your sales system, helping to determine, for example, which prospects to invest in, and how to direct the sales team. In one sense, creating partners is the ultimate objective of every sales organization.
After having defined a partner and measured their impact on your business, committ to creating more. Use this guideline: Typically, somewhere between three percent and five percent of your customers can and should become partners.
To begin to use this principle to enhance your sales system, create a goal for the number of partners you’d like to create each year for the next few years. Remember, if typically takes years to develop a partner, and you only need a handful. A goal of creating one partner per sales territory per year is reasonable. Once you have a goal on paper, then you can proceed to develop a plan to reach that goal.
Creating Partners
Ask yourself these questions: “What would have to happen for a good customer to become a partner?” “What can we do to make that happen?”
Here’s an example of the kind of thinking those questions prompt. Working with one of my clients, a B2B seller to manufacturers, we determined that:
· the customer would need to know several people in the selling organization, in addition to the salesperson.
· the customer would want to know the seller’s senior executives.
· the customer would want to have purchased a variety of things for a period of time.
· the customer would need to visit the seller’s facility.
Each of these experiences were designed to build a relationship with the customer, and to instill in him a greater degree of familiarity and trust with us.
We then determined which clients were candidates for a concerted effort. So, start with a small group of good customers who seem like the most likely to move to become partners as you have defined it.
Create a check list for each of the potential partners, listing the events that you want to make happen with that candidate. Put a sales process in place to make all the above experiences happen with that each one. We created a check list for each of our potential partners and methodically worked to create the experiences we had identified.
When you have proactively created a partner relationship with a few of your customers, you’ll discover that:
* Your partners do about 50% of your total business.
* Your partners are the most loyal of all your customers.
* Your partners provide the regular income you can use to grow your business.
It could be one of your most powerful sales strategies.
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