I don’t know about you, but my first instinct
is to try to do EVERYTHING myself.
Let’s see, I’ll edit my video Monday morning,
then memorize lines while I write a new song…
and I can’t forget to screenprint my latest
t-shirt design.
It takes me about 20 minutes a shirt, so I
should be able to print 10 by tonight, but
if I could print more I could sell more.
Which reminds me, I need to update my budget
spreadsheet, that thing is a mess.
I’ll do that after I design the cover art
for my new album.
Oh!
I forgot lunch!
I’ll have lunch on Thursday…
Maybe you should outsource some of this?
Or even hire one of those AI assistants or
something for a bit for some help?
Help?
HELP?!
I don’t NEED help!!
That sounded so fun and efficient, didn’t
it?
Entrepreneurs do have to wear a lot of hats,
but we need to understand where we fall short
and where other people or products could help
get the job done.
We can’t be an expert in everything or have
time to do everything.
But some people or some software can help!
It’s time to figure out where we could use
some help and find our people.
I’m Anna Akana and this is Crash Course
Business: Entrepreneurship.
[Theme Music Plays]
Last episode we outlined all the key activities
and resources we need to keep our competitive
advantage -- the reasons why customers should
choose us over the competition.
And now we’ll dive into the people outside
our company that help us do our key activities,
also known as our key partners.
These aren’t employees, to be clear.
When you’re just starting out, employees
are a human resource you might not have the
money for.
So instead of hiring someone long-term and
full-time, it might be wiser to contract with
individual people or another small business
to do specific activities for just a few hours
a week.
And some tasks are really specialized.
Even if you have employees, it might not be
worth it to keep someone on staff if you don’t
use their expertise often, so you might contract
with someone for a specific project.
Here at Crash Course, we make fun educational
content, but we can’t keep experts in philosophy
and mythology on staff at all times.
So for each course we contract with an expert
consultant and writer as key partners.
They get to teach subjects they’re passionate
about, and we get to make sure our content
is accurate.
Now in general, lowering costs is a great
reason to forge a key partnership.
If you have a growing business bottling your
grandfather’s famous ketchup recipe [the
secret is apple cider vinegar, shh!],
you might partner with a glass bottle company
who will give you discounts if you place big
orders.
So you get a discount, and your bottle supplier
gets a giant -- and hopefully repeat -- order.
This advantage is called economies of scale.
As your production becomes more efficient
and sales increase, your business will order
more ingredients in bulk (like glass bottles,
stoppers, tomatoes, spices, all that stuff),
which lowers the cost per item you produce.
Besides costs, working with key partners might
reduce risk -- or exposing our business to
factors that would lower profit or even cause
failure.
As entrepreneurs, we’re willing to take
financial risks to start a business.
But it would be silly to not use strategies
to minimize risk.
We want to keep our business open and profitable!
So we might consider a strategic partnership
for any key activities we’re unsure about.
Say you’re a food entrepreneur with a recipe
blog where you’ve amassed a following.
Your specialty is American southern-style
food, and you’re known for zesty hushpuppies.
Now, you’ve got your eye on creating a line
of seasoning and breading mixes for grocery
stores.
You know a few bloggers who have made the
leap from side-hustle to business owner, but
creating a product is extremely risky.
There’s a lot of hoops to jump through -- from
government health and safety requirements,
to finding suppliers, to finding people to
buy and sell your mixes in stores, to probably
getting a loan.
You might want to consult with a blogger friend,
or even partner with a company with experience
in product launching.
You’ll get invaluable guidance, and your
partners get an opportunity to launch a high-potential
product that could bring all of you lots of
revenue.
In this case, more cooks in the kitchen is
a good thing!
It’s also pretty likely -- and pretty standard
-- that entrepreneurs form key partnerships
to get something they need, like knowledge,
licenses, or certain customers.
Even the mighty Starbucks went looking for
help to sell their coffee and paraphernalia
outside their coffee shops.
Enter Nestlé, the largest food and beverage
company in the world with factories, distribution
channels, and connections literally everywhere.
When the deal was made in 2018, Starbucks
was especially interested in leveraging Nestlé’s
vast and established influence in China to
spread their brand.
And Nestlé admitted they were late to the
coffee game, so with this deal, they catch
up and get a powerful brand-name product to
sell.
Both sides are hoping to caffeinate the world.
So the point of all this is: we don’t have
to go it alone.
There are lots of good reasons to contract
with key partners.
And there are some basic types of partners
we might consider working with.
The Laws of Physics unfortunately say we can’t
make something from nothing.
So if we’re trying to make a product, suppliers
may help.
They might get us raw materials -- the ingredients
our product is made of, like the wool to make
yarn, the lemons for lemonade, or the wood
for furniture.
Or they might help with supplemental products
-- basically the finishing touches our product
requires.
Maybe we need boxes for shipping or silverware
for a restaurant.
Customers don’t really want to eat soup
with their fingers.
Tacos -- completely different story.
To find a supplier for what we need, we have
to consider price and personality.
Ideally, we want low cost, high quality materials,
and someone who will cut us some deals!
It’s important to maintain a good relationship
once we find a key partner, but never stop
researching.
If I was paying a dollar a lemon but the market
down the block sells lemons for 30 cents each,
there’d be a sour taste in my mouth, and
I’d need to switch suppliers.
Now.
Or we might decide that product creation is
where we need help.
So we’d find a manufacturer -- someone with
the equipment, expertise, and sometimes even
developed supplier relationships to create
products.
When looking for the right manufacturer, we
want someone who will adhere to our high standards
and maybe even someone who will do small test
batches to try out materials before going
all-in.
Now a distributor can help us handle the process
of getting a product into the world.
We might know to talk to Neil, our local grocer,
if we want to sell in town.
But maybe we eventually want to get into a
big box store or even another country.
We love Neil, but he’s probably not going
to be super helpful anymore, and there are
professionals that have wider reach as distributors.
We might look for an expert consultant to
guide us, or we might look for larger companies
who already have vast distribution networks
that want to acquire our business.
Marketing and branding are so important yet
so easy to do badly, no matter the business
size.
So we might look for a key partner to get
our design and messaging ideas out into the
universe, develop our trademark symbols, logos,
and even colors, and help cultivate customer
relationships.
We could hire someone full-time if we have
the budget and enough work to keep them busy.
But if we’re just starting out, a local,
trustworthy consultant who we meet at a networking
group would be an excellent choice.
Also, I hate to tell you this, but
you’ll probably need an
attorney or law firm.
Legal services can help us make sure we’re
abiding by the law, and help us draft contracts,
policies, patents, trademarks, investor deals,
and more.
If money is an object -- which it is for most
startups -- we can check our local city government
for low-income legal services, or even ask
an attorney if they ever do pro-bono work.
It never hurts to ask!
At some point we might want to hire legal
counsel full-time, but unusual situations
can still pop-up that require special experience.
And fortunately, there’s not a lot of cutthroat
corporate espionage in entrepreneurship, as
we learned in our video about competition.
So it’s possible to find a complementary
business to partner with for a special campaign
or sales incentive that will add value to
our customers.
We might look for someone doing something
completely different with the same set of
customers, or a customer base we’re looking
to break into.
So overall, to pick key partners, we need
to ask 3 questions based on our key activities
and resources.
One, what key activities are we good at?
If we don’t know how to do something or
we’re worried about doing it well, we may
want to look for a partner to help.
Two, who supplies our key resources?
If our business can’t begin without stuff,
whoever has that stuff is a key partner.
And three, is the partnership sustainable
and helpful to both parties?
For a partnership to be healthy and long-lasting,
it needs to be a win-win!
There are definitely lots of ways to fill
your dance card, so let’s practice choosing
partnerships in the Thought Bubble.
Paola lives in Ecuador and wants to bring
Ecuador’s flavorful cacao beans to the world
through handmade chocolates.
After selling at some of the local mercados,
she’s built up enough funds to think bigger.
As Pao plans her business, she comes up with
key activities.
There’s growing or sourcing ingredients
like cacao beans, making the chocolate in
a commercial kitchen that follows health and
safety standards, becoming Fair-Trade certified,
packaging chocolates, selling products online,
building brand awareness… the list goes
on.
She could try to do all of this alone.
But even though she might be an amazing chocolatier,
buying all the equipment to grow cacao and
produce chocolate is expensive.
And the specialty, international agriculture
industry has a lot of regulations.
Not to mention, she’s never been great at
graphic design.
Going it alone probably means Pao’s business
would grow slowly and have a lot of hurdles
to overcome, which increases her risk of failure.
She could hire employees, but she doesn’t
want to make those long-term commitments right
now.
So she decides to focus her efforts on making
chocolate, and look for partners for the rest.
She looks for suppliers for cacao beans and
other raw ingredients.
And she wants to sell across the Americas,
starting with Ecuador, so she looks for distributors
with channels there.
She knows chocolate, but not the ins-and-outs
of social media branding, so she looks for
marketers, too.
And she looks for legal partners.
To compete at the highest levels she’ll
need a Fair-Trade certification -- which isn’t
easy to get -- and there will be lots of contracts
to negotiate as she builds her chocolate empire.
It might take a village, but the rewards will
be sweet!
Thanks, Thought Bubble!
This hypothetical example needed at least
four key partnerships, but there’s not a
golden number that all entrepreneurs should
have.
Every business is different.
The bottom line is: ask for help.
“Can somebody help me with this?"
By thinking strategically and partnering with
experts, businesses can provide the most value
for their customers and lower risk.
Next time, we’ll think even more about our
customers and how to build relationships with
them as our business grows.
Thanks for watching Crash Course Business,
which is sponsored by Google.
And thank you to Thought Cafe for the beautiful
graphics.
If you want to help keep Crash Course free
for everybody, forever, you can join our community
on Patreon.
And if you want to learn more about the economics
of supply and demand for businesses, check
out one of our other videos
