From the December 1996 issue of Entrepreneur

What's hot, hot, hot these days in the world of sales? If you like using the latest buzz words, what's hot is "vertical selling" or "partnering". But while it may be hot, it certainly isn't new.

I prefer calling it The Good Old Buddy System. Meaning? Two forces of equal reputation from separate spheres of influence come together to double their market penetration.

Example: Carolee Jewelry teamed up with Estee Lauder cosmetics a few years ago, creating a new and exciting way to wear makeup and jewelry. The two companies approached their mutual customers (retail stores) with an innovative idea: An in-store promotion called "Customer Color Consultations" would offer women a complimentary makeover by one of Estee Lauder's expert makeup artists. The beauty consultant determined whether the customer had "warm" or "cool" skin undertones, while the Carolee representative coordinated a pearl ensemble to go with the customer's new cosmetic shades.

Now I can almost hear you thinking out loud, "I'm just a small entrepreneur. How does that apply to me?"

Size means nothing. Large or small, well-known or up-and-coming, the vertical selling system works best when the timing is right.

Sometimes an up-and-comer teams with a proven winner for vertical marketing. The benefits are obvious for the new kid on the block, but there are some excellent advantages for the other party as well.

Take Jay Margulies, for example. A successful salesperson, Margulies also loved to tinker with computers. He created his own customized program to keep his database of customers organized. Other salespeople in his industry saw his software setup and wanted Margulies to make his program available to everyone.

One of Margulies' former customers was Dave Drews, who had helped develop the popular home book-keeping software program Quicken. Margulies talked to Drews about his client software system. Drews liked what he heard, and the two joined forces.

By integrating Margulies' sales know-how with Drews' computer expertise, Margulies' new Incline Village, Nevada, firm, The Real Estate Office Software Co., started creating contact management software packages for salespeople. The first program rolled out was The Real Estate Office; next on the drawing board is contact software for insurance agents.

But Margulies didn't stop there. To make vertical selling really work for him, he formed a seminar division. He teamed up with well known, industry-specific speakers, offering three mornings of sales training-and got the opportunity to demonstrate his software as well.

The seminars proved so effective, Margulies was soon able to sell sponsorships to the events. Phone companies, digital camera businesses and others with an interest in expanding their market share were eager to display their wares at the events.

Getting to the desired market is only the first step, Margulies cautions. "In vertical selling, many reputations are on the line, so the promise of service must be fulfilled," he explains. "We provide a 24-hour hot line [to answer customer questions]."

The best types of partnering often evolve naturally due to the exemplary reputations of the separate parties. Peter Dembergh and Ken Thuerbach are excellent examples. Fifteen years ago, Dembergh started his contractor business in the then-small marketplace of Sun Valley, Idaho.

Meanwhile, in Victor, Montana, Thuerbach and his company--Alpine Log Homes-- already had an impressive, nationwide reputation designing log homes. Enter Ashley Gilbert, a local Sun Valley salesman who was doing business with both of them. Although Dembergh and Thuerbach had never met, Ashley felt compelled to introduce them.

"Both were master craftsmen and passionately devoted to their customers. I knew if Alpine got a log design contract and Dembergh did the finish work on the same project, a customer would be getting the best of both worlds," says Gilbert.

The collaboration took a small-town business-Dembergh Construction--and put it in front of a national market. But Thuerbach will be the first to say Alpine also contracted plenty of work in Sun Valley with people who had never heard of the company before the recommendation from Dembergh.

Today, both entrepreneurs are thriving, working sometimes with each other's competitors. Says Thuerbach, "It's always extremely satisfying to partner up again when schedules permit."

Lessons Learned

What can we learn about vertical selling from these successful entrepreneurs? All the parties looked inward to accomplish their main goal--providing a quality product. Imitate their good example by looking within and asking yourself two key questions:

1. Is your reputation with past customers solid? Too often, entrepreneurs concentrate more on networking and getting "in" with the right people than on being one of the right people. A graduate professor of mine one told me that if you throw a good script out on the Hollywood freeway, someone is bound to find it. Many people would call that fairy-tale thinking, but Gilbert wasn't a fairy godfather--just a man who discovered two talented people and wanted to bring them together.

No big sales pitch should be necessary when professionals connect to do business. The size of the market each company dominates is not as important as the standards the company imposes on itself to service that market.

2. What do you expect to get out of this relationship? I interviewed Dembergh and Thuerbach separately, so neither of them knew what the other would say about their relationship. The outcome? They both share the same values in life.

"Both Alpine Homes and Dembergh Construction are independent businesses," Dembergh says. "We do not receive any type of monetary reward from each other. The payoffs received are the mutual benefits of customer satisfaction."

Thuerbach agrees: "Anyone who thinks they need referral fees [to partner with another entrepreneur] is missing the point. When the relationship becomes an economic one, there is time wasted on book keeping and negative energy between people who are trying to figure out who owes what. This time could be better spent going out and doing more quality work."

Obviously, not all entrepreneurs share this "no referral fee" policy. If you want both mutual satisfaction and remuneration, the time to talk about the details is before any business transactions take place between you.

Partnering is a close alliance, requiring a lot of maturity on both parts. Sometimes, that boils down to being able to discuss why either party wants to do business together in the first place. And that issue alone could really be what's hot, hot, hot.