Four questions to ask before walking away from a partnership

“I’m thinking about cancelling a partner agreement,” I told my manager just over a year and a half ago during our morning one on one. This was the first time I had considered this course of action for a partner.

While I usually focus on platform partnerships (product integrations), I‘d done a referral deal a few years back that admittedly, while profitable, had not generated even 1/20th of the projected revenue. You could tell that the partner was feeling a similar strain as we sat in bi-weekly meeting after bi-weekly meeting looking at a flat line graph with a Y axis as shallow as a kiddie pool.

My manager asked me four questions to think through before terminating an agreement:

1. Is it profitable?
2. Can we change our time commitment?
3. Do we have the right product to be successful?
4. Is the timing right for this partnership?

Is it profitable?

This was easy to answer. The deal was ROI positive, so by definition it was profitable.

Can you change your time commitment?

The deal was profitable, but the issue was that the deal was draining resources disproportionate to what was being invested on both sides: namely two dedicated program managers — making for a slimmer margin than expected.

In the short view, this question was asking about the minimum time required per week to be successful. In the long view, this question has a few broader interesting implications: namely whether our partnerships program needed to:

1. Reimagine the gradients of our partner tiering (resourcing consummate to performance). Do we add more tiers? Do we raise the floor to qualify as a partner as our program grows given we have finite resources such as partner manager hours? How do we promote or demote partners between tiers?
2. Partner automation: what turn-key processes are needed to be able to allow us to acquire more partners at scale while reducing touches per partner? Could these include self-onboarding? Automated reporting? GRM triggers for new customers? Marketing collateral disbursement through a self-accessible vault?

The answer to the second question would be the impetus for us to eventually launch our Partner Development program which in some ways takes the venture capital approach. We pull companies in by the dozens into a cohort model wherein based off of certain milestones being hit (forms filled, customers onboarded, payments volume growing), additional support is provided. The aim of the program is to provide automated technical and business support to help the partner scale with our joint integration. Only when the partner hits our more traditional milestones, do they become a ‘managed’ partner with their own Partner Manager. The development of this program would go on to allow our partnership program to multiply the number of app platform partners in one calendar year by a not-so-insignificant factor.

Do we have the right product to be successful?

In the Canadian market, during the first two years of this agreement, we were missing two key features: the ability to fully accept Interac Debit payments (which accounts for 50% of all transactions in Canada by transaction volume), and we were also missing a more familiar form factor, namely a pin-pad terminal that could also be used as a consumer-facing display.

Square Contactless Reader

Square Terminal

We had launched full debit acceptance a few months prior on our more well-known Contactless & Chip Reader — but that device as an artefact of previous non-acceptance (going from not accepting Interac Debit at all, to only accepting NFC Payments under $100) was not widely known for being viable. There was also a sentiment that the Contactless Reader was more for mobile businesses, and that more traditional brick and mortar businesses had a preference for the Terminal form factor.

On these grounds, Square within the referral program only appealed to the up-start, new business demographic which we were already strong in acquiring. With over 75% of the Canadian small business market being payments acceptance enabled, we were only going to take marketshare once we could address both the product and feature requests, and work on product education to show that we can not only be competitive against traditional incumbents such as Moneris or First Data — but beat them with our ecosystem approach of tying payments and software together.

Is the timing right for this partnership?

From a product perspective, the time horizon was aligning with the introduction of full debit acceptance and a terminal product on the way. However, from a program management perspective, we had two issues: one macro, one micro.

1. Macro: merchant services (payment processing) has always been a game of “but how much does it cost?” This notoriously brings every conversation down to a discussion about processing rate, in an industry known for lack of transparency. Square’s positioning has always been about TCO (Total Cost of Ownership) meaning that your cost of doing business is never just your quoted processing rate, but it includes everything from your rate, your monthly hardware fees, your software fees, delivery fees, risk fees, labour and scheduling — and even your sanity. In late 2018/2019, the broader business community was beginning to think more and more in-line with how we were selling services. In 2020 as a result of CoVid-19, as every fee under the sun became scrutinized by small business owners, understanding of TCO and ‘Value’ over ‘Price’ continued to grow — which naturally benefitted us.
2. Micro: The original program manager was also a former senior employee of a competitor company. Their familiarity with that company (which was also a merchant services option in the partner program), and partners similar to traditional payments companies, created a preference to pass leads to those providers. By a stroke of luck, the program manager actually moved on to a new opportunity about three weeks after my discussion with my manager — and the incumbent’s partner was actually a Square seller (lucky, us).

Adjustments made

After a discussion framed around these four questions, I realized that I had been short-sighted. I went back to the partner and made the following immediate adjustments.

1. Time commitment: I moved the partner manager’s bi-weeklys to a monthly with a set-agenda. To not have this come across as disengagement, I instead 1/ put in a weekly reminder to asynchronously check the agenda doc for any new items written by both parties that could be addressed as needed and 2/ shared the product roadmap for the requisite feature launches that would allow us to restart the program back up with Square in good standing.
2. Product Fit: I designed two partner NPS surveys 1/ one for program managers) and 2/ one for their customers. The shared sentiment was that “Square is not a tool for a ‘business of my size’ to use.” This showed high brand awareness (we know what Square is), but low product awareness (it doesn’t work for us). Based off of those surveys, I worked with our marketing teams to create external facing case studies with businesses localized to each province that sales reps could attach as PDFs to their outbound emails to help educate the market they were selling into
3. Process improvements for competitiveness: leads were not being sent to Square because the previous program manager had associated the Square brand as being ‘the expensive’ option. To address this, I worked with our sales operations team to create an inbound landing page that both had educational materials about TCO, and direct submission to our SalesForce for a ‘complimentary’ statement review. The positioning: if you want the best product, let all of the program partners compete for your business. This would go on to both increase our lead-inbound by 5x and the average size of the lead by 8x.

The result: In the 12 months following the initial conversation with my manager, the partnership grew by by a triple digit % change year over year. The combination of product and timing coming into alignment (on both sides), and the adjacent process improvements which frankly could have only come when they did — two years after the ink had dried on the original agreement.

Little to no level of communication or process changes would’ve generated the type of growth we saw in year three, prior to all of the above changes occurring on both sides of the company.

If we had terminated the partnership, we likely would have struggled to re-engage. If we had never signed it in the first place, potentially a similar outcome would’ve occurred with other partners saturating their offering. In the realm of partnerships, it’s a good reminder that we’re working on a horizon of months and years, as opposed to days and weeks — if we see the potential, then we have to be proactively patient, anticipating what small adjustments to make along the way for when we can double down.

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Kaveh Sarhangpour is a global platform partnerships lead at Square working to make commerce easier for both developers and sellers using Square’s Commerce platform.

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