Are you hiring a vendor or a partner?

A company that wants to sell in a new market usually ends up comparing proposals. One firm offers a market study for a fixed fee. Another will find distributors and charge per introduction. A third talks about partnership and asks for a share of what the venture earns. On paper the fixed fee looks safest, because you know the cost on the day you sign.

What the fixed fee does not tell you is what happens if the work is delivered in full and the plan still fails. That is the real difference between a vendor and a partner. Settle it before the contract is drafted, because the contract will fix the answer in place.

Neither is better in general. A vendor is the right choice for a job you can specify completely, such as a translation or a legal opinion. You know what good looks like and you can check it on delivery. A partner earns its place when the outcome depends on things nobody can specify at the start: which buyers will respond, which counterparty can be trusted, what the market will pay for the product once duty and freight are added, how long registration takes. Most market entries belong in that second group, though many are still bought as if they belonged in the first.

The five questions below sort one from the other. Ask them of anyone you are about to hire, including us.

1. Who loses money if the plan fails?

Start here, because the answer shapes the rest. A vendor is paid when the work is delivered. If the market study is thorough and the product still does not sell, the vendor has done its job and keeps its fee. That is fair. It is also the full extent of the vendor's exposure.

A partner's income depends at least in part on the result. It might be a success fee, or a retainer that continues only while agreed targets are met. Read the proposal and find the line where the adviser's money moves with yours. If there is no such line, you are hiring a vendor, whatever the proposal calls itself.

2. Who wrote the brief?

A vendor starts from a brief you have already written. It may ask good questions along the way, but its job is to deliver what the brief describes. Suppose the brief asks for a distributor search and the real obstacle is the shelf price. You will get a distributor search.

A partner should start a step earlier, with how your business earns its money and what you want it to become. Expect it to push back on the brief. If the first meeting ends with exactly the scope you walked in with, take note.

3. Who will they bring to the table?

A vendor brings its own people and its own service, and that is what you pay for.

A partnership often needs people the adviser does not employ. It might be a buyer, a licensee, a co-investor or a clearing agent who knows the port. Ask who the firm will introduce, how it checks them first, and whose interests it represents once everyone is in the room. A firm that holds a mandate from both sides of a deal should tell you before the first meeting. If it will not say, you have learned something.

4. What happens the day after delivery?

Ask what the firm will be doing three months after the agreement is signed or the first order ships. The honest vendor answer is "nothing, unless you hire us again". For a translation that is fine. For a distribution agreement it leaves the hard part to you, because the first months are when targets slip, stock sits in a warehouse and each side starts to blame the other.

A partner should be able to tell you what it will measure, how often both sides will review the figures together, and who from its side will sit in that review. If the proposal stops at signature, so does the partnership.

5. How does it end?

Every working relationship ends eventually. Sometimes the goal is met. Sometimes the market turns out to be the wrong one, or the business moves on. A vendor's contract ends at delivery, so the question hardly arises.

A partnership needs its exit agreed while both sides still get on: the notice period, who keeps the customer records, what happens to unsold stock, and who holds any product registration or licence. Ask for these terms in the first draft. An adviser who resists writing down how to leave is asking you to rely on its goodwill for longer than you can check it.

Reading the answers

Few firms come out as pure vendors or pure partners, and a single engagement can use both. A company might commission a fixed-fee assessment first and decide afterwards whether to go further. Our own method starts that way. Its first two stages end in a written diagnosis, and no counterparty is approached until the company has read it and agreed a design.

So the label on the proposal matters less than what its terms do. "Strategic partner" costs nothing to print. A fee that falls when your sales fall costs the adviser something. So does a scope that changes when the evidence changes, a review booked for the months after signature, and an exit written down in advance.

If the proposal in front of you has none of these, it may still be a good proposal. Buy it for what it is: a vendor's.