If you’re like many readers of this site, you’ve probably spent years building your skills as a software developer. You have probably worked on software projects both big and small, and have worked on a variety of software development teams.
With all of this experience, you might have a little voice in the back of your head wondering if you could ever strike out on your own. Maybe you want to go indie, and launch your own app. Maybe you want to be a solo consultant, or even start your own full-fledged software agency.
If this describes your situation, this article is for you. By now you’ve probably figured out that doing anything 100% solo will be extremely difficult. Most people find it much easier to get by “with a little help from my friends” – but how, and with whom?
In this article, I’ll explain how partnering up with others can result in a more successful business for you. We’ll explore the 3 types of partnerships a solo consultant or software agency can pursue, and I’ll share some stories and examples from myself and the raywenderlich.com community.
What Are Partnerships?
What in the world do I mean by partnerships, anyway?
Well, if you know where to look, they are everywhere. Huge corporations enter into partnership all the time: even companies that boast about doing everything in-house!
For example, Apple has entered into two well-publicized partnerships recently, one with IBM in 2014 and another one with Deloitte in 2016. Why did Apple do this? One reason is that Apple needs to make a push in the enterprise market and IBM/Deloitte are happy to get more consulting revenue. It’s a win-win for all parties.
Other types of partnerships are harder to spot, but they power a lot of the things that we buy. If you’ve ever bought Kirkland-branded products from Costco, Amazon Basics from Amazon or practically anything from Trader Joe’s, then you’ve seen white labeling in action. White labeling is another kind of partnership, one in which one company takes another company’s product and re-purposes it under its brand. Believe it or not, this is also available to you as a developer. You can learn more about white label partnerships later on in this article.
Keep in mind that you don’t need to be a Fortune 500 company like Apple to pursue a partnership. If you’ve ever read an article or bought a book on raywenderlich.com, or if you’ve ever attended the annual RWDevCon tutorial conference, you’ve already experienced the result of a successful partnership.
3 Types of Partnerships
The word “partnership” can mean many things to many people. Legal definitions aside, you can think of a partnership as two or more parties agreeing to work together on something.
That sounds very general, and it is. Specifically, in this article you’ll read about three types of partnerships of great use to software developers:
- Referrals: Imagine two different developers with different skills referring each other for work.
- White-labeling: Imagine subcontracting work to another developer.
- Joint-ventures: Imagine teaming up with another developer to build something together.
Let’s explore each of these in more detail.
If you’re a talented software developer with industry experience, you are probably familiar with inbound emails and LinkedIn requests from tech recruiters. Maybe a bit too familiar :]
If you decline the recruiter’s offer to talk or interview, some of them will follow-up and say something such as: “if you can refer another developer to this position I can offer $money_amount.”
What’s going on here? The recruiter is offering you a referral fee for a successful placement. Tech recruiters aside, referrals are the simplest, least-involved, types of partnership available to you.
Here are some ideas for finding potential referral partners. These are all common arrangements in our industry:
- Big small. Some larger software development agencies, due to their cost structure or revenue goals, can’t take on projects under some threshold of revenue. Rather than turning business away, they will often refer out smaller projects to smaller agencies that can take them on. The bigger agency gets a referral fee and the smaller agency gets a new client. The client is also happy because they get good folks to work on their project.
- Closing agencies. A software agency decides to wind down operations. Closing up shop can happen for a variety of personal or business reasons, and it happens all the time. The soon-to-close agency will continue getting inbound client inquiries for some time. Instead of turning the projects away, they can refer them out to another agency or consultant and get referral fee.
- Different skillsets. Clients engage you because you have a set of skills they need, like mobile development. Some clients, however, will also need to complete projects in adjacent areas of expertise, like branding, marketing, or web development. If you don’t already offer those services, you can refer your client to a trusted consultant or company and get a referral fee in return. Another option is white-labeling, which we’ll cover in the next section.
Those were just three simple examples of service providers entering into referral agreements with each other. As a software developer or software agency, you can either be the referring party or the person getting the referral.
Note: In my experience, some folks feel bad about receiving referral fees for recommending someone else. Don’t! Finding a good service provider (for everything ranging from software development to replacing your HVAC) is difficult and time-consuming.
On top of that, choosing the wrong service provider can be very costly. If you have a good eye for talent, and can recommend someone who is head-and-shoulders above the competition, the client will get ten times the value of your referral fee.
Let’s say you want to enter into a referral agreement with someone else. What should you do next?
First, get some legal advice about drafting your referral agreement. There are some templates on the web, and you can use them as a starting point, but it’s always good to get professional advice for your particular situation.
In the end, the terms of any referral agreement will depend on both parties entering the agreement, but it doesn’t hurt to have a baseline set of terms. To give you a ballpark, my software agency Sweetpea Mobile has a standard referral agreement that offers 10% of a new client’s first-year revenue and 5% on top of that if your help close the deal. I’ve found this to be fairly standard for services.
We also asked the members of the raywenderlich.com community to share their experiences setting up successful referral agreements. Here’s what they had to say:
We have also setup a few different referral models with staffing agencies, design firms or other development agencies for referring us projects. Some of these follow the percentage of revenue model, others allow agencies to mark up and white label our services, while others are negotiated revenue splits on individual deals that we partner on.
We have found that these referral agreements tend to generate strong trust and long term partnerships that are a win-win for both parties as well as our clients. We welcome new referral agreements with open arms!”
– Jeremy Stroud, Partner at FivePack Creative
– Rick Richard, Founder of Groove Development
Sharing a percentage of the project’s revenue is standard, but you can also get creative with your referrals:
– Joey Jarosz, CTO & President of hot-n-GUI, Inc
Referrals vs. Affiliates
Note that referrals usually work best if you sell a service, like software development or graphic design. If you’ve developed a product, like an app or a book then you’ll want to look into developing an affiliate program instead.
The way affiliate programs work is you give your affiliates a special link to your product, and they promote your product using that link. If someone buys a copy of your product through their link, they get a cut of the profits (usually ranging from 10%-30%).
For example, amazon.com has a very popular affiliate program; anyone can sign up and promote amazon.com products, and receive a 10% cut if someone buys through their link. These are usually considered a win-win, as it’s a sale you as a product seller wouldn’t have gotten otherwise.