Working with a competitor can have business benefits.
By Maura Keller
Have you ever worked with a company that meshes so well with your vision it’s simply startling? You know the ones—they are organized, effective and deliver on their promises each and every time. They are the people you turn to time and time again because of their exceptional products, services and business acumen. But just how often are these awe-inspiring partners your competitors?
For Darren Arthur, owner of Nautilux Custom Canvas in Red Bank, N.J., and Carl Pellegrini, owner of Sea Canvas in Egg Harbor Township, N.J., partnering with each other—even though they both own marine shops and are competitors—has proven to be one of the best business decisions they’ve made.
Making it work
Marine fabricators rely on people they can trust and who will do an effective job in helping make their business a success. But when Arthur began his first job in the marine fabrication industry, a man he worked for emphasized that, “anybody doing what we are doing is the enemy.”
“My mentality starting in this industry was that I shouldn’t interact with any competitors,” Arthur says. So imagine Arthur’s surprise when, at a boat show several years later, Pellegrini approached him and began talking to Arthur, sharing info about his company, products and the industry.
“I was very hesitant at first,” Arthur says. “It took me awhile to be open to share information.” Fast forward to today and Pellegrini and Arthur are close confidants, sharing business expertise and referring each other to appropriate customers.
While geographically close—their shops are a mere hour-and-a-half away—Arthur and Pellegrini have divided the area so that if a potential customer of Pellegrini’s is within Arthur’s “jurisdiction,” Pellegrini refers that customer to Arthur and vice versa. “For example, Carl manufactures winter covers,” Arthur says. “This is something that I’m not interested in getting into, so I refer my customers to Carl. I know he does exceptional work and I feel comfortable sending them to him.”
Pellegrini agrees. “If a potential customer lives closer to Darren, I immediately tell them that they need to talk to him instead. I assure the customer that Darren does great work—the level of work that I do—and it would be much easier for them if they worked with him.”
Both Pellegrini and Arthur recognize that to stay competitive and profitable, they must determine their referral objectives, which can include a variety of strategies. For example, they discuss with each other ways to increase sales, increase their customer base, maximize long-term profits, stay competitive, and establish a stronger market position.
“We have a lot in common, so we help each other by sharing ideas about all aspects of our businesses,” Arthur says. “We are friends and we talk a few times a week—bouncing ideas off each other, offering support and sharing resources. We talk about problem-solving issues, how can we save time, what processes each of us has in place that seem to work better than the other guy’s, how to streamline our operations, and we even get our employees together to share ideas. We recognize that sharing information brings new ideas and that progresses the industry as a whole.”
While Pellegrini and Arthur’s relationship as competitors sounds unique, Charlene Clark, owner of Signature Canvasmakers, says collaboration in the marine industry is quite common.
“There is strong sense of community in this industry and a tremendous openness when it comes to sharing ideas and techniques, discussing challenges and finding solutions,” Clark says. Clark, who knows Pellegrini and Arthur, says there is a feeling that this collaboration creates a stronger industry in general and supports growth and innovation.
“Often when companies are reluctant to embrace collaboration it is out of fear—fear of losing a customer, fear of losing money, fear of someone else stealing their idea,” Clark says. “No small business wants to lose a customer to
a competitor, but if done right, collaboration could provide far greater rewards than risks.”
For Pellegrini and Arthur the rewards have certainly outweighed the risks. “We recognized that if we worked strategically together at boat shows, we would get better product coverage by taking on the whole state, rather than individual areas,” Arthur says.
Indeed, as Clark explains, there are some key benefits to partnering with a like-minded company. “There is time and cost savings; purchasing power, and ideas sharing and brainstorming,” Clark says. “In the case of working with a company that has a greater expertise in a particular area, their efficiencies could save you both time and money in the long run. Also, if you are able to purchase larger quantities at a price break and share shipping, it’s a win-win for both companies.”
And the drawbacks? “If the partnership is public, your reputation is now associated with theirs,” Clark says. “That can be good, and that can be bad.”
While Pellegrini and Arthur have their own advertising and marketing strategies, they do periodically advertise together at boat shows. “The high cost of advertising means that we can split the cost,” Pellegini says. “We work together on the Atlantic City International Boat Show—we’ve custom built a double booth and set up one display about both of our shops.”
Clark believes that there are different ways to approach marketing two different shops, depending on the arrangement of the relationship.Â “In the case of Carl and Darren, their shops are located in different parts of the state but they market their services jointly at trade shows and in promotional materials,” Clark says. “There is a cost savings to them in doing so and they are able to reach a broader audience and cover a larger territory than either shop could support on their own.”
In a scenario where a shop is sub-contracting work that perhaps is not part of their core business, they probably wouldn’t include that in any of their marketing materials, but rather discuss the options with the customer on an individual basis.Â “For instance, we often have customers that will call asking if we replace boat headliners or install boat carpeting,” Clark says. “They come to us because we are a company that they are familiar with and comfortable with us and they trust our recommendations.Â We often will serve as the intermediary and sub-contract these services out for them.Â We become the point of contact, which makes the process easier for the customer.”
And how do customers react to the collaboration and referral process that Pellegrini and Arthur have established? “My customers look at it as a good business decision,” Pellegrini says. “We have similar pricing structures but, most importantly, we both feel so comfortable with the level of work the other person provides that our confidence is clearly communicated to our customers that they can trust our referral.”
The trust between both of these business owners continues to evolve as they even embark on new product development ideas. “We have things in the works, which I can’t disclose, but we enjoy sharing ideas on new product development for out-of-the-box, niche items that will enhance both of our shops and the work we do,” Arthur says.
For shops interested in entering this type of business venture with a competitor, Clark recommends you make sure that you are working with a business that shares your views on customer service, quality standards, timelines and business ethics.Â “Verify that they have a good reputation in their field and that they are trustworthy,” Clark says. “If these aspects don’t align with yours, it will probably not turn out to be a good, long-term, successful venture.”
Clark also says to take the time to do your research before embarking on a relationship with another shop.Â “Ultimately, your reputation is on the line so be sure that they match up with your goals and timelines,” she says. “It’s okay to ask to see their work—in fact, it should be expected.Â You need to be completely comfortable that your customer’s expectations are going to be met and, hopefully, exceeded. Perhaps the worst mistake a shop can make is to jump into a relationship too quickly without testing the waters.”
Clark had a situation about a year ago where her shop was in a scheduling bind and had several large cushion jobs that needed to be done.Â “We hastily found a local upholstery shop that on the surface appeared to produce good, quality work,” Clark says. “Unfortunately, in our rush to get one of the jobs done, we failed to ask the right questions and were unaware that they, too, sub-contracted to other individuals. The results were disastrous and we ended up having to redo the job, which cost us additional time and money.Â A hard, but valuable lesson learned.”
One of the key reasons Pellegrini and Arthur’s collaborative business arrangement works so well is their level of trust with each other. “We have established a system that we check with each other and share ideas. We trust each other and learn from each other all of the time,” Arthur says. “We just keep pulling each other along.”