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Why Are Strategic Alliances Important to Your Small Business
Written by: Mark SmiciklasArticle Overview: Global Edge defines a strategic alliance as a “collaborative agreement between two companies designed to achieve some strategic goal.” Traditionally, strategic alliances take place between larger companies and encompass formal arrangements such as “international licensing agreements, management contracts, and joint ventures” - but more and more small businesses are banding together in less formal ways to form strategic partnerships of their own. What are some of the benefits of forming small business strategic alliances? As a small business owner, how can you reach out to start conversations with potential allies and what should you look for in a strategic partner?
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Why Are Strategic Alliances Important to Your Small Business
Global Edge defines a strategic alliance as a “collaborative agreement between two companies designed to achieve some strategic goal.” Traditionally, strategic alliances take place between larger companies and encompass formal arrangements such as “international licensing agreements, management contracts, and joint ventures” - but more and more small businesses are banding together in less formal ways to form strategic partnerships of their own. What are some of the benefits of forming small business strategic alliances? As a small business owner, how can you reach out to start conversations with potential allies and what should you look for in a strategic partner?
Sharing Resources.
Strategic alliances offer an opportunity to pool and share resources. Many small businesses have to operate within a limited capital resource framework – both from an economic and intellectual point of view. Shortages of cash and certain types of skills make it difficult to build your small business.
“Strategic alliances are extremely useful to small business owners - Many times small business owners have limited resources, one of these is man power; another is money,” says Ross Karp, Chapter President and Founder of My Networking Group Inc. in New York City. “By forming a strategic alliance you have partners to bounce ideas off of to help go after the clients that you are marketing to. Karp goes on to say that strategic alliances help small businesses develop or gain access to different skill sets. “We all have different skill sets that can compliment each other. By working to our strengths and having help with our weaknesses we are maximizing our time and energies.”
Eric King, VP Business Services at Delta Community Credit Union in Atlanta, Georgia, also feels that the right type of strategic alliance can benefit a small business. “Strategic alliances can be highly beneficial - particularly if the partnerships are based on complimentary core competencies and cultures. The concept of cost sharing, especially in start up mode, can be a great balance sheet management tool.”
Expanded Service Offering.
Small businesses can also use strategic alliances expand their service offering. Establishing strategic alliances with (like minded) vendors that share the same target market and provide products/services that compliment your brand can help your small business prosper. In the case of my small business (Intersection Consulting), I have used strategic partnerships to offer clients access to a wide variety of marketing related service providers - becoming a conduit to “best of breed” talent for my clients has helped my small business develop a compelling value proposition.
More Benefits.
In addition to sharing resources and expanded services, strategic alliances present small business with a number of other benefits. “Businesses that are close geographically (and share a target market) can combine resources to double their advertising efforts,” says Hilary Hamblin, an Independent Marketing and Advertising Professional in Florence, Alabama. “They can share database information and mail information to two or more mailing lists instead of one. Businesses can refer clients to other businesses in the alliance and even get discounts for bulk purchases on certain products.” Guy Timberlake, Chief Visionary and CEO for The American Small Business Coalition (The ASBC) in Washington, D.C., adds “gaining access to competitive intelligence” and access to prospective customers as two more possible benefits associated with forming small business strategic alliances.
Marci Tomascak, an Independent Public Relations and Communications Professional in New York City, shares a story that highlights another benefit – the opportunity to engage in co-marketing programs. “I went into a well known bridal shop to pick up a catalogue for researching purposes. While I was there the "greeters" at the front of the store talked with me for a bit and we got chummy. Before I left the store, catalogue in hand, they had also given me an intuition razor. THAT was a great alliance where there is no competition. Not only does the bridal store have a great give away for prospective brides and bridal parties but the razor company gets new people to try out their product.”
How to Get Started.
How do you start the process of creating strategic alliances? In my experience, the best way to reach out to potential strategic partners is to start networking. I like to research other small business in my immediate market area and try to find products or services that compliment my brand and provide solutions for my clients. As a next step, I usually send an email introduction outlining how our small businesses might benefit from working together. What really works for me is a casual meeting over a coffee – I find meeting people face to face in a non-business setting is a great way to quickly find out whether or not you can envision working together.
Ross Karp agrees that forming alliances through networking works best. He also feels it’s important to understand your own target market and to establish what services (offered by potential allies) compliment your product/service offering. “For example, a real estate broker could team up with a mortgage broker, an attorney, insurance planners, etc.” says Karp.
Things to Consider Prior to Forming an Alliance.
An important component of any business arrangement, be it formal or casual, is the performance of due diligence. “Like the level of effort required to effectively and efficiently pursue new business, the same research and scrutiny should be leveraged when seeking to develop partnerships,” says Guy Timberlake of The ASBC. “Simply put, consider the business case for developing and utilizing such a relationship.”
Eric King also suggests looking to see “how the partnership impacts the aggregate market share. Is there overlap in target markets? Is the overlap mutually beneficial? Does one part of the alliance stand to benefit more than the other?”
“Your Strategic Thinking Coach’s List of Ten Key Components of Effective Strategic Alliances”
“Strategic Alliances and Their Powerful Benefits”
How to Build Successful Strategic Alliances
Strategic Alliances
Create Strategic Alliances
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Different Hats
- CEO Sales & Marketing & Leadership Development Company
Strategic Vision 10
Alliances & Growth Strategies 10
Hiring & Managing People 8
Mentoring 8-9
Strategic Planning for Clients 10
Execution of Marketing Campaigns 9-10 (i have great people who do the nitty gritty)
Financial Management 9
Bookkeeping 3 (outsourced as I really hate the fine details like GST0
Administrative Follow Up 6-7 (again have great staff)
Writing & Publishing 9 (getting better all the time!)
Speaking 10 (so I have been told)
Self Promotion 9-10
Web development & Promotion 6-7 (learning more and have brought on players who are 10+)
Babysitting Employees (1 - wont do it, that's why I work so hard to hire and motivate the people I have)
Great topic Kevin!!
Jude
My entry
- 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read
- this is a fascinating book about the history of Business theory, and I'd recommend it to anybody.
2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto.
3. PADI: The Business of Diving Book
Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
These maybe the coldest franchises out there:
- Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops.
WORST FRANCHISE LOAN FAILURES Failure %
1 OBEE'S SOUP SALAD SUBS 55.56%
2 LADY OF AMERICA 41.94%
3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18%
4 COPY CLUB 36.36%
5 ALL TUNE AND LUBE 35.71%
6 PICKERMAN'S 35.71%
7 PHILLY CONNECTION 35.59%
8 ROLY POLY ROLLED SANDWICHES 34.78%
9 COTTMAN TRANSMISSION 34.48%
10 HAIR COLOR EXPRESS 33.33%
11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33%
12 GODFATHER'S PIZZA 33.33%
13 SMOOTHIE FACTORY 33.33%
14 BLIMPIE 31.39%
15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77%
Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Exclusive: Interview with Results
- Hi Forum Members,
I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles).
As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business.
This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business.
I am looking to interview about 30 businesses across North America over the span of 3 months.
At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews.
I would like to extend this opportunity to members of the Forum.
If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM.
Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.
Re: Biz Plan Competition
- i just wanted to say that posting Small Business Events on CanadaOne is a great resource. Thanks Julie!
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