As a small business owner, you can’t do it all yourself – as much as you may want to. In order to best manage and grow your small business, it may be time to consider building strategic alliances.
A strategic alliance is defined as an agreement between two or more parties to pursue a set of agreed upon objectives while remaining independent organizations. It is not a partnership. And it is not a merger or acquisition. It is businesses joining together to pursue mutual benefits.
Forming strategic alliances with other businesses allows you to increase your capabilities without adding internal resources. Need a bookkeeper? Align with a small financial services firm. Need a copywriter or graphic designer? Align with a creative agency. Need help getting your product to market? Align with a distributor. By forming these types of alliances, you now easily outsource those duties to people who are experts in their field, leaving you to do what you do best – be an expert in your field.
Before forging ahead though, here are three things to keep in mind when forming a strategic alliance.
1) Don’t write and sign a formal contract that lays out precisely how much business each company will gain from the arrangement. You’re both breaking new ground with the alliance so you don’t know exactly how it will work out. Both companies need to get a handle on the alliance over a period of time before setting targets. Setting them too soon will result in one or both companies being disappointed if they’re not met.
2) Understand that something is bound to go wrong. Nothing in life ever runs perfectly smoothly so be prepared for problems. The best strategic alliances are a good cultural fit for both companies, making it easier for both parties to discuss and agree on what needs to be done to fix problems.
3) Be aware that your margins will drop when you enter into a strategic alliance. After all, you still need to manage the alliance and any issues that arise as a result of it. But it’s short-term pain and one that is far less painful than if you had to add the capabilities to your own business rather than relying on another business’s expertise.
Your business may have started out as a solo enterprise but as you grow and expand, strategic alliances are a smart solution to expand your reach without generating a lot of extra debt and overhead.