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Strategic alliances: How 1+1 = 4

By Kimberly Deas        

When Holly decided to start a cheesecake company, she knew she could not afford a storefront immediately, so she looked for a low-cost opportunity to launch her business. She decided to create a strategic alliance with aBusiness handshake local restaurant.

The restaurant owner would allow her to use the restaurant as her commissary and she would supply him with cheesecakes. The arrangement worked well for both. Holly had a place to bake her cheesecakes and a steady flow of dessert-craving customers. The restaurant was supplied with delicious handmade cheesecakes for their customers. It was a real win-win relationship for both parties. 

Today, more small business owners are setting up atrategic Alliance Partnerships (SAP) as a way to grow their business. Strategic alliances allow you to leverage the resources of another business in order for both businesses to achieve their goals.

Common resources that are often leveraged include employees, facilities, knowledge, and contact bases. By sharing resources, both businesses can grow more rapidly with lower costs than without the alliance.

SAPs open the door to new opportunities for the businesses involved. Here are four important benefits to an effective strategic alliance:

• Instant trust and credibility. By partnering with a business that already has an established reputation in the marketplace, you can quickly gain credibility and trust from the marketplace purely by association. You are elevated to a higher level in the eyes of potential clients that know your partner. You gain significantly more credibility through association with a credible business than through an advertisement alone. If you are a newer business, this allows you to establish credibility in a few months that might normally take years.

• More clients. Setting up a cross-marketing campaign in which you market to your partner’s customers and vice versa allows you to increase your contact base with no additional cost. It is like doubling your contacts overnight.

• Addressing more of your clients’ needs. Partnering with a business that can provide your clients with more services allows you to be the “one stop shop” your clients are looking for. For example, a hair salon might partner with a masseuse to come in three days a week to provide its clients with massages. The salon is now able to serve more of its client’s needs without hiring staff and incurring additional overhead. The masseuse has new clients and comes highly recommended by her new partner.

• New markets. By partnering with a business that specializes in a particular niche market, you can quickly tap into new market segments. A CPA firm might want to work with first-year business owners. By creating a SAP with a legal firm that specializes in incorporating businesses, the CPA can quickly access a pool of potential clients for a fraction of the cost of creating it themselves.

1+1=4

An effective strategic alliance becomes more than a sum of the parts. Working together allows both businesses to experience growth beyond what they could have done alone. This is how 1+1 = 4.

The key to achieving this type of exponential benefit is to choose the right partner. Just like a marriage, the right partner makes all the difference. Your partner becomes a reflection of your business.

A mismatched partnership can have detrimental effects on your business. Because your partner is a reflection of your business, a poorly chosen partner speaks volumes about your business. This could result in loosing clients, a tarnished reputation, wasted resources, potentially even staff losses and possibly a lawsuit.

Go slow; take your time. Get to know your partner. Find out about the business and its owner and their way of doing business. Just a like a marriage, once you are in the relationship, it is much harder to get out.

As you consider a partner, use the following criteria to evaluate if it is a good match for you:

1.     Complement. Does your partner’s business complement your services and products? In a strategic alliance, it is important that the partners complement and don’t compete for the same clients.

2.     Business styles. Can you work together? Many partnerships fall apart because the partners just can’t work together. Sometimes differing business styles can ruin a partnership. Take time to evaluate your partner’s business style with yours. Do you ‘click’ with your new potential partner?

3.     Credibility. Does the individual have a good reputation? His credibility will be your credibility, especially if you are a newcomer. Take time to get to know your potential partner. Check out his web sites and talk with his clients. Ask for references. Would you be happy being his partner?

4.     Needs of the contact base. If you are cross-marketing, does the potential partner’s client base need or want your services and vice versa? For a successful partnership you want a mutually beneficial partnership. Look for a win-win. 

5.     Size of the contact base. If you are cross-marketing, is it a fair trade? Consider the size of the client base of your potential partner. Ideally, you want to have a similarly sized contact base. Your partner might feel cheated if she offers 1,000 contacts and you have only 10.

6.     Efforts of your partner. Can your partner put in the same effort that you are willing to put in? If not, this will seem like an unbalanced relationship and may fall apart.

7.     Consider your goals. Can the partner help you achieve your goals? Consider your objectives with the partnership and confirm your partner has the resources, abilities, and desire.

Taking the time to thoroughly evaluate your partner will save you thousands of dollars and hundreds of hours of cleaning up after a partnership gone wrong. The rewards of an effective strategic alliance are well worth the effort it takes. Imagine doubling your contacts, opening new markets and obtaining instant trust and credibility. It is truly no surprise why strategic alliances are so popular with small business owners.

Kim Deas 500x720Kimberly Deas is the founder of SBHBTools (). Her firm designs customized marketing strategies for small business owners including social media plans. She can be reached at KDeas@SBHBTools.com or 904-206-7754.


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