Why are Strategic Alliances Important to Your Small Business?

By Mark Smiciklas

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, 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?†

Contributor Links:

The American Small Business Coalition

Momentum Consulting

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