Join forces with another company

S Jakarasi

Many businesses are often constrained or limited in their growth either because they lack funding or access to capital or they are far away from major markets or they lack the competitive edge. All these factors serve as impediments to growth. Small businesses as a result fail to realize their growth potential.

There is a popular saying that says “Two heads are better than one.” Small businesses need to collaborate if they want to grow. They need to form strategic alliances. A strategic alliance is a long-term, mutually-beneficial relationship formed between two or more companies to attain agreed-upon goals while remaining independent entities. In a strategic alliance each party contributes its specific strengths, such as technology, customer base or marketing expertise, so as to help the alliance relationship grow. Strategic alliances can be very simple or more complex operating relationships but the aim of such relationships should be win-win in which both parties benefit.

An entrepreneur in search of growth can opt for an alliance because this can quickly and inexpensively provide access to proprietary technology, expertise, marketing, production, distribution and other unique capabilities. Research has shown that entrepreneurs who have opted for strategic alliances grow faster, increase productivity faster and report higher revenues than others who have opted to go it alone. Business is not about “solo-preneurs” but is about collaboration.

Strategic alliances result in synergy, where the interaction or cooperation of two or more organisations, results in a combined effect greater than the sum of their separate effects. If your company has a very good product but lacks distribution, you might have to seek synergy by cooperating with another company that has good distribution but no competing product.

If you want to enter a foreign market which might have entry restrictions or you might lack the local knowledge of the market then an alliance with a local company will prove to be beneficial because the other company can provide local market skills while your company supplies imported products or technologies. Strategic alliance partners can also benefit by purchasing cooperatively, marketing jointly, combining research and development, co-sponsoring training, or agreeing to set standards in a new technology.

Finding a good strategic partner is as difficult as finding a good marriage partner. There are important considerations that you need to take into account. You need to know the traits that you expect from your partner before you start looking for one. This will make it easier when you start looking for one. You should also check if the relationship will result in a synergistic one.

The benefits should not be lopsided in which one partner benefits more from the relationship than the other. Don’t negotiate to get the best for yourself only. If the other partner thinks the deal is unfair, they will not put much effort to make the deal a success. Trust is critical in a strategic alliance. It will be advisable to build trust between potential strategic partners before finalising the relationship. You can test the trust by collaborating in one or two projects.

You can find potential strategic partners from your customers, suppliers, competitors or other professional associates. Before finalising your selection of a potential suitor you need to do some due diligence on your prospective partner by looking at the other company’s credit rating, financial reports and reputation in the industry. You also need to check from your gut feel. How do you feel towards this relationship?

When you have decided on a partner you need to set and agree on specific goals of what you want to accomplish from the relationship. Without clear-cut goals an alliance will be bound to flounder. You need to be very frank in your discussions so that each other’s expectations are well spelt out. These discussions should be put into a legally enforceable agreement. The agreement should also provide ways of dispute resolution and should also provide for an exit strategy if the relationship does not work. In the negotiations you should make sure you both attend to each party’s objectives and ensure that they’re compatible.

Once you’ve entered into an alliance you need to make it work by doing your part of the deal. Refer frequently to your agreement and to the original objectives to see if you are on course. There should be a way of measuring performance of each partner in line with the agreement. Communicate the results and any changes to your partner.

Strategic alliances will inevitably involve costs especially related to management time. You need to put time in managing the alliance if you want to make it work.

Curtis E. Sahakian author and Managing Director of the Corporate Partnering Institute said “Joint Ventures, Alliances, and other Corporate Partnerings are fueling the growth of the world’s most successful companies. The demand to deliver more new products, more quickly, and at lower prices has never been greater. Joint Ventures and other collaborative business arrangements are revolutionizing how winning companies compete. They permit companies to enter new markets and field new products that they otherwise couldn’t do on their own. They are the quickest way to grow your company, particularly in times of change.”

About the author

Stewart Jakarasi is a business & financial strategist and a lecturer in business strategy and performance management. He provides advisory and guidance on leadership, strategy and execution, preparation of business plans and on how to build and sustain high-performing organisations. For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: sjakarasi@gmail.com or +266 58881062 or on WhatsApp +266 62110062