Minimize risk, maximize profit with a strategic alliance

Last week's column covered the topic of finding the perfect partner to share the responsibility of business ownership. Should that not be a suitable solution, perhaps creating a strategic alliance is.

If you are self-employed, you are familiar with the need to mix passion with practicality while expanding the reach of your company. One of the fastest-growing trends in business today is strategic alliances, with a goal of minimizing risk while maximizing leverage and profit.

Smallbusinessnotes.com claims alliances can "range in scope from an informal business relationship based on a simple contract to a joint venture agreement in which for legal and tax purposes either a corporation or partnership is set up to manage the alliance."

Different from mergers or acquisitions, strategic alliances allow a business to remain a separate entity, but create an opportunity to commit resources towards a common goal. Smallbusinessnotes.com also states companies participating in alliances report that "as much as 18 per cent of revenues comes from their alliances."

Although profit might be a reason for aligning yourself with another organization, it isn't the only one. Equally motivating might be the need to compete globally or simply to keep up in this fast-paced business climate without overextending beyond your core business.

Examples of effective alliances might be joining forces to bulk buy for better pricing or establishing a network for joint marketing or sales. You might also gain the ability to improve competitive positioning, gain entry to new markets or share the risk or cost of major projects.

As is always the case, it starts with your business vision, values and strategy. These are the foundation of your company and going back to that will enable you to understand how an alliance fits your objectives.

You'll want to evaluate potential strategic partners to ensure their goals align with yours and that you are a good fit to work together. From there, you should be able to recognize opportunity and follow that up with a formal agreement that includes methodologies to monitor performance.

Cathy Goddard is principal of Lighthouse Visionary Strategies (www.lighthousevisionary.com). Lighthouse offers small business consulting, mentor programs and workshops. Cathy can be reached at cathy@lighthousevisionary.com or 604-905-8660.

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