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The past 30 years have been thrilling times for small businesses. Technology innovations have made new tools available in forms that fit our micro-applications and diminutive budgets. But there’s one thing that has not changed: We’re still undercapitalized.
When I began talking to small-business owners on my radio program in 1997, I said there would be three things entrepreneurs would need to become good at in the 21st century: maximizing the potential of technology, networking and strategic alliances.
No doubt you’ve become more proficient with the tech stuff. And who isn’t a better networker today than 10 years ago? But can you say you’ve mastered the art of alliance building?
When you come to the end of your internal resources of people, operating assets, technology, cash and credit, you have to seek alliances.
Here are some ideas to keep in mind:
Think like a building contractor.
Let’s take a lesson in building strategic alliances from our brothers and sisters in the construction industry. Classic general contractors have some in-house resources, but beyond that, they combine people, tools and products from vendors and sub-contractors. It’s quite common for a small business general contractor to bid on and complete a multi-million dollar construction project with less than 10 percent of the required resources coming from in-house assets.
Consider these questions.
- Are your business growth dreams hampered by a lack of people, capital or other assets?
- Do you wish you had the capability to bid on a request for proposal that has specifications beyond your company’s ability to perform?
- Are you reluctant to ask a large customer about their future plans for fear that the answer may not be within your organizational and financial critical mass?
If any of these questions, or variations thereof, are all too familiar, take a page out of the construction industry playbook and start looking around for sub-contractors or strategic partners. Let’s look at these three resource examples, in order of formality:
- Partner: A partner relationship is more formal and typically longer term. Regardless of how a partnership is structured, in general, all partners have a vested interest in the success of the entire enterprise. Think of two business owners buying a commercial duplex and sharing the space because neither has the cash or credit to swing the deal alone. Most partnerships are best organized with the help of an attorney.
- Sub-contractor: As the term indicates, a sub-contractor—including product vendors—becomes a contractual participant you bring in to help fulfill a larger project for which you are, or want to become, the lead vendor to the customers. Unlike a partner, a sub expects to get paid for delivery of work or products regardless of how the project turns out for the contractor.
- Strategic alliance: This relationship is typically less formal. Let’s say a jeweler, florist and photographer join forces to produce a marketing/advertising campaign for brides that represents all three brands. By pooling finances and aligning brand messages, the campaign can have more impact than either business could swing individually. After the campaign is paid for and executed, the participants have no further obligation to each other.
Before giving up on a project because you don’t have the necessary resources in-house, look around for external ways to create alliances. When you’ve established a strong alliance, the opportunities are endless.
Jim Blasingame is one of the world’s leading experts on small business and entrepreneurship. He is the creator and host of the weekday radio program “The Small Business Advocate® Show.” Jim is also a speaker, a syndicated newspaper columnist, and the author of “Small Business Is Like a Bunch of Bananas” and “Three Minutes to Success.”
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