Building strategic alliances

At Finnies we can provide businesses with help and advice on a wide range of business issues. Here are some tips on building strategic alliances...

Going for growth means learning to spot emerging opportunities and taking advantage of them quickly - before your competitors move in.

But expansion requires people, skills, experience, equipment, plant, technology, and above all capital. Gathering all these quickly to take advantage of a fleeting opportunity is often beyond the scope of smaller businesses. By the time they have mustered the necessary resources the opportunity has passed, or a competitor with more clout has beaten them to market.

Sometimes the solution is to seek a strategic alliance or joint venture with another business with which you have appropriate synergy.

The first actions are to determine:

1. What the goals and objectives of the venture are
2. What resources are needed to accomplish them
3. Which of these resources you can provide
4. What resources you are looking for a partner to provide

Once you are able to profile the prospective partner, look for candidates among your customers or clients, among your suppliers, and in industry association sources. You can also ask your banker, legal adviser, and of course us to make suggestions.

Draw up a short-list and then research each candidate carefully. Besides checking what resources they can bring into the partnership, look also at such things as their ethics, values, and expectations to see if there is compatibility in these areas.

Check their accounts, history, and reputation. Ask their customers, suppliers, etc what it is like doing business with them.

Once you have found a suitable partner and agreed heads of terms, draw up an agreement that clearly specifies:

• The goals and objectives of the venture
• The time period within which they are to be accomplished
• The criteria for measuring success or failure
• What resources each party will put into the venture
• How profits or losses will be shared

Be sure to protect your interests by agreeing rules for such things as sharing data, poaching staff, disclosing financial information, and protecting assets such as intellectual property.

Above all else, be clear about your exit strategy before you begin.

If you are looking for help and support from experienced accountants and business advisers, contact Finnies.