Uncertain economic conditions are making strategic alliances an attractive option for many small and mid-size businesses that may not have considered such arrangements before.

A strategic alliance is a collaboration between companies to reap benefits not available to either alone. It holds special appeal when capital is short and businesses are seeking rapid access to new markets. Though legal arrangements vary, strategic allies may collaborate without creating a new company, pooling such resources as distribution networks, technological strengths, research and development capabilities, and specialized expertise.

A Good Fit
The success of a strategic alliance depends on a good fit – complementary strengths that enable both businesses to enhance performance and profitability with speed and economy. The first step in getting a good fit is to take your own measurements – to identify your business goals and your alliance expectations. With that information in hand, you can begin to seek the ideal associate. Search criteria in evaluating candidates will include hard data – with figures on such characteristics as production capacity, technological expertise, and market reach – as well as softer personal factors.

Though these intangible qualities may be tough to pin down, they can be just as significant in determining the success of an alliance as assets and liabilities. Among elements to evaluate are corporate culture, personal chemistry, and management style.

To develop an appropriate list of potential candidates, canvass professional and industry organizations, professional service providers, and parallel businesses. Sometimes, companies even find it useful to undertake strategic alliances with competitors for specific projects. Follow a systematic approach in assessing potential business allies, using a set of focused questions to determine the suitability of each candidate.

• Does the company share your company’s goals?
  
• Are the company cultures compatible?
  
• How do the products or services of the two companies fit with each other?
  
• Do the company’s strengths and weaknesses balance well with yours?

You also need to take a close look at risks of the relationship. Look at the potential associate’s financial and legal history, its management capabilities, and its reputation with customers, suppliers, employees, and the community. If the opportunities are good enough, some risks may be worth taking. Others may not. For example, you might find it worthwhile to make the adjustment necessary to work with a company that has a much looser chain of command than yours, but is also known as a leader in innovative marketing ideas. But it’s probably never worth it to risk your reputation by aligning yourself with a company in poor public standing.

Clear Expectations
With this preparation behind you, you can begin active pursuit of alliance with your top candidate. During negotiations, it is crucial to clarify expectations of both parties. Alliance agreements need to consider the time horizon for collaboration. Will it be a short-term cooperative project, a transitional arrangement leading to some other operational relationship, or a long-term alliance for an extended period?

Once you’ve made the match, you’re ready to set up an organizational structure to oversee operation of the alliance. Effective organizational plans for alliances include a formal means to identify and pursue expanded market opportunities, clear executive and management responsibility for the alliance and a framework for resolving disagreements.

Finally, even if the association will be loose, short, and somewhat informal, a written contract is essential. Seek legal advice to ensure that the interests of all parties are protected.