Strategic alliances can be helpful and prudent for smaller businesses

The Outlook

September 01, 1996|By Abbe Gluck

IF "merger" is the nineties' buzzword among big-name companies, "strategic alliance" is the term gaining strength among smaller ones.

Such alliances are often informal agreements among companies exchange anything from personnel to services to customer lists.

And financial advisers are finding themselves more responsible for helping clients hook up, as they attempt to achieve long-term goals at the low costs attractive in a decade of downsizing.

What makes these alliances so attractive? How do they work? What can a company in an alliance do that it couldn't through a merger or on its own?

Charles J. Morton Jr.

Attorney, Right, Constable & Skeen, Baltimore.

Strategic alliances are happening for many reasons, including absence of capital, concerns regarding the risks associated with forming entangled webs of alliances as well as businesses' desires in a very competitive marketplace to leverage their assets and skills most effectively.

They are particularly helpful for emerging business, which otherwise would face difficulty acquiring the capital necessary to grow. By forming an alliance, they can more effectively respond to the needs of their clients without that capital.

Small businesses are also able to act quickly and may be more comfortable with less formal alliances. The costs associated with mergers can be staggering.

One example of an ideal way to leverage people is when there are individuals with complementary skills active in distinct markets.

They can work together to acquire skills that could then be

applied in their own markets. A contact of mine is exploring the possibility of working in an interim position in Baltimore which would enable him to develop skills he could apply in his company in Washington.

Christopher Helmwrath

Manager of client development, Clifton Gunderson LLC, Baltimore

Strategic alliances are occurring because small business need to expand while doing more with less.

Whereas, if I hired more employees, I would have a great expense for an unknown future, with a strategic alliance, I would have no expense, but the horizon becomes quite large.

Alliances can be based on any facet of the business.

I could leverage via someone else's sales force to sell my product, or we could jointly market. If I am selling hamburgers, I could have a strategic alliance with a bakery, helping it sell buns.

The benefit doesn't have to be a trade of dollars. It could be, "I'll do your bookkeeping if you let me market off your customer list."

With the boom in start-up businesses, we're going back to barter. I do this for you and you do that for me and we're both better off.

Most companies are going to see this on the horizon.

As we've seen the mergers and acquisitions, in the future you'll see alliances that are smaller, and where you'll be able to keep your own identity.

The small business owner wants to be in control of his business. In a merger, you lose that control. In a strategic alliance, you retain control but leverage off someone else's expertise.

Dan Garfink

Partner, French Accents, Baltimore.

We import high-end period antiques and we were introduced to Joe Miller, who has a gallery in Northern Virginia. He was looking for someone with really high-end pieces to offset his art, which may help sell his art. And we were going to stay away from painting because we were afraid to dabble in the unknown, but now maybe Joe can put his artwork in our store. It's a very symbiotic relationship.

We just discussed it for six weeks and did it. It's very easy, very flexible.

We are starting with five pieces and paying him a commission. A more formal approach might have scared some of the parties.

Gary Barnoff

Owner, Hawk Specialties Inc., Kingsville

Hawk is primarily a local advertising specialty/promotions company. Gameday, which does a lot of T-shirts and has national accounts, is kind of a competitor. But it's owner, Randy LeFaivre, really helped us take some big steps in the beginning.

For someone starting out like myself, it is very difficult to become a member of the Advertising Specialty Institute. Randy was instrumental in helping us learn about the business, become a member, and recommending companies to use for things such as embroidery, which are are relationships we had to establish. With his help, we were able to establish them very quickly.

For him, there will be times he will have orders here he may not be able to give attention to, and he will be able to subcontract us out for that. So as far as his clients are concerned, he's taking care of them.

He also got us in touch with the Maryland Homebased Business Association, which helped us with Internet advertising. And now, we're working with MHB to open a Harford County MHB. What's in that for us is that at every meeting we get to get up and talk about our company. It's an opportunity to network.

Pub Date: 9/01/96

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