Many of us are growing tired of the colder weather just as we grow weary of the grind of health care reform updates and downdrafts. And all of us are ready for the economy to improve in a meaningful and sustained manner. In some respects it is our winter of discontent. Not to mix literary references, but it is the best of times and it is the worst of times. Which will it be for you? That depends on whether your glass is half empty or half full. And it depends on whether you have a plan to succeed.
Last month we discussed business planning and the need for a succession plan. That seems to have resonated with a number of you given that so many readers are grappling with how to morph their business model while growing their revenues. We provided the rationale for having a written business plan and explained that it is both a strategic and tactical exercise that serves a multitude of purposes. We provided an outline of the potential content, and we discussed succession planning.
This month, we want to address strategic alliances as one aspect of business planning, expanding your capabilities, and adapting to the market conditions. In an ideal world, a strategic alliance will permit you to enhance your value proposition and your client offering without having to build or buy the resources, skills and capabilities. And ultimately, your alliance partner might be a great merger candidate at some point in the future.
Consequently, developing an alliance might be your personal succession plan or even your exit strategy. So selecting the right alliance partner requires focused consideration of the attributes of the ideal partnering relationship. The strengths and opportunity areas of your business will determine who the ideal candidate will be. Evaluating potential candidates is about finding business partners that have complementary practices. This way both businesses benefit from not having to spend time or money on building a new entity.
Self assessment
As we talk with benefits advisers all over the country, the forward thinking, select few are looking at their existing customer base, capabilities, and their own business models and are contemplating methods to adapt their practices. They are evaluating their client value proposition in light of today's market realities and emphasizing the expertise and capabilities that they possess and that will be relevant today and several years from now. I think there is real value to this kind of self-examination. If you do not think your firm can be objective in evaluating its capabilities, contact us and we will assist you. An ideal alliance partner candidate would possess some or all of the following characteristics:
* Complementary domain expertise
* Synergistic products or services
* Carrier relationships (preferably not of the duplicative variety)
* Compatible technological capabilities
* New sales channels or markets
* Compatible management style, business model, structure and corporate culture
* Shared vision for the future of both of the businesses involved
Invariably the best place to start is with an honest assessment of the strengths and weaknesses of your business today. Only you are likely to really know where the gaps in your firm's capabilities exist and how to bridge those gaps. And be honest with yourself. Treat it as though your life depended upon it, because in many respects, your financial livelihood does.
The ideal partner
Depending upon the nature of the strengths and deficiencies of your business will largely determine who the ideal alliance partner candidate will be for your specific business practice. So the evaluation of potential merger candidates is largely about finding business partners that have complementary or synergistic business practices, wherein both businesses benefit from not having to build a new practice with all the attendant time and expense associated with the creation of a new business entity.
For example, if your business currently offers group benefits and you see that your firm is currently passing up a huge opportunity by not offering voluntary benefits, perhaps partnering with a firm that specializes in these product lines would make sense. The alliance partner presumably has: domain expertise; carrier relationships; technological capabilities; and sales channel partners, for example. And the alliance partner candidate in turn may be looking to affiliate with a larger firm that has: benefits plan design expertise; access to different carrier relationships; and a large number of group benefits clients who are undoubtedly making plan changes that create benefits gaps which could be satisfied by voluntary benefits offerings. Clearly these two businesses would be synergistic, and could greatly benefit from each other's expertise and relationships. That would also be true of businesses such as a property and casualty broker, a retirement planning firm, a human resource consulting practice, or even a small payroll company.
The state of ultimate compatibility may not be achievable in all cases, but the parties should strive to come as close as possible to approaching the business and the strategic alliance with a single and like-minded purpose. After all, you may all be working together for another 10-15 years and you are certainly linking your financial fortunes together in a nearly inextricable manner. You may as well be comfortable with each other and enjoy working together while presumably making yourselves wealthier. Clearly you would not ally yourself with another firm unless you were convinced that the financial rewards were significantly greater than going it alone. But on the other hand, there is no reason to pursue greater wealth if you will be miserable in the process. This comes under the heading of 'life is too short.'
Value proposition
Here are some of the key strategic benefits that can result from a strategic alliance:
* Strengthen the management team
* Acquire new skills and expertise
* Broaden the product set
* Increase the top-line revenue potential and accelerate growth
* Achieve operational efficiencies
* Improve profitability
* Qualification for more lucrative carrier contracts and contingencies
* Enhance technology capabilities
* Perpetuate one or both businesses
* Provide an exit strategy
All these are valid reasons to consider a strategic alliance. Which applies to your business? Is there more than one reason that applies to your circumstances?
Don't be afraid to "think outside the box" when it comes to considering potential alliance candidates. Today's competitor or administrator or vendor may be tomorrow's ideal strategic partner depending upon what you are trying to accomplish. Think broadly and strategically about what will benefit your clients and customers most in the future. Don't focus on the way you conduct business today. Think about how you want to be conducting business two or five years from now and the roadmap that will get you there.
Yesterday's message will not resonate amidst today's clamor about reform and change. You need to position yourself as a change "agent" - a change management expert that provides prudent guidance during periods of uncertainty. That has to be part of your value proposition in today's environment. Otherwise, can you honestly say that your clients consider you their trusted adviser? If not, they may just find another organization that engenders that kind of trust. If change is coming anyway, maybe now is a good time to reinvent yourself.
I know that our industry has been a cauldron of change over the last 35 years, and Darwinian logic still applies: the strong and the prepared will survive. As for the rest, well we have a fairly good idea what will happen to the rest. If you are an antelope, you don't have to be faster than the lion. You just need to be faster than the slowest antelopes in your herd. Would you rather adapt or become extinct?
Consider forming a strategic alliance as a method for adapting your business to the new market realities.
Reach Kwicien of Daymark Advisors at jkwicien@daymarkadvisors.com.
