Business planning has become a lost art. And one aspect of business planning is strategic alliances as a means to expand your capabilities and adapt 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. 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.
As we talk with benefit 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 todays 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. To not at least consider the possibility of adapting appears to be extremely myopic and short-sighted.
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 duplicative)
- Compatible technological capabilities
- New sales channels or target markets
- Compatible management style, business model, structure and corporate culture
- Shared vision for the future of the businesses
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.
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.
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 or service offering
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
Think about how you want to be conducting business two or five years from now. And think about the roadmap that will get you there. We realize that none of us really likes change. However, 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.
Kwicien is managing partner at Baltimore-based consulting and advisory services firm Daymark Advisors and a monthly columnist for EBA. Reach him at
