Click to Print

The Art of Strategic Alliances

Look for three factors before making a decision on a new ally.
January 19, 2009
URL: http://www.entrepreneur.com/article/199600

Whenever I consider new strategic alliances or expansion opportunities, I look for three things: good partners, good financing and good management. Whether we're looking for investors, partners or vendors, we weigh their experience, expertise, track record and character. The quality of the businesses or individuals we align with directly affects our future.

Are your philosophies and standards aligned? Is there trust and respect and a shared vision for the future? Are the business rules and reporting processes clear and manageable? The best partnerships and alliances are ones that have the potential to deliver big wins--for both sides.

I've come to believe that the strongest businesses are relationship-based, not transaction-based. We work to develop relationships with our customers to build loyalty and lifetime value. It's the same with the B2B deals we strike: Long-term relationships in which both sides benefit and profit trump short-term, transactional plays when it comes to the investment they require and the dividends they pay.

Good financing means strong financials as well as optimal strategies within the deal for managing debt, structuring terms, handling revenues and cash flow, and maximizing tax advantages. Often, the terms of the deal can turn an average opportunity into a great one.

Regarding the importance of strong management, you may have heard the maxim in business that "money follows management." I often ask myself what other companies see when they put my company under a microscope. If a potential partner or investor asks who your management team is and how strong they are, what will they conclude? That same test applies to the alliance decisions we make as entrepreneurs.

If your management is weak, so is the future of the business. If the management team of the company you're considering as an alliance partner or vendor is weak or ineffective, so are your prospects of a successful and profitable relationship. Weak management will be challenged in both good and bad times--explosive growth requires as much focus and discipline as managing through a downturn.

It's easy to find bad partners, lose control of your cash flow and discount the importance of strong management. It's harder to invest time and resources to find and vet agreements with strong partners, structure a deal that adds value to the entire relationship, and search for, hire, and build a strong and talented team of leaders. No matter how strong your product or service, your attention to these fundamentals--or lack of--will determine your future.

Robert Kiyosaki, author of the Rich Dad series of books, is an investor, entrepreneur and educator whose perspectives have challenged and changed the way people think about money and investing.