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Alliances

Definition: Joining forces with another company or individual to combine talents or strengths in order to attract more business

Alliances can be short cuts to growth. One recent study found that the average number of alliances fast-growing companies were involved in has increased in the past few years from three to four. And many allies are small. This statement is supported by a recent survey of CEOs of small, fast-growing companies in which 90 percent reported forming alliances.

Small businesses in search of growth favor alliances because these partnerships can quickly and inexpensively provide a company with access to technology, expertise, marketing, production, distribution and other capabilities. Studies show that businesses that participate in alliances grow faster, increase productivity faster and report higher revenues than those who do not.

Alliances are also excellent for testing the waters before a full-scale merger. Because no ownership changes hands, it's easy to back out. Another advantage to alliances compared with mergers or acquisitions is that you can participate in several at the same time.

Synergy is the benefit most alliances are after. If you have a product but lack distribution, you may seek synergy by allying with a company that has good distribution and no competing product. Companies that own technologies that can be combined with yours to create a compelling product are also potential allies. In international alliances, one company can provide local market skills while another supplies imported products or technologies. Allies may also benefit by purchasing cooperatively, marketing jointly, combining research and development, co-sponsoring training, or agreeing to set standards in a new technology.

Yet it requires skills to maintain healthy alliances. Three out of four corporate alliances disappoint, producing higher costs or lower returns than expected.

Allying well is almost as difficult as marrying well. Ask yourself the following questions to help you decide whether forming an alliance is the right move for your business at this point:

The following are a few ways to find and make a match that will last:

The fact that these roads to growth aren't the ones most companies travel doesn't make them any less effective. Even if you're determined to grow by following conventional routes, you should be aware of the alternatives. After all, you may decide to change your course along the way.

Ask yourself the following questions to help you decide whether forming an alliance is the right move for your business at this point: