Startup: The Power of Strategic Alliances

There is an effective, yet under-utilized strategy by startups that is employed by companies every single day. It is the art of developing strategic alliances with associations, non-competing organizations and affinity groups within your industry. I hesitate to call them “strategic” partnerships as many do, because they are most often not partnerships. A partnership denotes some sort of shared risk and shared reward, but in most cases this is not the case, especially early on, as the parties will keep the relationship at arm’s length until the comfort level, expectations, and rewards of the relationship become more evident over time.

Indeed, startups and small businesses have a tough row to hoe to gain traction and customers in markets where competition exists and thrives. Throwing money at it is one way to overcome the deficiencies…maybe. It depends on how and where the dollars are spent and the metrics utilized to measure the success, or lack thereof. Most startups and small businesses don’t have endless amounts of cash to spend on marketing, nor can they effectively measure which piece of the marketing and communications budget actually creates the greatest ROI (return on investment). In my startup companies we always look early on for powerful strategic alliances to help drive our agenda alongside other non-conflicting or competing organizations in the same marketplace, thereby creating a more dynamic message and/or solution.

For example, in my new company we have identified real problems in the boutique hotel industry that are easily costing these hotel owners tens of thousands of dollars per year and up to two hundred and fifty thousand dollars to rectify or upgrade. One strategy for us to acquire customers in the target market is to start cold calling hotels that fit the profile we’ve identified. Anyone who has ever cold-called a market knows just how hard that is to get anyone to even listen to you, much less buy from you. The odds are in the low 2% range, which means that for every 100 calls made, only 2 will result in an appointment or sale. Those are some rough odds for anyone in this era of small business customer acquisition and phone screening.

Our primary strategy is to align with the various organizations that cater to this particular industry. It does help that in this case we have a thirty year relationship with several hoteliers, and know the founder of an association that includes a membership of 20,000 small hotel chains all around the world. We have pinpointed a service we can offer for the association; we are building it, and the association is offering it to their membership as a real added value as part of their base dues. There are two more tiers of premium products that we will also provide at higher price-points that tether us to the customer base in long-term ways.

Why is it important to identify associations and memberships within your particular industry? There are many reasons, one of which was shown in the real world example provided above, which is simply creating a legitimate one-to-many relationship. Other parallel reasons for pursuing the associations and memberships in a particular market are to create parallel legitimacy with a recognized, established and trusted organization. Being able to leverage their brand alongside your brand is a powerful message to would-be customers and other potential partners.

No organization can operate solely on its own. All need resources, networks, customers, and strategic alliances. Alliances with industry associations and organizations help an entity accomplish more than it could on its own, tap into new markets, create new synergies, and most importantly help startups and established businesses thrive and prosper.

Matt Westfield is a serial entrepreneur, founder of Entrepreneurs Assembly and Adams Hub for innovation Entrepreneur in Residence and Mentor. Matt can be reached at Matt@EA-nv.org