Strategic Alliances

One of the more interesting aspects of my business is the reasons which motivate a client to seek business coaching. For some it is simply a business that is not making enough money or not growing. For others it is quite clearly a feeling of not being in control of the basic business aspects of their practice. One client I enjoyed helping, exhibited all these issues. I soon realised that the practice was not growing, was only making enough money to cover its overheads and it seemed to me that the partners were not in control. However when I initially asked what the key reason for talking to Summit Partners was - I was told – “we have too much business to cope with and therefore we need help to organise the practice”.

Now when starting out with a client we look to assess their business as it exists. And in this case it didn’t take long to identify a key problem.

The client had a lot of ‘C’ & ‘D’ class clients that took time to service, were difficult, paid late and accounted for a large proportion of the fees being generated.

This in turn meant that what should have been a well staffed practice, in comparison to gross fees, simply could not cope because of a poorly proportioned client base. And this simply compounded the problem of poor profitability.

Having identified and agreed on the problem we began developing a plan that would see our essentially competent group of professionals given a client base that contained a greater proportion of ‘A’ or “ideal clients” with which to work. Ideal clients are those which generate a high level of fees and who because of their own professionalism are pleasant to work with and understand the benefits of efficiency and transparent relationships.

That said – we were not suggesting that the practice immediately fire clients and perhaps reduce staff. The idea was to gradually develop a better client base and move on problem clients over time. Our first objective was more ideal clients – and in doing that create what I call controlled profitable growth.

This obviously required change in the way the business was being run and very specifically a change in direction on developing new business.

The key to this change was the building of “strategic alliances” as a method of finding ideal clients at very little cost while building worthwhile relationships in the wider business community.

What are strategic alliances?

This is the development of a wide range of relationships with other businesses, groups or individuals who are in a position to warmly endorse and refer you to their clients who maybe in the market for your particular professional services. Sometimes they are related to your business – a surveyor for example will be involved with engineers, architects, lawyers, town planners & real estate agents to mention just a few.
It also becomes a win-win situation when you are able to recommend a ‘strategic alliance partner’ to one of your clients or friends.

I believe this strategic alliance approach is the no.1 marketing leverage strategy for most businesses seeking quality clients.

That is, one source equals multiple referred clients at little cost.

Clients referred to you are generally pre-sold, more open to advice, more pleasant to deal with and more profitable. If they are those things then they are also very likely to be highly professional in their own areas of expertise. At this time they become more than clients but rather potential strategic alliances.

So how valuable are strategic alliance partners to your practice?

Let us say we develop 5 strategic alliance partners (i.e. an engineering firm, an architect, town planning firm, real estate agent and a legal firm). Now, if after building the relationship each one refers 1 ideal client worth $20,000 p.a., and then if these new clients use your services for the next 5 years then the value is half a million dollars - a very effective marketing strategy that employs a little of your time.

How to find the right strategic alliance partners.

To gain quality referrals we recommend you seek to establish alliances that exhibit desirable core business values such as sound ethics, a good business reputation and have a positive attitude.

While the rewards for you (and your alliance partner) are significant they may not be easy to find. Certainly in a business sense they, like you, will need to take some time to develop the trust that is required to refer a client to another organisation. An excellent place to start is to consider those business you are already working with eg town planners, architects etc who you currently have a relationship and maybe under service or take for granted but where trust has already been established. Next, look to those businesses where you are already working together such as you your own lawyer or accountant.

The Approach

When I introduce this concept to many clients they will often say “We have great relationships with clients and associates and we are sure they would refer us if they had the chance”. My response is to ask how many times they have recommended you or an engineer or a lawyer to someone else. The truth is that many people are reluctant to recommend or in a business sense, don’t recognise the power of strategic alliances.

It is also true to say that the instinct to recommend, like many other good habits, needs to be worked on. With this in mind you will soon see that we need to approach the building of strategic alliances in the same way we organise other parts of our business dealings.

Firstly establish a list of candidates of ideal related services/firms who have the profile to have these ideal clients you’re looking for. Consider a brief phone call to introduce the subject and confirm a letter will follow with a more detailed proposal that could help both businesses grow with referrals (both ways). Mention this article as the instigator of your idea if you think it will help broach the subject.

The proposal should be brief and avoid explaining the alliance concept in detail, rather outline the benefits and to set an appointment to mutually build on the relationship and the concept. Certainly the letter should suggest a meeting between you to discuss the benefits of a strategic alliance for both parties.

The appointment is to develop synergy and confirm how you could add value to each other’s services. Perhaps you could leave them with a simple overview of what your company offers & how you could help them & their clients. For example your lawyer or engineering partner will probably not have a very detailed idea of what you offer your clients and benefits.

Most importantly educate your strategic alliance partners on the value your recommendation could have to their business.

This then becomes a win for your partner, a win for the clients and a win for you.

Do strongly consider follow up meetings to develop “top of mind” awareness & building that trust & confidence to refer you.

That firm we talked about earlier has grown in a controlled manner over the past 18 months. While they had many issues to address as part of a coaching program, this one marketing leverage strategy has made a decided difference to their business. They still have some of their C and D clients – to suggest we only have ideal clients is simply not a real world scenario for most of us. However the client base has a far great number of the A clients and overall the practice is more profitable and more in control of the new clients they take on board. They are also focussed on upgrading their C and D clients through more active credit control and operational systems.