The Underutilized Value Behind a Strategic Alliance

Fortune 500 companies, along with sole proprietorships alike, have demonstrated the inherent value and power of strategic alliance. Strategic alliances allow you to instantly expand the value of the customer base. However, the question still remains – how much is a strategic alliance really worth?

Before embarking on a strategic alliance endeavor, it is critical to calculate the costs and benefits of the partnership. There are several factors to evaluate in determining the true value of the strategic alliance:

Customer value: The most powerful part of a strategic alliance is gaining an instant, new customer base, which you may not have been able to tap into previously. What value does your potential partner’s customer base have for your company’s services and products? Could you reach these customers through other marketing avenues? Are there specific synergies that would allow you to fully capitalize upon your partner’s loyal customers? How many of those customers would be a converted sale for your company, and are the purchases sustainable over both the short and long term?

Calculating the costs: What are the tangible costs associated with implementing the strategic alliance? This would include building new web pages, links, advertising campaigns, administrative tasks – as well as the cost of your time in developing and managing the relationship.

Defining your profit margins: Although an increase in sales will certainly be a benefit, how much of your profit margin remains after the costs or commissions of the strategic alliance? It is importance to calculate what your true profit margin is and compare it to your anticipated increase in overall corporate revenues.

For every business transaction, there is a cost that is inherently built into the value of the end-product. Strategic alliances are no different. The value that you will gain with a strategic alliance comes at a cost – and it is critical that you calculate the true benefit to your bottom line before engaging into a fruitful partnership.

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