BUSINESS NETWORKING , Part 2: Strategic Alliances
By Alan Carson – Carson, Dunlop & Associates Ltd.
In the last article, we discussed business networking using joint ventures. Now we will discuss the use of strategic alliances.
A strategic alliance is similar to a joint venture but it involves two or more companies that have products or services so compatible that one company can actually sell the other company’s product or service.
For example, if you formed a strategic alliance with a company that installs alarm systems, you could literally make recommendations and quote a price for an alarm system for your clients at the end of the home inspection on behalf of the alarm company. You would get a portion of the alarm installation fee for your trouble.
Maybe the alarm company could advertise and offer a discount on a warranty inspection for all of the new houses that get an alarm system installed.
You have seen strategic alliances before. If you join a club, or buy a product, you receive discount coupons on other related products or services that will save you more than the cost of the original product or service. For instance, an airline might advertise free flights to Hilton Head to play golf. Is the flight really free? No, in fact it’s full price, but after all the associated discounts–50 percent off the cost of your hotel room, 20 percent off the car rental fee, and half-price golf lessons–the flight cost is effectively free. In other words, if you take advantage of all of these offers, you will have saved more than the cost of the flight.
It’s easy to assemble a list of suppliers that would be willing to offer a discount to your clients in exchange for you inserting their coupons or flyers into the back of the inspection report. You could advertise that anyone who gets an inspection with you will save more than the inspection fee on things they will need to buy in the first year they are in the home.
Consider the code of ethics of your professional association, if applicable. In general, you should avoid strategic alliances with companies which can be viewed as potentially a conflict with the way you inspect the home. We'll discuss that more in a bit.
Exclusivity Is Key
The strategic alliance requires more than assembling coupons. You need to endorse the companies involved exclusively, and they need to endorse you exclusively. For instance, if you include a coupon to Acme alarm systems at the back of your home inspection report, don’t include a coupon from Acme’s competitor. You can only endorse one alarm company. Why? You undercut your alliances if you dilute the pool. In other words, why would Acme agree to offer your clients a discount if you are also offering clients access to other alarm companies? This exclusivity goes the other way, too. If Acme offers their discount to other home inspection companies, the widespread access to the discount dilutes the effectiveness of your campaign.
Why would a client choose you if they can get the Acme discount with another home inspection company as well? Exclusivity, therefore, is required.
Which suppliers may be interested in participating? Think of all of the parties and processes involved in the transaction. Here are some to get you started:
• Real estate lawyer
• Mortgage financing company
• Insurance company
• Alarm company
• Moving company
• Carpet cleaning firm
• Painting services
• Locksmith shop
• Deck building company (if no deck exists)
• Basement finishing firm
• Home staging firms
• Landscaping companies or lawn care services
• Renovators (who only perform cosmetic renovations, e.g. flooring finishes)
Here are two cautions:
1. Don’t step on any toes. If the agent is involved in strategic alliances, you don’t want to interfere with their relationships. The agent may be your prime source of business. Some agents will resent you offering a coupon or endorsing a bank if the agent has a mortgage broker with whom they do a lot of work.
2. Don’t form a strategic alliance with a company that could influence your inspection.
For example, if you have an alliance with a roofing contractor, and you inspect the house and the roof is shot, your client, the agent, and the seller may be suspicious about your assessment of the roof. Is the roof shot because you want to send business to your friend, or is it really shot? Here are some alliances to avoid:
• Basement waterproofing
• Heating contractor
Generally, you should avoid companies who service items which you are required to inspect under the Standards of Practice, or if you include that item as part of your inspection. If you don't inspect swimming pools or if none exist in the home, it may be okay for you to refer a pool company. However if you do inspect pools, it makes sense to avoid referring a pool company to service your client.
In this and the previous article we briefly introduced the topic of business networking and the use of joint venture and strategic alliances to foster business relationships and referral business. This is a very extensive topic that can be discussed in much greater detail. We encourage you to explore this subject further and utilize all of the current information and tools available online. Most of the information and tools are free for you to learn and implement. Take advantage of them to grow your business!