How strong and profitable are the business alliances you currently have? Are they a result of a plan or have they just evolved over time? Establishing alliances with other like-minded professionals makes sound business sense for many reasons:
1. Life is less lonely
Many businesses are small and there are 1.7 million “one-man bands” operating in the UK alone. This is a large number of organisations in which an individual wears many hats. Establishing alliances with other sole traders or small businesses can be empowering, making working alone less lonely, while also opening the business up to new potentially lucrative opportunities.
If we always do what we have always done, then we can never change and evolve a business. New strategic alliances or reinvigorating existing connections can open your business to a number of opportunities that perhaps you have never thought of or had access to. For instance, the correct partnership mix can allow you to enhance your offering to clients.
3. Widen your proposition for clients
It is a well-known fact that it costs around five times as much to acquire new customers as it does to sell to existing ones. So why do many advisory businesses spend so much time and energy seeking new clients when their greatest opportunity lies in maximising their existing relationships?
You may have heard the phrase “share of wallet” or, in plain English, the level of financial engagement you have with your clients. You may feel that you are their primary source of advice and financial education, but have you actually maximised your relationship with them and ensured they have consolidated their wealth under your guidance? Or do they use other sources of financial advice?
The secret is to ensure you identify your most valuable clients and then understand their lifestyle and life stage requirements. You can then provide them with a service proposition that allows you to consolidate their assets. This will ensure they remain loyal with the added bonus of helping you maximise profitability.
If, after this analysis, you find you have gaps in your proposition that could help your clients, you should seek relationships with professionals that can meet those needs and broaden your proposition.
4. Get more of the clients you want
Do you have enough of the clients you know are profitable and that value your proposition? If not, then a focused way of obtaining them is to use strategic alliances. If you have done your client segmentation exercise correctly you will know the profile of the clients you want for your business. Conversely, you should also know the types of clients you do not want: the “vampires” who suck time out of your business without adding value.
As you approach a potential alliance, it is powerful to outline to them not only your proposition but also the client identikit of those best suited for this service. If they have clients like this then your task is to create the alliance and work with them to communicate your proposition.
If not, then it is time to reflect and decide whether this is an alliance worth making. Now it may offer other attractions, such as a chance to learn new skills, establish a wider network and expand your proposition. However, if new client acquisition is your goal then perhaps it would be best to move on to an alliance that can deliver this.
The right relationship can increase the profitability of your business. The secret is knowing which are profitable and which are costing you money. Each year you should review the profit and loss of each alliance. Those that are profitable you should nurture; however, any that are costing you money need reflection and action. Perhaps it is time to sit down and review the relationship and change the balance in your favour to reach profitability.
6. Business networking
Effective networking is the key to success with other professionals, but when was the last time you sat down and reviewed your networking strategy? The more thought and planning you put in at the start, the greater the returns and reward.
Referrals have built many businesses and will continue to do so. The right clients at the right time can deliver the right profits, so it is essential you have a referrals strategy. The biggest benefit of a strategic alliance (if they are selected correctly and managed professionally) is the referrals they can provide. If done incorrectly, though, the wrong fit can provide you with inappropriate clients that cost you time and money.
John Joe McGinley is founder of Glassagh Consulting