Have you ever met someone at a networking event who serves the exact same clients you do? You find that you like and trust them. A strategic alliance seems like an obvious next step. And by the time you’re done talking, you’re already imagining how you’ll send clients back and forth.
You feel like you’ve hit the jackpot!
It felt that way for me, too.
Several years ago, when I was a divorce coach, I connected with a certified divorce financial planner. We served the same people at one of the most difficult times of their lives. A strategic alliance seemed like an obvious move to both of us, so we decided to work together.
And our relationship lasted almost a decade.
We genuinely liked each other. We met regularly. We wanted to refer clients to each other, and we fully expected it to happen.
Despite our high hopes, we never sat down to figure out how. We were both content with the friendship and assumed the business would just follow.
Unfortunately, it didn’t.
Over the entire time we worked together, I sent one or two clients to her. She didn’t refer anyone to me. She was really struggling with her business for many years and wound up taking a job with another financial planner who expected all her referrals to go through his network, not hers. So that was that.
I learned a lot from that strategic alliance. Yeah, a lot about what not to do.
According to HBR, 60 to 70 percent of strategic alliances fail. The most common reasons for the failures are misaligned objectives, no accountability, and agreements built on enthusiasm instead of strategy.
This is exactly what caused the failure of my strategic alliance. Sound familiar?
Here Are 5 Questions to Ask for a Successful Strategic Alliance:
1. What does success look like for both of us?
A successful strategic alliance requires that your goals, your potential partner’s goals, and the goals for the alliance itself are aligned. Most people skip this question because it seems obvious. You both want more clients, revenue, and reach.
The problem with this answer is that it’s just a bunch of wishes.
To get real alignment, you’ve got to go deeper and define what each of these wishes means. You’ve also got to gain clarity on the depth and breadth of the alliance.
Is there even more integration possible through things like co-branded services, shared resources, and joint events?
Are you trying to enter a new market or serve more of the same one?
Is this a short-term relationship, or are you looking to build something more lasting?
Where you land on each of these shapes the entire partnership.
The definition of success is a vital first step because it determines whether the partnership will work. If you’re not aligned, you’ll wind up distracted by the activity instead of growing your business.
2. Do we each have enough business right now to make this worth it?
Very few people think to ask this question. Yet it’s critical to your alliance’s success because, unless both businesses have enough sales and pipeline stability, the alliance will fail.
A referral partnership only works if there are clients to refer. Think about two struggling businesses that decide to partner. If neither has a steady stream of business, there won’t be any referrals to make.
That was part of my story. My colleague and I respected each other and had every intention of sending clients to each other, but we were newbies and didn’t have a steady stream of business. So we wound up talking about how to get clients and commiserating when we should have been busy building our practices.
Before committing to any alliance, you both must be honest about your numbers. You’ll want to discuss the number of clients you’re currently serving, the state of your pipeline, and the stability of your business.
A strategic alliance amplifies what’s already working well. Both businesses must be working well enough to support the goals. And if they aren’t, the timing isn’t right, and you’ll want to make sure you’ve got the right foundations in place before working together.
3. Are we actually complementary?
Complementary means different things depending on your goals. So, getting specific about which definition applies to your situation is essential before you commit.
The best alliances create something neither party could offer on their own. And everyone nods along when I say “complementary strengths” because it’s one of those terms that sounds obvious. And it is until you try to define it.
Sometimes complementary means different services serving the same client. That could mean a divorce coach and a divorce financial planner, a marketing strategist and a web designer, or a plumber and an interior designer who specializes in kitchens and baths. Each handles a different piece of the client experience.
Sometimes it means the same service, but a different capacity. This could be two photographers who refer overflow clients to each other when they’re booked solid.
Sometimes it means the same service, but different markets. Imagine two HVAC businesses that work in different regions with no competitive overlap.
Each of these complementary definitions can produce extremely fruitful strategic alliances. Knowing which type fits your situation is one thing. Honestly assessing it is another.
4. How will we measure results, and who’s accountable for what?
An alliance without accountability is just a relationship and distracts you from your business goals. I ignored this too, in my first attempt at an alliance.
The first question has you define success, so you know what to measure. Now you need to make sure it all gets measured, along with who will measure it, and at what frequency you’ll review the metrics together to make adjustments.
According to ASAP’s research on alliance management practices, companies that follow a structured alliance process report up to 80% success. On the other hand, those who just wing it report a 20% success in their alliances.
My colleague and I are a perfect example. We talked about marketing. We compared notes on the networking groups we were both part of. We showed up for each other in ways that felt productive. But we never once said “by next quarter, we should have referred X clients to each other,” or anything close to it. There was nothing to measure, so no way to evaluate the efficacy of the alliance.
5. What happens when the strategic alliance isn’t working anymore?
Every strategic alliance, just like every business, needs an exit strategy. These are specific conditions that trigger a review, and agreed-upon terms for winding down if it comes to that.
Skipping this question at the beginning could set you up for a very costly mistake. All alliances change over time, and some will end.
Sometimes they end because goals shift. Sometimes, because one partner grows faster than the other. Sometimes, because of external pressures.
If you decide that the partnership will not continue, you need plans for how to handle clients in process and settle disputes between yourselves. Agreeing to this upfront protects both parties because you’re clear on the “rules” before any emotions are involved or there’s anything to lose.
Chemistry Alone Isn’t Enough For A Successful Strategic Alliance
These five questions may be uncomfortable to discuss, but things will be more uncomfortable if you don’t. Any business relationship needs to be vetted. Your livelihood depends on it.
The tricky part, though, is that discussing these five questions doesn’t mean that you’ll be able to answer them objectively. When you’re excited about a potential partnership, it’s almost impossible to clearly see your blind spots. You can understand exactly what to ask and still talk yourself into the wrong answers.
I knew for years that the referrals weren’t coming. What I couldn’t see was that I wasn’t prioritizing my business and had let the alliance simply morph into a friendship with the guise of supporting each other’s work. Familiarity is a surprisingly effective blindfold.
This is one of the things I did that led to an alliance that lasted about a decade with no real results. It’s what happens when strategy takes a backseat to comfort. It’s also why the business owners who build successful alliances rarely navigate the vetting process alone.
But when done correctly, a strategic alliance is one of the most powerful ways to grow your business. It can expand your reach without expanding your overhead, fill real gaps in your offerings, and open doors that would take years to unlock on your own.
