Self-Taught MBA: Strategic Alliances
Establishing strategic alliances can provide many of the benefits of partnerships without the contractual obligations.
One way of leveraging relations without getting overly encumbered is to find alliances. Instead of partnerships that imply both mutual benefits and obligations, strategic alliances are geared toward mutual benefit and a common interest. I got to thinking about this after reading one reader’s comment on my last blog post about Kevin Ireton.
This reader, who goes by the handle “Suburbangeorge” wrote on Sept. 15, 2017, that: “The other thing that helps avoid the whole “three bid” hassle is to become useful to other professionals in the industry. A single architect and a couple of engineers have provided more than half of my jobs over the last 20 years or so.”
This describes perfectly a strategic alliance. The mutual benefit is obvious, Suburban George gets job recommendations, no doubt he returns the favor when one of clients’ needs a designer, and their common interest is providing the homeowner with the highest level of design and construction.
A strategic alliance between these professionals lightens the load for both, neither must setup a design/build firm, while providing a better service level than most design build firms can.
Strategic Alliance Ideas
Partnerships imply long term commitments, while alliances provide flexibility. Alliances typically don’t require a contract, and because no obligations exist, and the relationship remains flexible. I’ve found my allies, precisely because no contractual obligations exist, they usually remain on best behavior and true to the objective.
- Purchasing: Some alliances I have set up include purchasing groups. For example, I worked in Val Verde, California, a small-time developer. My competitors were of similar size, and none of had enough muscle to snag a better deal from the local utility contractors. So, we formed a purchasing alliance between three contractors building a handful of homes, and approached the utility contractors with a larger project to bid, 15 water meters and 15 sewer taps. I collected the money to pay, and all saved a few thousand dollars.
- No reason you cannot do the same with other trades, except that you must coordinate delivery, which makes anything but infrastructure and sitework more cumbersome.
- Designers: Alliances with architects and designers (such as decorators, drafting services, and tenant improvement designers) work well since their clients always ask a trusted designer for contractor recommendations. But you must protect that relationship by never making the designer look bad. You must study the plans before bidding and point out omissions to the designer so they incorporate and correct items that may cause problems (i.e. extras) later. If you make the designer look good to the client, the designer will keep you flush with work.
- Engineers: If you do light commercial work, engineering firms can provide similar benefits to designers. They often administer projects, such as commercial maintenance and repair, which may require bidding, but you’ll always be informed.
- I found a special niche with engineers working for the Department of Energy and HUD’s homebuilding innovation programs. By staying up on new building technology and being willing to incorporate alternative building methods, I had ample opportunity to participate in demonstration projects that provided me and my company lots of free marketing. It’s how I became a building technology “expert” in the eyes of my community.
- Housing advocacy: Your local housing authority and none-profit housing groups, such as Neighborhoods, Inc. have many jobs available, from large scale maintenance projects, for example, I once replaced 85 rooftops under one contract with the Housing Authority (my roofing subcontractor retired after we finished). I have rehabilitated many homes with Neighborworks and then found buyers from my new houses through the same organization.
- Property management: I have written in this column about successful contractors that tapped into the lucrative maintenance and rental turnover business. Large property management companies often will offer massive replacement contracts for flooring, water heaters, forced air systems, painting and siding. They also have constant need for quick apartment turn-overs. The work is repetitive, and hence easy to master. You can become very quick and cheap. Nobody can compete. Don’t think it’s not lucrative.
- Subcontractors: I have found loyalty to subs does not pay off the way many writers and contractors claim. Sub prices go up and up, and many feel entitled to all your work. But one type of sub relationship that has proven itself over and over is to become a subcontractor’s “investor angle” by helping a journeyman open his own business. I have helped subs buy tools and become their first client, in exchange for a predetermined pricing pact and period, say three years with 20% discount off the local pricing. I’m doing this now, building in a very high cost ski resort area (knowing Spanish helps).
- Realtors: Homebuyers often need to know the cost of improvements to proforma a home purchase. A realtor can put you in front of the buyer to provide pricing, often ballpark. Once the purchase is consummated, you’ll surly be the first to get the call.
- Suppliers: Although it comes with contracts and obligations, many general and specialty contractors have found that major home improvement chains provide a steady stream of installed sales to perform, such as closet organizers, doors and replacement windows.
- Certified installer: Many manufacturers provide certification programs for installers, such as roofing, siding and windows. The training the manufacturer will provide becomes useful, as you’ll learn about warranty requirements and tips and tricks that help you do a better job. The manufacturers and local supply houses then list your name online as a certified installer in the areas you work, providing leads that don’t cost you.
- Associations: Last yet not least, membership in associations like Rotary, Lyons. Toastmasters, community leads clubs, and the Chamber of Commerce, provide a warm introduction to cold calls. You may not know the prospect, but mutual membership establishes a basis of trust and common interest. These associations, even if they engage in charitable community work, exist as effective resources for business networking.
A mentor once told me that in business you look for an artery, and then just draw from it. A strategic alliance, such as reader Suburban George found with a local architect, can feed you jobs the rest of your career.