qprev_HBB Manual 2.qxd - Small Business BC

Seek Strategic AlliancesThe downsizing of many large corporations inthe past decade has shown that increasedprofitability can come from concentrating on thecore of one’s business and outsourcing all otherbusiness functions to companies that specialize inthese areas. Your home business also can use thistechnique to your advantage. You can grow byforming alliances with other companies. Ratherthan taking on new overhead, you take onstrategic partners. You grow the business but notits size. For many entrepreneurs wanting to avoidthe headaches and bureaucracy of managing alarger company, this can be an attractive growthstrategy.For example, a company that produces vacationproperty log houses might grow its market shareby finding lumber mills in different parts of thecontinent who would manufacture the logs intopre-assembly kits. Distribution of the kits couldbe contracted to a national trucking chain whosupply customers located by a direct salesmarketing company. As the lead company, youspecialize in the order fulfillment and customerservice by providing a 1-800 telephone line forpeople to call if they have trouble puttingtogether the kit. Instead of constructing a nationaldistribution system, you establish a networkof interrelated businesses, each performing aseparate function.Some different ways in which the network can beformed are:• PartnershipTwo or more companies enter into a legalagreement to bind their companies together oraspects of their operations together.They share the profits and losses of theirenterprise. Professional services, such asmedical clinics or legal offices, are typicalexamples of such group partnerships.• Joint VenturesRather than have a permanent relationship,companies can come together to work onspecific projects or ventures of a temporaryduration. A typical example is a constructionproject where the property developer,architectural firm, building contractorand others may enter a contract togetherto build a housing sub-division.• OutsourcingOne company enters into a contract withanother to supply it with a certain service for aset price or fee. The contract may have beenput out to tender first and then bids accepted.Security, janitorial, cafeteria, and accountingservices have typically been outsourced bybusinesses rather than provide these functionsin-house. The practice is spreading widely toinclude personnel services, managementconsulting, and marketing expertise.• Independent contractorsOngoing relationships to provide a service can becontracted with other companies which stillremain independent from you because they haveother clients. Typical examples are manufacturerslicensing local appliance repair companies toperform warranty work, or freight transportationhandled by independent owner operators, orbuilding trades sub-contracted to localjourneymen. Increasingly, many clerical,equipment maintenance, and professionalservices are being contracted in this way.94solutions for small business home-based business