Business Combinations

Mergers, joint ventures, consolidations, acquisitions, strategic alliances, associations, and other combinations of business entities can also be employed to raise new funds for your business. The business climate of the '90s has encouraged the use of joint ventures and alliances between businesses as a means of reducing costs and ownership dilution. Most of these arrangements are contractual, but no standard contract terms exist for all industries. The advantages of these joint ventures and alliances is that your business can finance certain services or production functions by sharing expertise, assets, expenses, and risk without necessarily incurring cash debt or trading equity.

For small businesses, strategic alliances often consist of simple "bartering" with customers, suppliers, and even competitors. For example, if you own a manufacturing business, you might be able to get a better price for component parts if you propose using a label on your final product that includes the supplier's trademark. Alliances for research and development efforts are also quite common as a means of minimizing these long-term costs. In certain high-tech industries, the cooperation of other businesses is essential, not only from the standpoint of financing, but also for marketing, licensing, and distribution.

When considering strategic partners, most small businesses will benefit from partners that add value, not just money. For instance, a business association with a well-recognized industry name can generate immediate credibility and also assist in advertising and marketing for your company. Your networking ability plays a major role in locating and investigating strategic partnering opportunities.


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Keep in mind that although partnering arrangements are often with other businesses, you may also find that trade associations, nonprofit groups, local community organizations, etc., may offer great opportunities for financing some advertising and distribution expenses. Moreover, you may be able to work out arrangements with these groups that target a very specific, and important, consumer audience.