Strategic Alliances... How Do They Work?

mdshunk

The thought of a strategic alliance has been floating around in my head a lot lately. A "coming together" of smaller contracters, of all trades, in a given labor market to be hosted under one main banner.

I'm not talking about the simple, "I'll refer people to you and you refer people to me" agreement that is normally practiced. I'm talking more like a partnership... almost. The businesses still maintain their seperate identities, but are part of a "group". Say (for instance), you'd have "The Finley Construction Group", which might include "Billy Boy's Plumbing", "Spark-o-matic electric", "Tear em up excavating", etc. Any work required by one member of the group, not within their scope of work, would be funneled to the other members. Any work generated by the flagship name would be bid with the members of the group to perform the work.

I know that this is being done in other areas, but not in mine. Can anyone offer any insight as to how this actually works? I'm only guessing at the moment. This line of thinking has been prompted by this Philadelphia area website, http://www.ablegroup.net/index.html , which appears to be a strategic alliance of electricians only. I thought it would be great to have such an alliance of contractors from all trades in a given area, to operate under one banner, posing as a large GC.

Thoughts?

Tom R

Sounds like a great idea in it's 'purest' form, - - just seems these days everything is about 'litigation', - - so it might be setting yourself (your business) up for a fall that you really have no direct control of. I know, I know, - - I'm always skeptical. I'll be interested to hear others opinions of this, though.

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mdshunk

Yeah, I see your point, but I'm 110% positive that a properly set-up alliance (read attorney involved) will properly insulate the innocent member parties.

Did you look around on that website in my original post? Jeeze... it knocked my socks off. That's a good model for a contractor website if I ever saw one.

Tom R

I just glanced at it, - - I'll check it out a little more.

It does sound like an idea with potential if you get past some sticking points.

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Tom R

Side-note, - - just started breezing through it, - - checked out 'carpentry conractors', - - noticed right away CUSTOM DECKS AND CARPENTRY, - - Philly area??, - - must be cdac, - - he should be able to give a little 'inside scoop'!!

Good catch, huh??

Allright, - - I'll shut up and check it out some more now.

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Tom R

Yes, that site is pretty damn awesome, - - actually, I had considered something of that nature myself (on a smaller scale). Yeah, yeah, - - just daydreamin' around again.

They do a similar thing in Princeton, NJ, - - it's based on 'high-quality' work with minimal complaints, - - work goes to arbitration if necessary.

Very small cost to belong and get recommended by the town of Princeton, - - you MUST keep up that reputation to stay in, - - actually, I'm still a 'member', but had to have them pull my advertisement about a year or two back, - - I'm always just too busy to even have time to go look at any of the jobs, - - plus I've really concentrated on cutting my work radius to 10 miles, - - and now I'm working on 5.

Anyway, it's a great program for contractors and homeowners alike, - - theirs is based on a 25 mile radius only, - - and only allows a certain amount of each 'trade' at a time.

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skylands

I've often wondered why these alliance groups don't pan out.

Back in the 80's there was 1-800-REPAIRS. They set everything up by zip code. If I remember correctly (that's going some these days) it was 10 bucks for the name of the customer and then a percentage of the job on a sliding scale. Nothing ever came of it.

Then there was Contractor Connection. They were doomed from the start. They wanted 40 bucks a month, 10 bucks a name, 15 percent of the job off the top, plus they were going to charge the customer.

Then a few years back there was Preferred Contractor Connection. I called them back and asked for something in writing to outline who and what they were and that was the end of that.

Now I get faxes from Renovation Experts. Anyone done any work from them?

Tom R

Skylands, - - I hear what you're saying about these services, - - and that's why I'm somewhat skeptical of them, - - but just for the record, - - the one I'm talking about in Princeton, NJ, - - is sponsored by the 'town' of Princeton, - - and is not about money, - - but about recommending good contractors to their townfolk.

Although I do still belong to it (Consumer Bureau), - - I only have to pay while I am 'advertising' in the 'town-recommended' classified section of the local newspaper ('Town Topics'), - - the advertising fee is only $8/wk. There is no fee to the prospective clients. Hardly a money-maker, - - what they charge just covers their time/paperwork. All workmanship or guarantee issues/problems must go to arbitration, and decisions must be abided by or you 'lose your spot', - - no second chances!!

Nice to see a town once in a while who really DOES care about their people!!

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Tom R

Anyway, - - didn't mean to hijack md's thread, - - any other opinions on his original post??

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Teetorbilt

What md suggests, I have been doing for years. I'm also fortunate in knowing most of the members for 30+ yrs. Many of us were buddies in Jr. High, we can get by with a handshake, my bro-in-law is a GC and has an architect in house, another old friend is a PE.

Starting from scratch with unknowns is a different challenge. I'm in the process of introducing an ID to the above for the purpose of doing high end flips. Remind me from time to time and I'll let you know how it goes, we're still working on it ourselves.

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cdac

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Grumpy

A strategic alliance can work very dirrently from situation to situation.

For example I have toyed around with the idea of setting up huge mass marketing advertising, but sharing the cost between smaller roofing contractors... then splitting up the leads either by area or specialty. I won't go into too many details, but it will allow all of us to hit a huge market and minimize our risks. We wouldn't be operating as one body, only advertising as one.

Brian

I'm doing this very thing in the Houston area, though we are limited to painting and wallcoverings. We just launched last fall, but so far the results have been good.

We are sharing marketing and dividing the leads by zip code. This is allowing us to do home shows, yellow pages, and other marketing that wouldn't make much sense for us individually. We are also getting better pricing on our marketing, as well as materials, because of our larger purchasing power.

Brian Phillips

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Bob Kovacs

Can't offer any insight as to how they work, but I can say that the site you linked to is a mess! There appear to be a number of sites run by the same guy (Able Group, Contractors Solutions, etc), which are all linked back and forth in a very haphazard way. At the same time, the graphics are cheezy, and they offer all of these supposed "services" like invoicing, back office solutions, estimating services, and even a "Workshop" where you can have anything built, yet there's no further info on any of these services.

Maybe they're in their infancy, but so far, the site seems to be a real hodgepodge- like it doesn't know "what" it wants to be.

Bob

IHI

I've also thought about it the same way mdskunk has, but thought process stops when I think of trying to sales pitch my team of subs into making this mass conglomeration when all of us (smaller 1-4 guys crews) keep as busy as we want already and know growing will lead to more headaches than I think we're ready to accept.

It's a great concept though, would like to see a working model and how it's set up to be fair to all since you hate pizzing off the guys you work with. A close friend of mine in the sign business was just "added to the list" of the high end business owners that get together at a local restraunt and mingle...network/what ever you wnna call it-basically staying fresh in each other's minds for future work. Buddy had to laugh since he's no bigger than any of us for the most part, but was added because he did work for a guy tht decides who's on the list LOL. least he reassured me he'd try to get me on the vip too if he should ever be able to...hob knob with the yuppies

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Peladu

Think of it like this … how many of these alliances can you think of off head?

I have been in construction for a while … I have never seen one make it.

The only alliances I seen that worked were only to pair up a minority company with a decent sized GC.

Alliances? Hmmm, the first chance one of the other guys have a chance to stick you they will. I have seen many people loose friendships over dollar bills.

But all in all, I don’t think that they work. I can give more examples, but I am too tired today.

mdshunk

While those are certainly interesting observations, I only linked to that site to show what spawned my original idea. While that site may not appeal to you super cool web guys, it held much appeal for me in that it was rich with unique information, had graphics that appealed to me, and seemed like I could click forever and bring up new stuff each time. That really doesn't have so much to do with the topic of this thread, however. It was just the seed for this topic.