Look on many high streets and you will likely find that most of its estate agencies can be found next door to each other. Why would they do this?
The simple answer is to bring more customers through the doors. But it also means that each individual business saves on the cost of promoting its location to customers who more likely will visit the street where all the other estate agents are located. This analogy goes further where often independent estate agents in an area produce a joint publication that each distributes so that they can compete with the large estate agents that have many offices.
Collaboration can be found in both the natural world and the business world. Wales often hunt together and fishermen tend to work the same fishing grounds, in both cases because the locations are known to provide the most prolific source of their quarry but also through collaboration the fish are herded into one place making it easier to catch them and jointly profit from the collaboration.
Collaboration can even the odds
There are several other scenarios where it makes sense for otherwise competing SMEs to collaborate.
It is often the case when tendering for larger contracts, particularly in the public sector, that the small players are regarded with suspicion, particularly in IT supply. “Will they be able to handle this job?” is the question.
In this context, by forming a consortium or joint venture for the purpose of the bid, several small IT companies, each with its own strengths may dispel such doubts and improve the chances of success. Equally, they can benefit from pooling their marketing resources for the benefit of each business when looking for projects.
Another case where collaboration brings benefits to the smaller business is where each is supplying a much larger client and if negotiating alone may be vulnerable to being bullied over prices. Obvious examples of this are cooperatives such as farmers or independent small producers supplying, or hoping to supply, the larger retailers, who are notorious for the pressure they apply.
In the same way, buying cooperatives can bring down the cost of supplies and bought-in products by consolidating their purchasing power. An additional benefit here is the cost saving in terms of time by having one party represent the cooperative instead of everyone spending time on negotiation and buying.
The power of belonging to a professional association or even a franchise organisation should not be discounted. There are many such organisations whose branding is well-known and recognised. Again, these offer scope for promoting their members in a way that cuts down on the individual members’ marketing costs but can also help with purchasing and standardisation such as documentation which all contributes to increased profits.
Equally, when lobbying government or where there are issues of unfair treatment between larger organisations and small independents, the power of a self-interest group collaborating cannot be discounted when it comes to getting a fairer deal.
The SME world can be a lonely place, but will be made more so if each owner regards all their competitors with suspicion. Never discount the power of a group pooling resources to collaborate for mutual gain.