The Declaration of Independents

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While mergers are on the decline, alliances of all kinds are on the rise. Peter Pekar, coauthor of Smart Alliances and a respected authority on the topic, says it won't be long before alliances catch up with mergers as a preferred path for growth. Strategic alliances involving a big company make headlines. Alliances among small companies usually don't, but they're happening far more frequently, behind the scenes. When two or more companies decide to help one another do sales, distribution, or equipment purchasing, for example, Pekar calls the arrangement a "transaction" alliance. He estimates that transaction alliances outnumber strategic alliances (involving an exchange of proprietary knowledge) by nearly three to one. In other words, they're everywhere, though no one officially tracks them all.

Tom Melaragno has built a fast-growing business almost entirely off these low-profile alliances. Melaragno, president of $9.6-million Compri Consulting, based in Denver, competes in the brutal field of information-technology staffing. Compri has more than 400 competitors in the Denver area alone. But some are friendly enemies. For example, Compri is part of a consortium of 30 or so local IT consulting firms that banded together to provide services to the largest employer in Colorado. He also shares technical personnel for hard-to-fill jobs with a number of companies in town. There are five companies in particular that lean on one another. "I can call and say, 'I've got an Oracle database administrator who just came off an assignment. I don't have anything for him. What do you have?'" It's like swapping employees, and sometimes the employees come back to Compri later. It's a different way of looking at the competition, an approach that's not always shared by Compri's largest rivals. "The big guys are more like the Survivor mentality," Melaragno says. "They'd be happy voting everybody off the island, but we're not going to let them."

The old strategic alliance is Goliath + David. The new one is David + David + David + David.

The Next Wave
Is forming alliances the wave of the future? Will entrepreneurs increasingly depend on one another to stay independent? The movement keeps growing. In some city somewhere there's a new alliance forming right now. "Everyone's trying to figure out, What's the current version? It keeps evolving," says David Bolduc, owner of the Boulder Book Store, which has sales of $5 million. As cofounder of the Boulder Independent Business Alliance, Bolduc has more experience at working within an alliance than most entrepreneurs do. He is part of a national marketing campaign on behalf of 1,200 independent bookstores that is centered on a recommended-reading list known as the Book Sense 76 -- in honor of 1776. (The tag line: "Independent bookstores for independent minds.")

Five years ago Bolduc helped launch the Independent Booksellers Consortium. It may be his best "start-up" yet. The 25 members operate in every corner of the country. They jointly produce one product together -- blank books for journals -- and help one another with group buys. Getting independents to agree on anything isn't easy, Bolduc says. But what he gets back is invaluable. It's the creative capital he values most. Three times a year the 25 bookstore owners travel to a different store, spending three days together. The company owners are intensely proud, self-critical, and generous with their ideas and time. In a very real sense, their future as independents depends on how well they can work together. Says Bolduc, "We're looking in a very intimate way at what works in this industry."

Related links:
Directory of Organizations Promoting Independent Businesses (Contains contact information for many of the organizations mentioned in this story)
Independent Business Alliances: The Basics
Independent Business Alliances: Reports from the Field

Susan Greco is a senior writer at Inc. Additional research was provided by reporter Kate O'Sullivan and senior staff writer Emily Barker.

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