Growth & Leadership Brief
Should You Open Another Location, Acquire a Competitor, or Expand Through a Partnership?
There are three ways to grow beyond your current footprint. Each trades speed, cost, control and risk differently, and the right one depends on what you need from the move.
Short answer
Opening a new location gives the most control but takes the longest and costs the most to establish; acquiring a business buys customers, capacity and know-how quickly but carries price, integration and cultural risk; a partnership or alliance is the lightest and most reversible but gives the least control. Research by Dyer, Kale and Singh suggests the choice should rest on the nature of the resources and benefits you want, the business environment, and each firm’s competencies at collaborating, and that companies using both alliances and acquisitions grow faster than rivals.[1] The SBA notes acquisitions absorb the purchased company, and that true mergers are uncommon.[2]
What are the three options?
Build means expanding yourself, for example by opening a location or launching a line. Buy means acquiring or merging with another business. Partner means collaborating without combining: an alliance, referral arrangement, joint venture or shared service. The SBA describes the difference between the buy routes: mergers combine two businesses into a single new legal entity, though it says true mergers are uncommon because it is rare for two equal companies to mutually benefit from combining resources and staff, including their CEOs; acquisitions do not form a new company, and the purchased company is fully absorbed by the acquirer, sometimes liquidated.[2]
Partnerships sit at the other end. They share benefits and risks without transferring ownership, which makes them quicker to start and easier to end, but more dependent on trust and alignment. Estimates of alliance failure are sobering: the MIT Sloan Management Review notes survey data estimating that about 50 percent of alliance portfolios fail, and an estimate that 33 to 66 percent of alliances break up within ten years, though alliances can end for reasons including achievement of their goals.[3]
How do the options compare?
| Factor | Build (new location) | Buy (acquire) | Partner (alliance) |
|---|---|---|---|
| Speed | Slowest; months to years to break even | Fast; customers and staff come with the deal | Fast to start, slower to scale |
| Up-front cost | Fixed costs and losses until break-even | Purchase price plus integration | Lowest |
| Control | Highest | High after integration | Lowest; depends on agreement and trust |
| Main risks | Slow start, cash drain, management stretch | Overpaying, culture clash, losing key people | Misaligned goals, partner changes, break-up[3] |
| Reversibility | Closing is costly | Hardest to reverse | Easiest to end if designed well |
Use the table as a prompt to think about your own priorities. If speed and access to customers or skills matter most, buying or partnering rank higher. If control and culture matter most, building does. If cash is tight, partnership or a staged build reduces the up-front commitment.
How do you choose? The ally-or-acquire framework
Dyer, Kale and Singh’s research, summarized by BYU News, suggests considering three sets of factors. The first is the nature of both companies’ resources and the benefits they want: the types of resources (human, intangible, technological, physical or financial), the benefits that would be created and the extent of redundant resources. The second is the business environment, including market uncertainty and competition, and whether other suitors are interested in the target. The third is each firm’s competency at collaborating: a company may have developed a competency in alliances or acquisitions, but should not stick with a pet strategy when it does not suit the situation.[1]
The authors add two useful points: that companies must develop the ability to execute both alliances and acquisitions if they want to grow, and that knowing when to use which may be a greater source of advantage than knowing how to execute them. They also describe a third route, an alliance that turns into an acquisition, which lets a company learn about the value of the partner’s assets and how well they collaborate before committing.[1] For a small firm, the equivalent is a trial arrangement, such as a joint project or subcontract, before an offer to buy.
What due diligence applies to each option?
For a new location, the SBA’s guidance is to update the marketing plan, compare your business with local competitors, build a forecast of costs and revenue for the new location, check that your balance sheet can cover the costs and comply with local laws.[2] For an acquisition, the SBA says the process is similar to starting a new business, but you need extra steps to protect your existing business, starting with calculating how much the other business is worth.[2] Add commercial due diligence (customers, contracts, concentration), financial due diligence, people (who is essential and will they stay) and legal checks.
For a partnership, define the purpose, what each side contributes, how decisions are made, how value is shared and how the arrangement can end. The Association of Strategic Alliance Professionals describes alliance management as covering strategy, selection, trust-building negotiation, operational planning, structuring and governance, launch and management, and finally transforming, innovating or exiting gracefully.[4]
How should you decide?
Write down what you need most from the move: speed, access to customers, skills, geography, control or low cost. Score each option against those needs and against your capacity, including cash and management time. Consider staging: start with a partnership or pilot, then build or buy once the market and the partner are proven. Set decision criteria and stop rules before you start. Whatever you choose, the decision should survive a simple test: if it goes only half as well as planned, can the business absorb it?
Frequently asked questions
Should I build, buy or partner?
It depends on speed, cost, control and risk. Researchers suggest considering the resources and benefits wanted, the business environment and your competencies at collaborating.[1]
What is the difference between a merger and an acquisition?
The SBA says mergers combine two businesses into one new legal entity and are uncommon, while in an acquisition the purchased company is fully absorbed by the acquirer.[2]
How often do alliances fail?
Estimates cited by MIT Sloan Management Review put alliance portfolio failure near 50 percent, with one estimate that 33 to 66 percent of alliances break up within ten years.[3]
Can a partnership lead to an acquisition?
Yes. Dyer’s research describes alliances as a stepping-stone to acquisition, letting the buyer learn about the partner’s assets and how well they collaborate first.[1]
What is the lowest-risk way to try?
A staged approach: a pilot, joint project or subcontract with defined goals and exit terms before committing to a purchase or a new site.
What to do next
- Write down what you most need from the next growth move.
- Score build, buy and partner on speed, cost, control and risk.
- Design a staged test for the leading option.
- Set stop rules before you start.
Plan Your Next Stage of Growth
Two Pillars helps owners and leadership teams investigate growth, partnership and leadership questions with evidence and a structured assessment process. A good first step is a short growth readiness and options review that tests margin, cash, demand and leadership capacity, and compares expansion, acquisition and partnership routes.
Sources
- BYU News, BYU article in Harvard Business Review explores alliances and acquisitions (August 23, 2004). Accessed October 2026.
- U.S. Small Business Administration, Grow your business. Accessed October 2026.
- MIT Sloan Management Review, How to Manage Alliances Strategically (Hoang and Rothaermel). Accessed October 2026.
- Association of Strategic Alliance Professionals, ASAP: What is alliance management?. Accessed October 2026.
Sources checked October 2026. This guide is general information for business owners and leaders and is not legal, accounting, tax or financial advice. Figures and rules are cited to the sources below and may have changed since they were accessed, so confirm anything you rely on against the current source. Two Pillars & Co is independent of the organizations cited. See our editorial policy.