Conventional business wisdom tells us that if we work hard, have a great product or service and the right marketing plan, your business will consistently grow. Anyone that has ever ran a business will tell you that this conventional wisdom is flawed. The hardest working individuals with the best products in the market with the best laid plans can often fall flat. So how do you as a small or medium size business owner stimulate growth in your business? One short cut to growth can be through acquisition.
Growth through acquisition is often associated with large, Fortune 500 companies. You open any business publication and can read about these major national corporations buying up a startup or a competitor for millions, if not billions, of dollars. While this is the general perception of “Mergers and Acquisitions” the fact is there are an even greater number of transactions that take place on a much smaller scale. These types of acquisitions can accelerate or maintain growth trends in your business.
There is an old cliché: “The bigger the risk; the bigger the reward.” This is not the case in growth by acquisition. An acquisition allows you to take calculated risks and not wild, out of control risks. You have an opportunity to look into whether acquiring another business would fit with existing operations, what is the potential liability and what do the financials really reflect. If you are sinking a ton of money into new marketing strategies or research and development to grow your existing operations, the potential returns can be much more speculative.
Synergy between your existing operations and the newly acquired operation should provide more than sum of the two operations. You should expect that combining these two entities should create a single entity that is even greater than the two apart. The ability to share the synergy between the entities can provide even more of a return. Acquiring a competitor can give you a market advantage over the remaining competitors. Buying a similar operation in a different geographic area can allow you to expand into that territory easier. Finding a company that provides complimentary services to your business can allow for faster expansion through using each other’s distribution channels. These are simplistic examples of potential synergies but show how it’s much easier to acquire the ability to grow than it is to try and create them from scratch.
Cleaning Up Your Business
Many businesses put off organizing internal processes and pushing to be more efficient with operations. Acquiring a new business can force you to look at the existing operations and make simple changes that will actually grow the value of what you already have. No one wants to try and integrate someone else’s disorganized business into their own disorganized business. Taking the time to analyze and strategize around a potential acquisition can also reveal areas that can be improved in current operations or potential liabilities that can be rectified. Cleaning up your current business as part of the preparation process that will pay off dividends in a number of ways.
There are many other advantages to growing through acquisition. Right now there are great financing options available. It is also much easier to finance an acquisition of an existing business then it is to try and gain financing to develop a new area of your business. The current market would be considered a seller’s market because of the financing that is available and the low number of available business for sale. But there will be a shift soon enough when baby boomer business owners begin to retire. At that point there will be more small businesses for sale then the market will know what to do with.
Your business has the ability to leverage this perfect storm of financing and wave of available businesses. If you have big goals for your business and what it can be, you don’t have to focus on pouring money into marketing and hoping that it is effective or relying on your R&D team to have a breakthrough. There is another cliché: “You don’t have to reinvent the wheel.” Acquiring the right business can allow your business to advance much faster than you thought it possible.
For more information on growth through acquisition and more, schedule a free consultation with one of The Business Law Group’s experienced partners today.
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