For small and medium-sized businesses lucky enough to get past the stage of worrying about keeping the lights on, growth is the next challenge. But did you know that you don’t have to rely on organic growth alone to bring your business to the next level?
That’s right, there is another way to grow your business – one that can help you to get into hyperdrive: acquisitions. While this type of business exchange is usually the domain of large, international companies, small and mid-sized business entrepreneurs can also buy a business to help achieve strategic targets.
With that in mind, here are some tips on how to grow your business through acquisitions.
What is Growth Through Acquisition?
In its simplest terms, growth through acquisition refers to when one company buys another. The result for the acquirer is that they have gained access to new customers and have most likely expanded their balance sheet in the process.
Growth through acquisition however, isn’t always about buying a direct competitor. In some cases, the business you purchase could be a supplier (i.e. upstream acquisition), especially if that supplier has a process or technology that you don’t want to fall into the hands of your competitors. You could even seek to buy a complimentary business if it opens doors to a new market.
In either case, the goal is to shorten the time it would take to achieve revenue or profitability targets through organic growth alone. Keep in mind, these transactions are not mergers as there is a clear buyer and seller – as opposed to a sharing of assets and control which is the hallmark of a merger.
How to Develop Your Acquisition Strategy
While volumes have been written on business strategy, let’s condense the entire body of knowledge into a few easily defined steps.
First, the goal of growth by acquisition is to expand your business, either through additional resource availability or greater access to customers. For small and medium-sized businesses, the focus should be on execution above all else.
As such, the next step is to clearly define business process management which, in this case, is to identify and vet acquisition targets. This is not the time to make an emotional decision; there is too much on the line. Instead, you need to approach each acquisition with the same criteria in mind, for example:
- How will this opportunity help to grow my business?
- Could I achieve the same result with my current resources?
- Do the target’s numbers check out?
- How will I pay for this purchase?
- Who are the target’s key people, and will they stay?
Regarding the last question, remember that success for a small and medium-sized business is all about having the right people. As such, the last thing you want to happen is to complete the transaction and then find that a core member of the target’s team is leaving.
As mentioned, strategic planning for small and medium-sized businesses is all about execution. You don’t have months to sit in a boardroom and look at PowerPoint slides; instead, pick a direction and execute better than anyone else.
Find out how Beal Business Brokers and Advisors can help you grow your business through acquisition. Contact us today to learn about current opportunities.