Are you thinking about growing your business by acquiring other businesses in your industry? This is something many successful businesses do, but there are several points you’ll want to consider before making any decisions.
First and foremost, it’s critical to connect with a broker to help manage any mergers and acquisitions you pursue. If you’re not seasoned with acquisitions, you’ll need an experienced professional to make sure you get the best deal. Aside from that, here are some of the top reasons to pursue growth through acquisition and some reasons you may want to hold off.
1. Your market share will increase
Most businesses have at least some competition, even if it’s not that much. If you have even a modest amount of competition in your market, you’ll increase your market share by acquiring another business. This is easier than trying to obtain more market share by taking it away from your competitors. It could take years or even a decade to make headway with that, and you’ll spend a lot of money on marketing and advertising just to make it happen.
Many large corporations end up buying smaller businesses because they want that additional market share. Many smaller businesses are willing to sell because they’re offered good deals by the larger corporations.
Hopefully, you’ll be working with a broker who can help you negotiate deals, but remember that your offer will need to be enticing to convince someone to sell their business.
2. You don’t want to do the legwork
Have you been thinking about adding to your business, but you don’t have the time to innovate? Maybe you have an idea for a product or service that will expand your business, but you just don’t have the time or energy to get started. This is where buying another business will help. If you can find an existing business that sells the products and services you want to sell, but don’t have time to create, acquisition will help you expand without having to lay your own foundation.
3. You can offer your customers more
When you find a business for sale whose products or services would benefit your customers, it’s hard to pass on the opportunity to offer your customers more value. By acquiring another business and giving more value to your customers, you’ll improve your brand’s reputation and expand your customer base at the same time.
More isn’t always better, but adding complementary products and services to your offerings will help you increase your revenue. Companies have been using this strategy for years to generate more sales.
Acquiring another business in your market also means having access to more staff and expertise. You can expand your customer service operations and you may have the resources to work in partnership with other companies.
4. You want to expand into additional markets
Entering into new markets isn’t simple, and it can be a gamble sometimes. If you don’t have any experience in a market, getting a strong customer base will be difficult. This is especially true if those new markets have a culturally different audience.
If you’re thinking about expanding into a new market, acquiring another business is probably the easiest way to slide into that market. It will reduce the time and cost of establishing yourself in that market to be taken seriously. When you acquire another business in a new market, you can jump right in without having to prove yourself first.
Acquiring a business to grow your own has some drawbacks
Although acquisition offers fast growth at a low cost, some of the drawbacks include:
· Rapid company changes. You’ll need to be ready to deal with changes that impact your operations.
· Employee confusion. Your employees will need strong direction from you because acquisitions can be confusing. You’ll need to reorganize your workforce, which may include changing, merging, or eliminating departments and positions, and altering daily operations. Throughout this process, some workers will leave because they won’t like the changes. This is unavoidable, but you need to be prepared.
· A change in company culture. When you bring another business into yours, it’s likely that your company cultures will clash. This will create stress for both company’s teams. You’ll need to do some work to bring the cultures together to embody your ideal company culture.
Is strategic acquisition worth it?
If you’re interested in growing your business quickly without putting in the effort yourself and you don’t mind handling rapid changes, then strategic acquisition is worth pursuing. Acquiring another business will help you grow your revenue by entering new markets and expanding your offerings without having to start from scratch.