As 2017 comes to an end, hopefully you are planning for great things in 2018 . If the goal for next year is growth, have you considering buying another HVAC or plumbing company as part of that growth plan?
One of the most often overlooked areas for achieving quick growth and penetration into a new market is by acquiring another company that is already serving that area. There are a lot of things to consider when acquiring another company, and this article will not run deep into each of those, but rather help you to consider if acquisition makes sense for your plans, and how it compares to just growing through marketing and other methods.
As someone who has not only started and grown several companies of my own, but someone who has also bought other companies as well, I have seen how both sides work, and some things to consider when looking for fast growth.
One of the fastest ways if you plan to expand into a new area that you are not currently serving is through acquisition. If you are already servicing that area, then you already have exposure from vans, trucks, existing marketing, and hopefully referrals, but what if you are not working in that area consistently enough for the general public to know who you are and how good of a job you can do?
Of course, as you look to expand you need to make sure that you are doing all of the above items mentioned, but as I am sure you are aware, each of those takes time, and money. When you take a look at what you need to spend consistently as well as how long of a process it will be, I would suggest at least taking a look of what is currently on the market in that area, and what the asking price is.
Let me give you an example of a listing I currently have, what its numbers are, and allow you to compare it to traditional marketing in both time and money.
Lake City Florida Heating and Air Company for Sale
Asking price: $180,000
2016 Sales: $440,00
2016 Owner Benefit: $89,000
Now lets discuss numbers for a minute. How much advertising would you have to spend in a new market to generate $440,000 in sales? How many mailings? How many commercials? How much time will it take?
Lets also consider the net income side. In a new area, what would you have to spend in order to add $89,000 of income to your bottom line?
What is the lifetime value of a customer to you? How long does the average customer use your services? Are you better than your competitors at helping your customers with solutions for things like better filtration? UV lights? Annual service plans? Is there more money that can be generated by taking over someone’s customer base that has not been serviced as good as your company does?
Now lets also look at some other ideas. Will the seller consider offering some financing so you can pay for it out of its own cash flow? Will your local bank that you currently use help finance a portion of it based off or your current sales? Being creative is there a way for little to no money out of pocket you are able to add over $400,000 of gross sales to your existing business?
Finally, lets compare that to marketing options? Will Google allow you to finance your adwords expense over a couple of years to pay for itself? Can you do that with your mailing company? How about your person handling SEO, social media, etc.. Can you tell them that once you have made enough money to pay put $89,000 profit in the bank you will start to pay them? Typically not but with acquisition you can.
I completely realize that acquisition is not for everyone, and there are a lot of other things to consider when looking at acquiring another company, but it is certainly an option that should be looked at for growing your company into next year.
If you have questions about acquiring another company, or considering selling your own, please reach out to me, I am happy to help out any way that I can.