In a previous post, I wrote about why acquisition can be the fastest way to grow your company. Economies of scale, acquiring talent and expanding market share are some of the obvious advantages. But growth through acquisition doesn’t make sense for every owner. Here are three things to consider before making the decision to buy.
Location
Managing a single company is challenging. Managing two companies is exponentially harder. It requires enormous amounts of time, focus, and attention to make sure your current company keeps running on all cylinders and the new company makes a smooth transition.
You’ll need to implement your own systems and train employees. You may encounter some employee resistance (understandable if they didn’t have much time to adjust to the sale.) You may need to spend time with key staff to form a strong bond and introduce and connect them to your current staff.
All this becomes much more difficult if you’re separated by a long distance. Time spent on the road is time away from your best and highest purpose and will become exhausting pretty quickly. If you or your employees can make a quick trip across town to meet, tarin, and spend time together, you’ll have less travel time and more quality time.
Size
There are two considerations here. One is how prepared you are to run a much larger company. The skills it takes to manage a million-dollar company are very different from the skills it takes to run a five-million-dollar company. Owners who grow organically learn valuable lessons over the years about what works and what doesn’t. You’ll be catapulted into a much larger company without the benefit of that learning curve, and trial and error can be expensive.
Second, if you’re acquiring a larger company, you may wind up becoming a part of its culture, rather than bringing it into yours. If integrating the brand under your own name and policies matters (and it’s almost always an important factor in growing through acquisition), you’ll need to have a strong plan in place. From branding to scripting, procedures to decision making, your current and your new staff will look to you for guidance. Good habits and bad habits can spread easily, so keeping a close eye on operations, sales, the grapevine, and morale is the key to success.
Bandwidth
Most small business owners are working at full capacity; it’s not boredom that gets them interested in growth. They’ve figured out what works in their current company, and how to manage their time to keep things running smoothly and hold on to their sanity. Acquiring a new company is going to feel like starting from the beginning again. (See “exponentially harder” above.)
You’ll need to learn how the current company runs before you can make changes. You’ll need to assess, hire, train, promote, or let staff go. You may encounter business issues that weren’t uncovered in the diligence process. Customers or vendors might need reassuring.
Having a strong management team and solid procedures in place now will make an enormous difference in how challenging your job will be. If your current company is running smoothly without the need for close oversight, you’ll have more time and capacity to focus on the new company. You’ll be much less likely to disrupt service to your current customers or let quality slip.
Acquisition can be a fast and profitable strategy for some owners, but it’s not for everybody.
