If you want to grow your company, buy another company.
Hands down, 100 percent of the time, that is my advice if you are interested in expanding. Acquiring a company is an option for you, no matter how big, how profitable or how organized your company.
When I offer that advice, it is often met with resistance. It seems to stir up feelings of insecurity and doubt. No need to fear. Acquisitions can take all kinds of shapes and sizes, and one might be just right for you.
Let’s debunk a few myths about acquisition.
1. “My company is too small.”
You don’t have to cut your acquisition teeth on a full-blown remote location with millions of dollars in sales and dozens of employees. You could buy another small company. Or you can find a disconnected phone number and have that number start ringing at your shop. If you want to grow your company, be willing to look at why you are a small company.
2. “I don’t have very much cash.”
You could arrange an owner-financed deal and offer to pay a flat monthly fee, or a small percentage of sales from their customers. You could just buy the website or some equipment. Note that some companies are simply not worth a lot of money.
3. “I can barely manage the company I have.”
The more systems you have in place, the more options for acquisition you have. For instance, if you are rockin’ a “turnkey” operation, you could handle a separate location. If you are a two-truck outfit without any written procedures, you are better served to keep your acquisition action more modest – another one- or two-truck outfit, for example.
4. “The timing isn’t right, considering the economy.”
The timing is always right for acquisition. Right now, the timing is particularly good. Anytime there is a downturn in the economy, people – not you, I hope – buy into the myth that the national or global economy absolutely dictates your economy.
You have options. You can grow your company while others retreat in fear. You can help a brother or a sister out, particularly if the last few years have taken a toll. Create an opportunity that allows someone else to transition to the next phase.
So, fear not. Open up to acquisition as a marketing option.
Of course, if the seller says, “No, thanks,” that’s OK, too. You could make an offer on another company.
Acquisition is like sales. Some offers land and a lot don’t. The relationships you develop along the way might continue. A balking seller may change his mind later. Someday, you might find yourself on the other side of the negotiating table, too.
How good can it be? A pal of mine discovered that a competitor’s phone number had been disconnected. He went to the fellow’s house, knocked on the door and asked, “What’s going on?” He discovered his competitor was moving across the country to help out a troubled family member. He was willing to abandon the phone number. My pal arranged the situation to where he could assume the number and pay a referral fee on the calls.
That’s a win-win.
One of my clients tripled the size of his company with a key acquisition, from $1 million to $3 million in sales. He told me the key to the deal was his willingness to approach a company that was much bigger than his. “I didn’t know that was weird until others told me that later,” he said.
Yes, you’ll need to be careful. Consult a lawyer before you close the deal, and talk to folks who have made acquisitions.
However, you can grow through buying, and it’s worth exploring.
Ellen Rohr is an author and business consultant who helps entrepreneurs start, fix and grow their businesses. She conducts a monthly webinar, and her books include “Where Did the Money Go?” and “The Bare Bones Weekend Biz Plan.” She can be reached at ellen@barebonesbiz.com.
