Growing a company organically can be a long and arduous
task. Developing products and services. Marketing and
selling. Building a relationship with customers whilst all
the time worrying about the costs and whether your business
will work.
An alternative way to achieve a fast increase in the size
of your company is to make an acquisition. This means
buying a company that you can merge with your existing
business. Sometimes the investment you would have to make
to reach a certain size in 2 to 3 years can be more than
the cost of acquiring a company that could get you there
tomorrow. So it's worth considering.
This can even work if you are starting up. We raised
finance for starting a business and, before we even
embarked on implementing the business plan, we found one of
the main competitors in the market was up for sale. After
agreeing it with our investors, we made an offer and
acquired the company for a good price. Within 6 weeks we
had a fully fledged business completely up and running,
with an established name, services, customers, offices,
staff and a year's worth of marketing already done for us.
It jumped us at least 18 months ahead in our business plan
and probably saved us over £500,000 in costs.
If you already have a business or you're thinking of
starting one, then it's worth taking some time to
investigate the opportunities in your chosen market and
seeing what's available. One of the biggest advantages of
buying a business is that it can bring a ready-made
customer base. And whatever business you're in, you'll
know that the costs of acquiring customers can be
significant.
You can find businesses for sale through the internet and
through specialist business brokers. You can also find
them by talking to others in your industry, including your
competitors.
You'll most likely need help from professional advisers
when you decide to actually make an acquisition but your
initial investigations can be done at a low cost and with
minimum disruption.
It's up to you whether you choose to look for a business
that's smaller, the same size or even bigger. It really
depends on what your plans are. You may even find yourself
inspired to move into a different industry when you find
what's available.
Of course, acquisitions don't come without their own
special challenges, so you'll need to understand the risks
and rewards involved in buying someone else's business.
However, if you set clear objectives and create a solid
action plan then it's something that can really work for
you.
Make a list of what you want in your own business. This
could include more customers; more products or services;
bigger offices; more experienced staff or any other items
specific to your needs.
Then start your search for companies that fit your criteria
and at the same time calculate how much it would cost you
to achieve all your objectives by doing them yourself from
scratch. Once you find some companies that match what you
want, you can start making approaches and offers. Your
calculations will show you how much you want to pay by
comparing what the acquisition would bring you against what
it would cost to build it yourself. And you may be able to
pay a lot less than that.
Just imagine, after reading this, you could find yourself
in 6 weeks time with a business twice the size of your
current one and with many more opportunities to explore.
----------------------------------------------------
Andy Warren is the Managing Director of Marshall Keen Ltd.
He is a chartered accountant, successful CFO and
entrepreneur with extensive experience in M&A, Corporate
Finance, Business Growth and Exit Strategies. Marshall Keen
http://www.marshallkeen.com specialises in CFO services for
early and mid stage businesses, particulary in the tech
sector. Andy is also the author of How to Buy a Business
for a Pound http://www.buyabusinessforapound.com
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