When it comes to growing a company, entrepreneurs often pursue two common routes: Organic growth and acquisitions. While both methods can be effective in expanding businesses, increasing customer bases, and generating additional revenue, they each have their benefits and disadvantages.
Organic growth, while usually more cost-effective than acquisitions in the short term, is a slower path. Common organic techniques include:
- Growing existing accounts through cross-selling
- Capturing greater market share within an existing market
- Entering new markets or territories
- Creating new product or service lines
These methods, when effective, generally result in incremental, steady growth over an extended period of time.
For the entrepreneur who wants more immediate results, however, acquisitions may provide a quick fix. Strategic acquisitions can include buying an existing business, acquiring a product line from another company, or purchasing an existing customer base within a market.
Strategic Planning
The key to a successful acquisition is finding the right fit for your business, company branding, market, customer base, and products/services. Begin by assessing the assets, strengths, and gaps within your company. Ask yourself the following questions:
- Is there an offering that your customer base needs but you are unable to provide currently?
- Do you have a product that is perfect for a particular market, but you do not have easy access to potential buyers?
- Is there another company that provides an offering similar to yours and has an established base in another market?
There are all areas where an acquisition can meet your strategic business goals. Acquiring a company can provide an immediate boost to revenue, as long as the acquired company, product, or customer base aligns with your organization’s core objectives.
Due Diligence
After determining if the acquisition target is a good fit, you’ll need to roll up your sleeves and identify the value of the company. You’ll want to examine both tangible and non-tangible aspects of the business to be sure you’re buying a healthy entity that will add value to your existing company. This would be the time to consult with a financial advisor to help you determine whether or not the prospective acquisition has the potential to produce a positive ROI. Your advisor can also help you identify potential acquisition candidates.
While performing due diligence on your target company, it’s also important to consider how easily you will be able to integrate the new company into your infrastructure. When acquiring a business, you are often acquiring their staff, systems, processes, and culture as well. Will the integration process be seamless or present challenges to your existing business?
Don’t Go it Alone
Even the most experienced entrepreneurs should not navigate the waters of business acquisition alone. There is considerable value in partnering with an impartial and knowledgeable guide throughout the process. At Peek Advisory Group, we offer both sell-side and buy-side services, which means we’ve got the experience you need to help you reach your goals. We can assist you in understanding the financial and operational value of a company and identifying any potential hiccups before you make an offer. We ensure that you have all the facts and figures so you can make educated decisions.
Still Have Questions?
There is a lot to consider when it comes to identifying a potential acquisition and executing the transaction successfully. For more information, take a moment to listen to this Business Mastermind Podcast interview with Peek Advisory founder Jennifer Peek. She provides a detailed overview of what you need to know about business acquisitions.