Buy-side expansion – Is it time?
There may be a few reasons why you’d be looking to spark growth through buy-side acquisition. It may be because you’re experiencing business success and have the profits to acquire. It may be because you’re ready to move to similar or other markets within your industry, in an attempt to garner a bigger share of the pie. It may be in response to growing competition, and absorbing said competition is simpler and cheaper than developing new products or services to help you stand out. Whatever the reason, you’re basically looking to increase revenue and profit – and that’s the very point to any kind of growth.
But when determining to go ahead with an acquisition, the greatest confirmation is in the data that your business is generating right now. It should tell you a story – and that storyline arc should look similar to the following, if a buy-side acquisition is to be the happy ending:
- You have the finances, people and resources or an acquisition
- Your leadership team are backing a possible acquisition
- Your profits have grown consistently over several years
- Your costs and overhead are under control, and expansion here is possible
- You have products and services that are in demand, and acquiring the knowledge and capability of a similar business, for absorption into your own capabilities, and the augmenting of them, looks to be beneficial and seamless
Know the downsides – Disadvantages of business expansion
To reiterate, growth is great – it’s an exciting time for you and your business, and if you align with most of the points above, it is indeed, time to buy to grow. But if there’s an inkling of a doubt, maybe erring on the side of hesitation is the better step, if only just for now. Here are some disadvantages of business expansion when it happens too soon, or when a business isn’t quite ready to handle the disruptive influence of such a monumental event.
- Loss of control – hasty expansion can demand more delegation across more managers and locations, affecting morale, causing higher staff turnover, and instilling doubt among customers
- More growth, more capital requirements – acquiring to grow could mean the need for bigger facilities, a bigger staff contingent and more capital injected into infrastructure
- Third-party involvement – the need for more capital could demand more borrowing, and so, increased debt or perhaps outside investors that want to create a formal board of directors
- Excess workload – an underestimation of just how much workload there will be after acquiring to expand, could mean burnout for management, staff, and even the equipment you use across the business
If you’re still not sure about acquiring to expand your business, talk to Destined today. In our collective and personal capacity, we’ve bought, sold and merged our own businesses, so we know firsthand what it takes. We’ll help you make the decision that’s going to be beneficial to your growth, M&A strategy, and the future of your business.
Click here, and let’s connect.
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