7 Reasons Why You Should Acquire Another Business
Every entrepreneur wants to grow—and grow quickly. Some spend years studying business before they start one of their own. Others will learn by trial and error on their first business before moving onto a second. Once you get past the rockiness of the first year or years, you find your product, people, and place in the market. You can now take a breath, but you don’t want to plateau. So, what’s the balance? Can you still grow quickly while enjoying the benefits of an established business?
According to Roland Frasier on Season 6 episode 29 of the Making Bank podcast, the answer is yes. Once you find your footing, you can grow overnight. How? Through acquisitions.
As someone who has spent years building, buying and selling businesses, Frasier has seen how acquisitions can transform a business instantaneously either in size, scope, and sales. To Frasier, acquisitions can solve most existing problems in your company. In the episode, he delves into the seven reasons why every founder should consider acquiring another business.
The first and most obvious reason why you would want to acquire is to simply garner more customers. Whether you buy your direct competition or a company in a different geography, you immediately increase your market share. Instead of spending months or years growing one customer at a time, you can save time—and sometimes, money in the long-term—by acquiring. In buying another company, you tap into the already well-earned and loyal company base.
If you have mastered the sales process and are looking for more leads to convert, you can buy existing media. Ads tend to generate few leads and even fewer customers—and they tend to be expensive. They’re not always guaranteed to work and even then, conversions can be difficult. So, instead of spending money on little conversion, go to what already has people’s attention.
Perhaps you need to build a sales team. Interviewing and onboarding just one employee takes hours and hours. It’s another couple months before they have fully grasped the ropes and can take on more responsibility. Say you need a sales team of ten people; that could take years before it’s properly running on its own. That doesn’t even take into account any bumps in the road such as product issues, finding a cohesive culture, or disengaged employees.
However, you could also acquire an existing sales team—or writing or marketing team. A team that already knows the process and understands how to work together to meet their goals. Through acquisitions, you can bring in more resources, such as talent, systems, or processes. Rather than building a team or system up from the ground, you could find one that already exists, is trained, and works well together.
Higher Order Value
Maybe you have a loyal customer base, but you want to increase the size of their orders. They come back to buy from you, but you want them to buy more. A way to bolster your sales and size order can be acquiring businesses that create certain products.
Perhaps you sell camping equipment. Your customers come to you for tents, fire starters, wind proof blankets and more. However, alongside your products, customers are also buying hiking boots, water bottles and other camping essentials.
Instead of setting up whole new supply chains, teams, and products, you can buy the companies already creating the products your customers are buying alongside your own. Adding new products to your product line can take endless time and money—and even then, there can be defects. So, look to the products your customers are purchasing before, during and after purchasing yours—and acquire the companies making them.
Say, you want to increase your margins. A classic way to do so is through vertical integration. By looking to the companies in your supply chain and distribution, you can begin to eliminate external costs. In bringing those steps under your roof, you can produce and present certain parts, ingredients and more. This way, you don’t have to pay the additional costs of purchasing your supply chain from another business. By absorbing some of your supply and distribution chain, you cut out the middle man, reduce your costs, and generate more revenue in the long run.
More Stable Income
Another reason to acquire a business according to Frasier is to stabilize your income. If you have a seasonal business, or one that exists in a volatile market, you may want to branch out to more streams of income. By purchasing a steadier business, you will have regular money coming in, regardless of other ventures. This may give you more breathing room later on, as well as insure the company as a whole. When major events occur—such as a pandemic—your company won’t be as vulnerable. If a market crashes and you lose a revenue stream through no fault of your own, you will still have several more. This allows your business to survive difficult times, and perhaps even offer a way to pivot and pursue more avenues, so that you can thrive again.
If you find yourself wanting more innovation within the business itself, you can acquire intellectual property. You can turn to those who have already put in the hard work and energy and allow you and them to expand. Owning intellectual property also gives your company an edge over the competition. It could lead to solving unsolved problems or provide a better answer than the ones that already exist. As the world becomes more global and the internet holds so many answers, originality will become more and more rare. So, if you’re looking to give your company an advantage, you can look to intellectual property.
Overall, Roland Frasier believes that acquiring a business can help yours grow quicky and successfully than it ever could organically. So, if you’re looking to make a change, look to the businesses around you—they may provide the answers.