As we come to the close of the year, I want to talk some about something you should consider for next year: Inorganic Growth. That’s right, buying a business to add to the one you have. Most small business owners that I have met do not really think this is an option for them. I have posted this Fall about buying a business instead of starting one and about using an SBA loan to fund your business. In fact, if you look through my postings I think you will find ample ways of buying another Business.
The question is why buy instead of build? Well, the answer is that you are not buying instead of building. You are building and using buying as one mechanism. This does not discount all types of ways of growing your business. Buying one has a single advantage: Time. Imagine you run a $1M Revenue company and are growing at 10% per year. It will take you about 7 years to become a $2M Revenue company. But you might be able to buy a competitor Business and make that change overnight.
So, what is special about being bigger. You will hear it called “Scale”. What this means is that there are parts of two $1M business that are duplicated or asked to do multiple things. When the two businesses come together you can eliminate the duplication (this is called “Synergy”). People can focus on wearing fewer hats in a larger company so that they become more efficient at what they do.
This works in lots of ways. Let’s suppose both companies had websites and that they used both Search Engine Optimization (SEO) and Search Engine Marketing (aka Pay Per Click or PPC) to drive traffic into the business. By buying a competitor, you can eliminate one company that was competing in the Search and have better search results through SEO. You also can allocate more money to the one company and have more PPC traffic as well.
There are challenges with this approach and we will cover them as well. But you should consider Inorganic Growth as part of what you plan to do.
Have a great day!
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