Ready, Set Scale! Accelerating Growth Through a Business Acquisition Strategy
by David McKenna
Ready, Set Scale! Accelerating Growth Through a Business Acquisition Strategy
We often discuss the journey of growing a business from its inception, building value, and attracting buyers. However, one milestone that is often overlooked is the first business acquisition. People acquire businesses for various reasons, but the underlying factor is usually growth.
As a company, growth can occur through organic means or through strategic business acquisitions, both of which require a significant financial investment. Organic growth follows a natural progression, starting from the startup phase and becoming profitable. It involves scaling based on revenues, product offerings, and service expansions. While organic growth can lead to unexpected increases in growth, it is also susceptible to market fluctuations.
To counteract these fluctuations, businesses should constantly seek opportunities to scale. This requires creative thinking, entering new markets, or developing different business models. While considered the safer route, there are still risks involved. Businesses need to invest money to win business, whether through hiring top talent, implementing new campaigns, or launching initiatives that may or may not yield desired results.
This dilemma creates a chicken and egg situation for business owners. Should they grow at a normal rate until their business reaches a size and level of innovation that attracts top talent? Or should they directly acquire the talent they need, regardless of their current size or service offering?
Growth through acquisition involves carefully considering mergers and acquisitions. Large companies often pursue this strategy to fill gaps in their business models or enhance existing offerings. However, small and medium-sized enterprises (SMEs) tend to shy away from this approach due to perceived financial risks. Acquiring another business requires a significant financial investment, with the hope that the return on investment (ROI) will outweigh the initial costs.
A well-scrutinized business acquisition strategy can serve as an expressway to growth. While it involves financial risks, a carefully planned acquisition can provide instant ROI and propel your business forward.
What is a Business Acquisition Strategy?
Understanding the importance of a business acquisition strategy is crucial whether you are purchasing your first business or aiming to expand an existing one. It is essential to make informed decisions regarding the choice of the business to acquire and the timing of the acquisition. To determine if a business acquisition is the right move for you, consider the following questions:
- Does the acquisition align with your overall business strategy and improve your competitive position? Assess whether acquiring the target business will complement your existing operations, enhance your market position, or provide access to new markets or technologies.
- What impact will the acquisition have on your business, employees, shareholders, and clients? Consider the potential benefits and challenges that may arise from integrating the acquired business into your operations. Evaluate how the acquisition will affect your stakeholders and ensure that the overall impact is positive.
- Have you conducted thorough due diligence? It is crucial to conduct comprehensive internal assessments and thoroughly evaluate the business you intend to acquire. This includes analysing financials, operations, legal aspects, market conditions, and potential risks. Due diligence helps identify any potential issues or red flags that may impact the success of the acquisition.
Taking the time for introspection and following a structured approach is vital. Research shows that businesses that adhere to a careful acquisition structure are 94% more likely to become high-growth firms within three years post-acquisition. This highlights the importance of strategic planning, thorough analysis, and informed decision-making in the acquisition process.
Ready to Scale and Grow Your Business?
