Business growth through acquisition means buying an existing company instead of building every customer relationship from scratch.
Most people in business seek to grow, create more sales, utilize management skills and attempt to build a constantly growing strong financial base from business and company profits.
Advertising dollars do not always relate to more sales or more profits. Sometimes markets are saturated. Lots of businesses can double their advertising and gain only small bumps in sales.
What can a savvy business professional do? Consider growth through acquisition.
An example is the story of Health Extension, a company organized to provide at-home nursing services. Rather than try to out-market competing businesses in their territory, the company developed a growth-through-acquisition strategy. They found a great business broker and spent four years researching and opening the door to acquisition negotiations. By offering reasonable terms and agreement to maintain employment, Health Extension grew from 20 employees to over 1,200.
Growth through acquisition can be a powerful advisory activity within a business brokerage practice. Becoming an acquisition finder is within the science and art of becoming a business broker.
All the best, Frank Covich
When business growth through acquisition makes sense
Business growth through acquisition tends to make sense when your market is crowded and extra advertising is no longer moving sales. Buying an established company can add customers, staff, and systems at once, which may be faster than trying to win each customer away from a competitor.
Patience and preparation matter. As the Health Extension example shows, a company that commits to this strategy takes time to research the market and works with a qualified business broker. Before you buy, review financial statements and customer records, confirm licenses and permits, and ask an attorney and an accountant to examine the contracts and the numbers with you.
Not every acquisition is a good fit, so be ready to walk away. Look for a business whose customers, culture, and location complement your own, and make sure you can afford the purchase without putting your current business at risk.
Related reading
- Buying an Existing Franchise Location (Resale): Pros, Cons, and Costs
- Franchise vs. Independent Business Opportunity: Which Fits?
- SBA guide to planning your business
Further reading: Wikipedia: Business broker and The Atlantic.
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