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Growing Up - Expansion and Acquisitions

Geoff Flemming12 March 2013

Growing Up - Expansion and Acquisitions

By Geoff Flemming

I was reminded recently of how businesses and organisations have a tendency to grow rapidly and nearly overtake the resources that the company can provide. This can sometimes happen particularly when growing businesses are in their 'adolescent' stage and the owner / principals are skilled at business development - great at selling!

With the changes in the Australian economic climate over the last twenty years we all know there is a massive shift away from manufacturing and huge increase in service related businesses. So if you are in the services sector you could well be in the right place at the right time!

But growth in businesses and growing can sometimes get a bad name! Why is it sometimes that the thought of a larger business can be painful?

The business is already busy and running at capacity

• The business struggles to get the right team or to manage the team - or both!

• As the business grows profitability tends to shrink

• There is sometimes a struggle with cashflow to fund growth

So how can business be busy but yet not maximised. There can be lots of activity but yet little productivity?

If a business has never really defined its purpose in the market then it is possible that they have not clearly defined their marketing brand, the types of customers, clients or suppliers. The business can also lack in direction, leadership and/or structure. As per the header to this newsletter, all three are pivotal to profitability and success.

So growth is great!! Particularly when it is planned on the basis of the business' purpose, vision, mission, and values. On that basis growth can not only be sustainable but also profitable and exhilarating!

Apart from organic growth, a great alternative is a merge/acquisition. With the number of 'baby boomer' owners looking to move on over the coming years the time is good.

With acquisitions, whilst diversity away from the core business can be exciting for entrepreneurs, the more diverse away from core business the higher the risk.

  • Getting the structure of merged entities right is critical. As most people will hang onto old systems and processes this change always takes time.
  • Cultural challenges within merged entities are often a 'show stopper' even when the structure and processes are all in place. Values and behaviours need to be clearly defined and also enforced.
  • Consistent with defining the structure is to define new roles and who does what now!
  • Managing cashflow is also critical. It can be easy to overspend in additional staff, infrastructure, premises and marketing.

A good acquisition/merger like any significant initiative needs a strategic game plan combined with the right people - and a highly proactive leader in the driver's seat!

Geoff Flemming>

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