Business Growth Strategies for Entrepreneurs and Small Business Owners

Running a small business comes with as many headaches as running a big one. – Anon

Whoever said this was on the money.  Running a small business is just as stressful and problem-laden as it is running a much larger business with a few possible exceptions. The most common example is where the owner has intentionally designed a low maintenance business that affords him the maximum possible time for golf or television viewing or whatever their preferred leisure time activity is. The downside to these types of business is the shockingly low valuation that appears at selling time.  This article won’t be of any interest to this category of business owner.  However, if you are always on the lookout for growth opportunities and growth strategies, read on.

Everyone has a purpose in life. Perhaps yours is watching television? – David Letterman

Since running a business is not an easy task it makes sense to explore ways to make the effort pay off as much as possible.  While most business-people are aware that some of their competitors are using acquisitions to grow rapidly and leave them behind, they tend to talk themselves out of adopting this strategy for their own benefit. To better understand why sophisticated business owners and entrepreneurs use acquisitions, consider the benefits. Let’s take a look at some common scenarios where it makes sense to consider acquisitions for growth.

Reducing Competition

Buy Sell Hold

Buy Sell Hold

In situations where the economy has slowed down, a bubble has popped, or the industry is simply in the mature phase, you will typically find excess capacity. In plain English, there are too many businesses competing for the same customers. This can be an industry wide phenomenon or a local one.

Now imagine for a moment that you are a dentist and the proprietor of a dental practice in a small town with two competing dental offices. Over the years the town’s population has shrunk as young people have moved to bigger cities. As a result, your town has one too many dental practices. In this scenario, it’s going to be a tough situation for the competitors unless something is done to change it. One obvious solution is for you to then acquire the competitor, shut it down, and invite all of its clientele over to yours. If the other dentist is not ready to retire, you can invite him to work at your practice until it’s time to quit the profession.

If you can replace a situation where multiple businesses are struggling due to oversupply with one in which fewer can do better, you should explore the option to do so. It maybe easier than you had ever dreamt possible.  It’s tough to name a business that would not benefit from having fewer competitors. For a few months of the extra work involved in acquiring the competitor, the pay-off can be years of increased revenues and profits.  Once someone has closed their first deal it dawns on them that this is a strategy with an extremely high ROI.

If you refuse to even consider acquisitions for growth, you are voluntarily placing very low limits on your business’s potential. When it comes time to sell it you maybe shocked to discovered that it’s worth very little.

Be sure to read the series on business growth strategies that this post launches.

2 Responses to Business Growth Strategies: Reducing Competition

  • Peter – I *love* your articles and voraciously read them. I have considered acquisition-based growth and have two immediate possibilities. In one case, the problem is that the owner places an “unrealistic” value on his business. His asking price is way “out of whack” with any analysis. The owner is in his upper 70’s and has had his business for sale for the last 8 years. As a business counselor myself, I often see unrealistic valuations from his generation as a whole. Any ideas?

  • You have to educate the seller in most cases on how valuations are arrived at. I was broker for many years and can vouch for the fact that 90% of sellers have no clue what their business is worth. Some are a lost cause because they refuse to deal with reality no matter how much information you share with them on how to determine their business’s value. Sometimes you just have to walk away.

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