As a business owner for 20 years I was involved in an industry that was expanding and rapidly growing. The size of the “pie” my competitors and I were competing over was getting larger as the industry grew and we all sought to get our share of this bigger “pie”. So we increased our customer base as the market grew, and we also grew our customer base by buying competitors which resulted in many successful synergistic acquisitions.
In today’s economy in so many industries people are needing to spend less, cut back and therefore the “pie” is staying the same size or the “pie” is getting smaller. So you have business owner competing for their piece of a smaller pie. As you have the same amount of competitors competing for a smaller pie either all get less, some get more by pricing or efficiencies, but those getting more, results in other competitors getting less and or so much less that they no longer exist.
Today as a business broker based in Florida. I am working with several business owners looking to keep afloat and looking for exit strategies that meets their needs. Selling their business and going to work for the acquirer is an interest I have heard on several occasions as an exit strategy that they would welcome. (Also work with several business owners that have solid business models that are doing well).
A fast and often cost effective way to gain a bigger piece of the pie is by buying a competitor. Growing your customer significantly “overnight” by buying a bigger “piece of the pie”. Buying a business in a growing industry and or economy is a solid and effective way to grow a business. I had utilized this approach on multiple acquisitions to add to our own organic growth. Buying a business, or buying a competitors business in a recession can also be an effective means to grow your customer base and grow it fast.
Often most business owners don’t consider acquisition as a possible way to grow a business because they feel they do not have the funds or resources to make such acquisitions. But:
- Possibly you can find a struggling competitor that may welcome the opportunity to escape the burden of trying to run a struggling business.
- Possibly you can buy a business of a competitor that offers Seller financing.
- Possibly part of the purchase price can be the assumption of debt on trucks and or equipment that may be assumable and may be affordable thru the synergistic cash flow of the business.
- Possibly offering the owner of the business you may buy long term employment. A small struggling business that may have a few employees – who may be the last person to get paid?- the owner. An owner may welcome the premise of steady and consistent compensation.
- Possibly you can secure outside financing- An approach I always used as my last choice but may fit your situation.
Furthermore, would you be “just buying a failing business”? No. Synergies that can be realized can be plentiful and the cost saving that follow may help or completely finance the acquisitions.
You have an office space or shop so does the competitor. Can you and your competitor both operate under one roof? When you eliminate the need for 2 spaces you also eliminate so much of the lease cost, utilities, insurances, phone, internet and other Fixed Overhead cost associated with that space. Also by adding these customers your customers, density may increase and you may be able to increase efficiencies in service and maybe you need 1 less employees or more, along with the benefit cost that goes along with the employees. Advertising does not need to be duplicitous, maybe some equipment of vehicles are also duplicated and can be potential cost savings. As a business broker I try to look at buying selling a business from the perspective of a business owner and see that during this recession improving your position thru acquisition may have many long term beneficial results.
So what do you do when you are trying to keep your piece or get a bigger piece of a smaller “pie” ?
Buy another piece of that pie it may not cost you as much as you had thought.