If you study the history of modern business, including mergers and acquisitions as well as expansions, one of history’s primary business lessons is: Bigger isn’t always better.
Whether it’s a large corporation, small business or a startup what appears to be a great fit often times isn’t. There is always a difference in company culture, sales techniques, computer operating systems and a great deal of mixed emotions from employees who are either reassigned or layed off.
Usually when someone is selling a company it’s because there is a business problem. Whether it is loss of profit, sales volume, not keeping up with the changing times, people related issues or the current owners just want to bail out. Don’t want to deal with or be responsible for the business any longer. On occasion, it’s because someone is retiring and just wants to be bought out after years of work with no likely candidate to succeed them.
If you are going to expand your business by buying a competitor, be careful. Make sure you are not buying problems that will complicate your life and ruin your business position in the marketplace. You could be buying more problems than profit. Instead, it may be in your best interest to hire the best employees you can, increase your sales force and grow your business internally. You won’t be saddled with debt or other problems that arise when buying a business.
Owning and operating a bigger company is not always necessarily better for your overall business plans.
- Why am I in business?
- What is my motivation to own a business of a certain annual volume?
- Do I just want to be bigger thinking that is how best to compete in the marketplace?
- Or am I in business to make a profit and to run the very best business possible?
- More overhead
- More debt
- More people to manage
- More to juggle on your business calendar every day
- And… this can’t be emphasized enough, more problems.
Bigger can get out-of-control if not managed properly.
That’s often what is witnessed when reading the daily business headlines. Instead of profits, the business scrambles to survive and may eventually become a shell of its former self; if survive at all.
Don’t put yourself or your business in this position. Think before you jump in feet first to an expanded business venture. Be as certain as you can be it will be worthwhile and rewarding to go bigger. Know your facts. Know what you are capable of handling.
Being in business as a CEO, president or business owner is an amazing adventure, isn’t it? Remember when you thought about taking those first steps of going into business? Then you took the next step and started planning what your business would actually be like? Then one day, you decided to take the big step and go officially into business. Looking back, you thought you knew what you were getting into. You thought you knew what to expect but looking back, you really didn’t know what was going to happen every day.
So many factors are involved in your daily business outcomes. Business is something you just have to experience. Fortunately, your business grew and developed. You are a success! Yet you keep thinking about getting bigger and bigger and bigger with more sales, more volume, more people – possibly more locations or even buying or merging with another company. But let’s stop for a moment and think further about this idea of the company getting bigger.
Take a step back and make certain you have:
- Absorbed the business you currently have
- The structure is in place to operate the company
- An overall, yet detailed, plan is in place that is reviewed and updated often
- The right people are working with you
- Everyone understands exactly what they need to do.
If you don’t have that overview of your company now then as the organization grows bigger and bigger and bigger, you’re going to have problems. Problems you wish you didn’t have that are unique to your business situation.
You can’t just add business because you want to. You need to understand specifically:
- Why you’re adding business
- How you’re going to handle all the new business
- Where the cash flow is going to come from – This is a factor business people often don’t take fully into account. Instead, grand business plans can potentially go bust!
Yes, there has to be MORE business coming in to grow a company bigger. But there also has to be MORE profit. You may have the business rolling in but do you have the money coming in to pay the bills and to meet payroll? Do you have adequate funds to buy what is necessary for the company to operate at peak efficiency as it grows? If you don’t then you won’t be in business growth mode for long. Using every dollar of credit won’t help the situation either. In fact, it may dig the hole deeper for your business. The last thing you need is:
- Not enough business profit
- Not enough adequate cash flow
- A heavy debt burden.
Your business may collapse under its weight and the stress put upon you as CEO, president or business owner.
Remember: In business, bigger isn’t always better.
It’s not always the answer to creating a stronger, more competitive business.
For example, if you have a thriving business with annual revenues of one million – two million – three million dollars – five million dollars or many more millions of dollars, you may decide to go for an even bigger business. Nothing wrong with that.
- Do I have the infrastructure in place?
- Am I ready – is the company ready – to get bigger?
- Can we handle the increase in business?
- How will the company maintain its reputation?
- Will our customers still be happy – or will they not like the changes to the business?
- What about cash? Is there enough cash on hand? If not, how can a bigger business successfully be built?
Consider this approach to your business becoming bigger by analyzing and asking yourself:
- How can I improve upon that one – two – three or five million dollars the company is currently doing?
- How can I get, for example, a 5% improvement in MORE productivity?
- How can I reduce my expenses by, for example, 5%?
If you grow your business by 5% and you are doing, for example, one million dollars a year, you will take in an extra $100,000 a year with very little added stress. If you are currently doing more volume, just do the simple math to determine the potential dollar increase to your business.
I am fully supportive of growing a business; having a bigger business with more influence in your industry and with customers. It’s a dream of nearly every CEO, president and business owner to operate a big business. The key to success is to do so with well thought, calculated steps in the right direction. Be smart about how the business gets bigger. Make certain you can handle it. Otherwise, you could lose everything.
To your success!
Business expert and strategist, Howard Lewinter, guides – focuses – advises CEOs, presidents and business owners throughout the United States to MORE success – MORE profit – less stress. Business problems? Business issues? Get MORE from your business! Talk business with Howard: 888-738-1855.