Why Buying a Company May Be a Smart Move to Create Momentum
When determining new growth and direction, there are times when it is best to start de novo, or from scratch, and times it is actually better to go out and buy a company. Buying companies through an acquisition process to layer onto your existing business enterprise can sometimes be a great strategy. Here are a few reasons and ways that it might.
If your current team does not have the capability or capacity to add the business or product lines that you seek, or perhaps your staff is challenged in the concept of change (either unwilling or unable), it may be a better move to acquire a company that has those lines or products already.
New acquisitions provide opportunities not only to get new service and product lines but also opportunities to obtain new and great talent for your firm. New employees can sometimes equal super talent. They are immediately accretive to your financials, meaning that when buying a company operating in a profitable fashion, you get some level of consolidation in overhead, are immediately adding the sales and gross profit dollars, and in turn, net profit dollars to your bottom line.
One of the techniques for growth is being able to use financial leverage and borrowing. It can be difficult to convince a financial institution to establish some sort of credit line for the purpose of staffing up; however, it can be much easier when acquiring another company, particularly one that has hard assets, to finance that acquisition and spread out the capital cost of over a period of time.
I would encourage you, in your growth strategy, to look at both internal de novo and acquiring companies that you might layer on to provide a competitive advantage to your firm.
