This New Year, Accelerate Your Business With These Three Steps
It’s that time of year. As we tear down our decorations and bid farewell to another holiday season, we usher in New Year’s Day, and all of the resolutions that come with it. This is your time to start anew and plan ahead for the year to come. In life, you probably have a good idea of where you’d like to see yourself—maybe you’d like to save money this year, or exercise more, or maybe even travel more. But in business, what goals have you set? When it comes to your 2016 initiatives, consider preparing your organization for the next big thing—starting with putting the right strategy in place.
When it comes to the strategic initiatives of savvy organizations, there are often three crucial building blocks needed to solidify a strong foundation. The first two elements of a successful business include franchise development (new-to-industry growth) and operation support aimed at increasing the sales at existing locations (organic growth). But the third, very important component for a franchisor is sometimes a little less understood and a little more complicated—developing a mergers and acquisitions (M&A) strategy.
Strategic M&A development forces each organization to evaluate its market, address its individual needs in key areas and assess how best to stay competitive in dynamic business environments. Ultimately, the outputs from this strategic focus can yield significant value.
But when companies begin to consider the implementation of an M&A strategy, the tasks ahead can be intimidating. Like any other niche field, there is a sea of books, papers, consultants and other experts available that one should sift through when seeking guidance and ensuring success. Over the years, I’ve found that the process of strategic M&A development can be stripped down and simplified into key categories that every organization must focus on. Here are my three basic principles that can be applied to any marketplace.
Determine the “Why”
It’s a matter of human nature to want to know—and do—what others are doing, but that doesn’t mean it’s OK to simply jump into something. It’s important to first define a purpose—the “why.” In the M&A space, that purpose should be focused on providing an organization with the ability to be more relevant to its stakeholders—its customers, employees, investors, vendors and communities. Companies are always looking to acquire competing organizations to increase market share while, at the same time, decreasing competitive market share. And making your business relevant can often lead to expansion—a surefire way to put more pins on the map and to get you noticed.
For other organizations, increasing aptitudes forms a different kind of purpose for engaging in M&A—in other words, the “buy it” versus “build it” approach. These enterprises might seek out the latest technological advances or trends in their industries and choose to acquire them rather than developing competing competencies in house. This methodology boils down to choosing an approach of speed to market or spend control.
The concept of operational scale is another major M&A driver—I often refer to this approach as the “1 + 1 = 3” transaction. The merger of two organizations operating within a similar space can not only bring noticeable growth, but it also boosts operational efficiencies and buying power that each organization cannot achieve by operating on its own.
Determine the “Who”
It’s unavoidable—companies interested in acquiring another business, or being acquired themselves, need to sync up their vision, mission and culture with the other organization. Evaluating a company’s financial standing is—and always will be—a huge factor, but ultimately if the cultures fail to align, integration can spark some trouble. When integration becomes marked by roadblocks, the ability of the transaction to deliver the expected outcomes becomes nearly unreachable. For this reason, determining the “how” is one of the most important exercises when considering who to acquire and by whom to be acquired. Our first inclination is always to look at the hard data—such as the financials, as I mentioned earlier—to determine the best organization with which to complete a transaction. But in the M&A landscape, what looks good on paper can be lacking in the cultural alignment needed to make success a foreseeable goal and a reality.
Determine the “How”
When it comes to actually making the transaction, things can get a little complicated. Getting the job done comes down to having the proper resources in place—every company needs human capital to complete transactions in an effective way. When expertise is lacking or missing internally, seek out third-party resources to provide the guidance needed to complete a competent and appropriate due diligence process.
Ultimately, transactions require capital investment. And with capital investment comes the expectation of returns—or in other words, the win. If the other three factors listed above are aligned and in focus, the return on investment expectations become much more realistic.
Mergers and acquisitions get easier and easier after each one you complete. It’s like riding a bike: When you do it once, you have the basics down—all that’s left to do is refine, improve and excel at the process. With the right team and advisers set up; with your due diligence process down to a science; and with your marketing, HR, sales and other departments established, you now have the time, energy and resources to find more acquisitions and accelerate business growth at boundless levels.
By R. Scott Sutton
Vice President of Safeguard Acquisitions Inc./Vice President of Franchise Development for Safeguard Franchise Sales
About Safeguard
For more than 59 years, Safeguard, through its network of distributors, has been providing the products, services and expertise needed by business owners to help their businesses grow. Through innovation, dedication and a commitment to quality and integrity, Safeguard has transformed itself from a small check printing business to a fully diversified business solutions enterprise. To learn more about Safeguard, visit www.safeguardbam.com, or follow the company on Twitter at www.twitter.com/safeguardgrowth.
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