Growth, within the framework of a business environment, is generally good. It sure beats a business becoming stale, which may lead to a decrease in sales and revenue. But what is the best growth strategy for your company? That is the dilemma facing many businesses today.
Perhaps your company has plateaued, revenues have stalled, and you have wrung out as much cost as you can. Or maybe you have successfully completed a three-year plan to grow the business and now you are looking to move it to the next stage. Where do you go from here… and how?
That is the advantage of having an equity partner like Boyne Capital. For nearly two decades we have supported our portfolio companies in devising organic growth strategies, as well as in acquiring the right match to take the company to the next revenue level. Working alongside management from strategy development through implementation, Boyne advises and assists its portfolio companies in increasing revenue and maximizing value. Here are some things we recommend you consider in determining which growth path is best.
Organic Growth: Increasing Revenue from Within
Companies looking to go it alone and rely on internal resources to increase revenue must develop a strategic plan that captures a true understanding of the company’s capabilities and provides a road map for reaching the revenue goal they’ve set.
A case in point is Boyne portfolio company B&W Quality Growers. After assisting management in a buyout to acquire the company from the founding family, Boyne advised on an organic growth strategy (no pun intended) that improved operations and increased revenue significantly.
Organic growth allows companies to scale over time, retaining control of the pace and the overall impact on the organization’s business. It is a slower, more cautious approach to increasing sales and revenue.
There are several approaches to growing a business organically:
All of these approaches will strain internal resources and require that you re-invest earnings to fuel growth, which underscores the importance of having an equity investment partner who can provide the capital and expertise to fund and guide the process.
So why doesn’t every business choose organic growth over growth by acquisition? Three key factors weigh on this decision:
Growth through Acquisition: Building from the Outside In
As a pathway to the ongoing viability and success of the enterprise, many businesses choose a growth-through-acquisition strategy. Acquiring another company can be the quickest way to shore up weaknesses, enhance a company’s internal capabilities, expand distribution, grow sales and increase revenue.
At the core, acquisitions are about “Products, People and Pipelines.” And therein lie the advantages of the acquisition route to increased revenues:
There are four basic types of acquisition deals, driven by:
At Boyne Capital, over the years we have participated in nearly 30 acquisitions across our 25 portfolio companies, putting our expertise and capital to work to help them strengthen their market position and assure long-term business growth. As an example, working with portfolio company, Fulcrum IT Services, Boyne managed the acquisition of several technology company add-ons that provided new service capabilities and additional resources which have allowed Fulcrum to grow significantly.
In the process of these deals, we have identified some pitfalls and warning signs. Any company considering the acquisition approach must be cautious of the following:
Growth Is Good… Strategic Growth Is Better
Regardless of the path you choose, organic growth or acquisition, the keys to success are a clear understanding of where you are as a business and where you want to go, and devising a sound strategy to get you there. Having an equity partner with the resources and experience who will work with you to grow your business will assure a more successful outcome.
Organic growth allows you to control the pace and build a solid foundation for the future. The only risks are the possibility of taking your eye off the ball to the detriment of current business and not growing fast enough to keep up with ever-changing market conditions.
In contrast, a targeted acquisition can speed up your growth rate, combining the products and distribution of an established company – and its revenues – with your own. Be sure you have a clear purpose in mind for this acquisition, a good fit with the target business and a concise integration plan to make the assimilation as smooth as possible. An equity partner like Boyne Capital will bring access to capital, potential target companies and the experience in managing acquisition deals that will help make the process flow smoothly.
Which route is best for you really depends on the factors driving you to grow your business.
For more on the subject of business acquisitions, we recommend reading “Growth through Acquisition – Targeting the Right M&A Candidate,” from Boyne Capital’s series of thought-leadership articles.