Growth of any kind is always welcome for businesses, but the same growth strategy doesn’t necessarily translate across multiple different companies. There are several effective methods of expanding your business, with each being categorised as either organic or inorganic.
Inorganic growth is achieved by the taking over of another company. This could be via either a business acquisition or a merger with a separate business. As you might expect, it can bring about big results relatively quickly, but can be expensive to implement.
On the other hand, organic growth tends to be easier to implement and more insular in its approach, but may only bring about small growth to begin with. You’ll find that you probably implement several organic growth strategies in your day-to-day operations already.
This is because many of them equate to good, solid business practices such as streamlining your processes and diversifying your offerings to reduce risk. Directors should always be looking for incremental ways that they can improve their business, and as such, these can lead to overall growth over time.
While the streamlining of your business processes may only yield a modest saving, other organic growth methods, such as the introduction of a new product line, can drive expansion much quicker. A successful new product or service has the potential to transform a company’s fortunes, but this strategy isn’t without risk. Creating the infrastructure to sell or manufacture a new product line can cost a substantial amount. Even if you’re only offering a new service instead, the marketing costs to make people aware of it can create a serious dent in your coffers.
Any new product or service you plan to offer should be subject to the same intensive research beforehand that you’d afford an entire new business. You’ll not only need to be sure that there’s a large enough market for your new line, but you’ll also have to figure out if you can provide it for a price that’s competitive. One of the main risks here is that your business ends up encumbered with a warehouse full of products that you can’t sell.
Inorganic growth strategies such as business acquisitions may sound a lot riskier owing to the potential sums involved, but can actually be safer in some aspects. Launching a new product line, opening a new premises, or even just increasing your prices can put your business in a previously unknown space. Even with the proper due diligence performed, there is little way to know just how successful each method will be.
This is where the acquisition of another business makes a lot of sense. As part of the buying procedure, you should be able to look at exactly how your potential purchase is doing right now. Assuming a historically steady turnover, you could buy the company, change absolutely nothing, and still expect to receive the same revenue from it as reported.
This can often be a much safer option than opening your own premises near to a rival business. Instead of battling over the same customer base and settling with a percentage, you can remove your competitor from the equation entirely, and dominate the market.
It pays not to be dismissive of inorganic growth strategies as a riskier option. Although a business acquisition can potentially cost more to facilitate than some organic growth methods, it’s often the most sensible option for risk-averse directors.
Although there are multiple legalities and complexities involved in purchasing a business, you can receive expert guidance throughout the process. Forbes Burton have a team of specialist acquisition advisers that are able to help any directors interested in buying another company.
The friendly team of experts at Forbes Burton can also advise on the best ways to achieve organic growth if a business purchase isn’t right for your company. They offer a free consultation with no obligation to help business owners to determine the best route for their companies to take.
