Is there an optimal size to grow your Business?
In order to answer this question, you have to examine all of the components it takes to grow a business.
Let’s outline some of them here:
How mature is your business- in other words do you have the infrastructure in place to grow successfully.
Do you have the cash to fund business growth?
Can you raise the money to fund your growth?
Is your current business profitable?
Is there market demand for your product?
Do you know who your competition is and what their plans are?
Are your products / services innovative enough to break through in this era of technological innovation?
Do you have a growth plan in place that looks out 10 years?
Is the right staff and management team in place to help you grow?
Do you have the energy to implement a growth plan?
Are you the right leader to plot and implement the growth plan? If not, is there someone else on your team that can lead the charge?
Do you have the skills to plan growth, or could you use the help of a consultant with industry experience.
Do you know how much you are growing now and how many clients you are losing?
Do you know why you are losing clients?
Are there systems you need to improve before you grow?
Grow Organically
Businesses can grow as fast as their existing infrastructure allows. They can grow organically using their marketing, innovation and reputation as levers to help them grow. It just takes focus, drive and cash to grow. This growth can be fast or slow and depends on your continuous marketing.
Buy a company
One can raise money to purchase other companies that are already in the marketplace. In all industries there is constant business ownership churn, limited only by the economic and age cycles of the owners. Owners can age due to poor health, a family member’s health issues, the desire of key decision makers to try something else or for a myriad of other personal reasons.
As a business Buyer the most important think you can do is network in your industry and be a leader in your industry. Sellers will recognize your success and assume you have the resources to buy their company, and maybe you do.
Merge Your company
You can merge with another company and be the surviving operator of the merged companies. Sometimes a small company can merge with a bigger one and accelerate their growth. Merging is much like purchasing.
Cash Management
If you are dreaming of growth, cash management is critical. You need a skilled CFO /Controller that also has a good understanding of finance and can help you recapitalize your company to find the money to pay for your growth. Your eyes need to be focused on the numbers.
Beware not to grow too fast. Constant change burns out the department leadership and your experienced trusted staff, and you lose critical corporate / institutional memory that make your company great to begin with.
Develop a realistic growth plan, one that you can keep up with. As you grow organically and add existing companies under your umbrella you need to pace yourself. Seventy to Ninety percent of mergers fail. They fail because of poor planning, culture clashes, unrealistic expectations, the wrong objectives and poor communication. https://www.cloudficient.com/blog/unmasking-the-truth-how-many-mergers-and-acquisitions-fail; https://hbr.org/2020/03/dont-make-this-common-ma-mistake
Is there an optimal size to grow?
Be strategic in your decision making. Start small to learn the mechanics of buying and merging and then you can grow into larger purchases. The optimal size of growth is limited only by your energy and desire, and your ability to listen and implement quality controls to ensure successful growth.
Remember you have a ten-year plan. Take your time to reach your objectives. Don’t forget you need to raise money to pay for the purchase, the significant brokerage and attorney fees and budget for employee turnover and mistakes you may make. If you are fortunate, you may be able to harvest some merger efficiencies, much like you would as you gain in sales volume.
Clifford A. Hockley, CPM, CCIM, MBA
Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.
He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.
Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses. He can be reached at 503-267-1909, Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.
