3 Reasons For SMEs To Consider Acquisition

The idea that in a single signature, you can double or triple or quadruple the value of your business in comparison to decades of building a business is, I think, the number one reason for SMEs to consider acquisition versus organic, but of course you never stop with organic, but it’s just looking at that as an alternative to just having your blinkers on and only looking at organic, which is where most SMEs are, right? So this is about pulling off the blinkers.

Add more clients, achieve economies of Scale. You’re buying a business so you’re adding revenue but you’re not just adding revenue. You have the opportunity for increasing profit in both the acquired entity and your entity. Not just through economies of scale, which is what I’m talking about here. I.e. you’re bigger so you can negotiate better buying, supply costs, but actually what number 2 should really say is that it’s about increasing profit because you can pull out expenses for duplicate items. Duplicated admin, duplicated marketing, etc.. There’s just so much more that you can do when you’re putting these parts together than what you can do with the one entity.

I know this might sound really bad mathematically, but in a way, 1 + 1 = 4, not 2.

Add more services and products to sell to existing clients. Now, I guess the first starting point is that you have the opportunity to use acquisition to provide a more complete service or solution to your clients. That’s the first thing, but then think about it. If you’ve got two separate client bases that have something that they’re crossing over in, you have the opportunity to cross-sell and upsell to each other. Not only are you getting the benefit of the profits in the business that you’re acquiring and the uplift because now you’ve got a higher value and so therefore a higher multiple and then rip out the profits, the expenses, so you’ve got a higher profit in both, you also now have this ability to cross-sell products and services to each of the other client bases if what you’re acquiring is an extension to your current products and services.

Watch the full webinar at https://insp.red/acquireabusinessweb

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