Wednesday, January 12, 2011

Peak at the right time and you win a championship; even if your team wasn't the best over the whole season. Buy another business at the right time and your sales, profits and exit options grow exponentially. Here are 10 reasons why small and mid-sized companies should consider growing by acquisition.

1. To expand your customer base and your product base. Sell your products to the acquisition's customers and their products to your customers. All without adding to your sales force.
2. To get great employees who are not in the job market. Because you give more opportunities they'll want to stay and help you grow.
3. Access to vendors who might not consider you as a source to sell their products.
4. Enlarge your geographic footprint without the hassle and cost of starting a branch office and having to steal customers from competitors. This may also get you a desired location that otherwise is unavailable.
5. Eliminate a competitor so you can dominate a market or a niche.
6. Spread your overhead over a much larger sales base so much of the added gross profit goes right to the bottom line.
7. Qualify for volume discounts with suppliers now that you're buying more from them.
8. Get needed equipment that comes with nice things like customers, employees, cash flow and market share.
9. Demonstrate to future buyers that your company can successfully absorb another firm with out a loss of profits or market share. This is huge to larger firms and private equity groups.
10. Scaling the business gives you more options and a higher selling multiple when it's time for you to exit. All other things being equal, larger companies sell for a higher multiple than small ones.

About John Martinka?Over the last 15 years Mr. Martinka has written over 200 articles, authored a workbook, assisted on over 100 buy-sell transactions and spoken to thousands of people on the subjects of buying, selling or growing small to mid-sized businesses. Some of his related articles and speeches include:

• The Seven Deadly Sins of Business Buying

• Non-Financial Factors Influence a Company's Value

• How to Sell Your Business for What you Thought When Other People Can't

• Growth by Acquisition is the Fastest, Least Painful Way to Grow

• An ACTION Plan to Sell Your Business

Mr. Martinka can be reached at 425-576-1814 or at john@johnmartinka.com. Please follow him on his website at www.partneroncall.com/johnmartinka, his blog www.johnmartinka.com, and via Twitter at http://twitter.com/johnmartinka He is available to speak to and write for associations and media.