Greetings. If you’re reading this, I want to ask you – do you have a business plan? If the answer is yes, congratulations – you’ve taken the first step towards making your company grow and you should keep reading for concrete ideas on how to do that. If you don’t have a business plan, I, Jeremy Powers, am hoping that this post will inspire you to write one which includes growth strategies outlined in this post.
If you’re one of the people who have a business plan or have written one in the past, you know that business vision and growth strategy are an essential part of any good plan that you want to pitch to investors and use in your work. If this is your first time preparing a business plan, here’s a tip – writing it will help you get at least a rough idea about where you want to take your company. I’ve taken the liberty of creating a list of the best (in my opinion) business expansion methods and provided an evaluation of each of them that includes their advantages and drawbacks.
The simplest strategy, and the one with the least risks, is organic growth, i.e. focusing all the efforts into increasing income and revenues without any additional streams. You would basically be selling your products or services to clients and do nothing else in terms of business growth and expansion. Good organic growth can be achieved by extensive market research and exploring new target audiences in order to find potential new clients. The advantage of this method is the low amount of risk associated with it, as I said earlier. The main drawback is a low amount of potential new income streams and little room for thinking outside the box, which isn’t very feasible in today’s commercial world. However, if you’re creating a start-up, organic growth could be a good method for you at the beginning.
Franchising is a route you should consider if you have some previous experience with business plans and running a company, and are looking to expand your business quickly as well as tap into the new markets. Franchising can help you establish your brand in these new markets and increase your goodwill across them. However, the main problem with franchising is that you won’t be the sole beneficiary of the franchises – you would have to share the profits with a franchisee. There are also risks associated with unfortunate franchising partnerships that you might have to bear. Make sure, therefore, that you invest in legal services that can perform due diligence on your potential franchisee and draft a franchising agreement that protects you in case of any unfortunate circumstances.
Mergers and Acquisitions
You’ve probably heard of something called “mergers and acquisitions”. While legal mergers aren’t technically recognised by the English courts, so I’m just going to cover it briefly in the next section, acquisitions could be a good alternative to franchising. In case of an acquisition, you (the Buyer) would be purchasing another company, usually smaller (the Subject) from a holding company (the Seller). This is a complex transaction and I don’t recommend that you try it unless you’ve got some years of experience under your belt and a good legal team that can oversee the transaction from start to end. You can purchase the Subject via an auction sale or a private sale. When you purchase a company, you should keep in mind that it’s made up of several assets – usually you would be buying shares, if it’s a company limited by shares like most UK companies, but you can also buy premises, plant and machinery, client lists, data, and many other assets. Therefore, your legal team needs to perform extensive due diligence of the Subject and the Seller prior to you making any decisions. Acquiring a company is quite expensive and you need to either ensure that you have enough cash within your company or personal assets or take out a bank loan. The advantage of acquisitions is that you have a higher chance of being granted a loan because you’re a company that performs well and not a newly launched business.
Legal mergers are literally what they say they are – mergers of two companies via a legal document and a series of transactions. I don’t recommend this option, as I said earlier, because English law, unlike US law, doesn’t really recognise legal mergers as such. However, it can be a right option for you if, for example, your business partner is retiring or your lease is ending. Be advised that merging two companies is almost never smooth sailing, particularly at the start, and you can expect cultural clashes between staff members of two former single players. Make sure that you have a good legal team that can oversee the process and smooth things over if need be.
Irrespective of the growth methods that you select for your business at various stages of its development, you should take the time to consider each of them before committing to anything. A well-written business plan would be able to help you make a decision about which method is best for your company at that moment. Making that decision carefully is vital when you’re securing the funding for your business, as well as during the day-by-day running of your company.
When making the decision, you should ask yourself – what am I hoping to accomplish? Where do I want to take my business and how quickly? To answer these questions, you need to go back to the moment when you first got the idea and launched the company. What did you hope to accomplish then? Use these hopes and dreams when choosing a growth strategy.