***5 tips to consider when you’re planning to grow by acquisition: Ascent Partners Advertisement***

 Depending on who you listen to, print sales fell on average around 10-15% in 2009. There appears to be some green shoots in 2010, but it is still very patchy and inconsistent. So if you’re in the “norm”, and you want to stay in the game, you’re probably looking at ways to replace those lost sales, or reduce your expenses, or both … read more  

We also have four print-related businesses on the market now, and are soon to list another two-three. Contact us to list your business or register your interest in purchasing a business by visiting www.ascentpartners.com.au

There are basically two ways to grow sales – organic growth or growth by acquisition. Over the next five weeks I’ll focus on discussing what factors you need to consider if you’re looking at the second option, growth by acquisition. 

Growth by acquisition is certainly an enticingly quick way to grow sales, but do it is not without its pitfalls. Do you have the necessary skills to acquire, integrate and build a bigger business? If in doubt I hope the following tips will assist you:

TIP 1: Have an acquisition strategy that fits with your business plan

Buying a business can be a very fruitful exercise, but it is one that needs to be carefully planned and considered if it is to reap the maximum return.

There have been some great examples of successes, but probably just as many examples of dismal failures. I think most of those failures could have been avoided or minimised if there had been more thought and planning gone into them.

We all know we are in an industry that is consolidating. And there needs to more of it. It makes financial sense to run machinery at higher utilisation rates, to run from fewer locations, and to decrease the amount of duplication of resources and processes. 

Most buyers I see are focussed on growing their own sales. With last year’s downturn they have idle machinery and perhaps underutilised staff. Extra sales is seen as the panacea, and often it is.  

The first step in the planning process should be to look within, at your own organisation and the environment in which it operates. You should look at where it is now, and where the strengths, weaknesses, opportunities and threats are (SWOT analysis). And this, along with other elements in your business plan, should be used as the basis to plan an acquisition.  There is no point in purchasing a business if your won business is on a rocky foundation

By conducting a SWOT analysis, you should be able to develop some acquisition options – the acquisition doesn’t have to be another printer that looks just like you, (as more times than not, it is), it should be something that adds value to what you are doing, enable you to improve your own business, and help you in the achievement of your overall business objectives. 

Instead of just looking for “more offset sales”, perhaps you should also look at new markets or services that you could offer which could also aid your own client’s retention and growth.

An example of this is an offset printer buying a digital printer – here not only do they gain the additional sales from the seller, but also gain the digital IP, the machinery, and the potential to grow their own client base with digital sales.

So, I think it should be that you firstly take a good look in the mirror at your business. Do you really want more of the same? If you got more of the same, will this provide you with a sustainable business or will it just increase your sales for a short period, and then you still struggle to keep those sales.  Note, there is not much point in getting more of the same if your business continues on with the same shortfalls it has now. 

What falls out of the SWOT analysis may be also that you need to upgrade equipment, diversify into a new market, penetrate an existing market, obtain green credentials, gain IP and systems and process improvements (i.e. print management, on line ordering, warehousing), or obtain key personnel. Maybe it’s not an acquisition you need, it’s an affiliation. 

I’ve seen many an acquisition go wrong, because it was totally focussed on obtaining sales. Most of the attention was placed on getting the deal done, with scant regard to how the business would be integrated (the subject of a later discussion). Don’t me wrong sales are important, but they are certainly not the only thing that needs to be considered. 

Some key questions you need to ask before starting the search: 

•    What sort of business do I really need to buy? Does it fit within my overall plan? Will it build me a more sustainable and prosperous business? How will it affect my exit strategy?

•    How will I fund it? (the topic of next week’s discussion)

•    What effect will it have on my existing business? – ie sales, expenses, personnel, facilities, cash flow, brand etc

•    How do I go about searching for such a business? What skill sets am I / my team short of in searching for a business?

Buying a business can be absolutely the best decision you have ever made, but without careful planning and strategising it can also be the worst.

Next week I’ll talk about financing a business acquisition

Ascent Partners offers business appraisals, and the subsequent development of options as industry consultants.  Contact Richard Rasmussen on 0402 021 101, or visit our web site at www.ascentpartners.com.au


Ascent Partners – matching “market- ready” vendors to “qualified” purchasers.