Growing Your Business: Pros and Cons of Buy vs. Build– July 02, 2019 by Rob MacKinlay

Scaling a business isn’t easy whether you’re the founder, who “raised” the business from a fledgling entrepreneurial operation to an established company looking for growth opportunities, or the CEO charged with taking the company to the next level. Regardless of how you got here, the fact that you are considering how to best elevate your business means you are passionate about seeing revenue and profits soar for the benefit of your company and its employees.
 
Passion is a great start. You will need it to contend with a host of issues ahead, from labor and capital concerns to HR, payroll and managing monthly costs. Culture also will likely play a large role, going from a nimble, entrepreneurial environment to a size that likely will require an infrastructure and processes so the business can run efficiently, consistently and effectively on a larger scale.
 
Whether your goal is to branch into a new service or product line, new geography or new industry, below gives you the two most common scenarios for growth and a high-level perspective on what you will need to focus on to achieve it.

Buying a Company or Product Line

Let’s start with reality. While making an acquisition seems like a “quick fix,” breaking into a new market or expanding your capabilities via acquisition will put a strain on your company’s capital and take a dedicated team focused on tough areas such as process and technology integration. On the positive side, an acquisition will add revenue, people and capabilities to your team much quicker than building these areas organically.
 
One critical area often overlooked — that can make or break your acquisition — is having a plan to integrate culture. Regardless of how the numbers look during diligence, a successful deal is not possible, and definitely not sustainable, unless you and your team are equipped to properly integrate the people and culture from all sides. This is where many middle-market acquisitions fall down unexpectedly, wasting time, effort and money. Ideally, the company you acquire has leadership talent within it that bolsters your existing leadership team and helps to make the transition gradual in nature.
 
>> Read more on the importance of preparing for the full deal lifecycle in “Middle-Market M&A: The Secret to Realizing the Most from Your Deal.”

>> Read more on making a successful acquisition in “2 Critical Steps in Mastering an Acquisition.”

BYOB (Building Your Own Business)

Deciding to expand your business organically is a much different path to ideally the same place. You will need to hire talent or send existing talent from your company to the target geography or devote talent to a service line and build up from ground floor. You can clearly dictate your pace and the resources spent. In this scenario, not as much capital is potentially at stake upfront, as you are making a bit of a smaller bet on the business by incrementally making changes rather than buying everything you want outright. And your culture will likely remain status quo, taking away that critical roadblock to success. On the flip side, the obvious negative is time, especially if you are trying to be first to market for a particular product line or in a certain geography. The time it takes to build critical mass, reputation and brand is likely a much longer process than buying a company ready-made with presence and recognition in the market.

Motivate, Elevate, Delegate

Regardless of the path you choose, leadership will be critical throughout the growth of your organization. Think about how you will lead your employees to get on board and support your vision. Be aware of what you say, and sometimes more importantly what you don’t say, and the actions (or inaction) that back it up. Your leadership will impact others and the success of your goals.
 
Some lead from a strength-first position, while others may be more empathetic and approachable. Either way, find a way to show your employees you care, about the company’s growth and about their happiness and success. Make them feel like you are in this together. Empower your employees to create opportunity, make decisions (and mistakes) and lead! Whether that means starting a new office in a new market or leading the integration team for a new acquisition, engaging and empowering your people will produce a stronger company every time. An organization with great leadership throughout its ranks will be one of the most effective and competitive on the way to winning the battle of scaling and soaring!
 
 
Please contact a member of your service team, or contact Rob MacKinlay at rmackinlay@cohencpa.com for further discussion.
 
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.