Growth – Tortoise v Hare – the original dilemma
Aesop’s well-known fable doesn’t immediately spring to mind when you think of growing your business but the two methods of growth, organic and acquisitional, certainly exhibit the traits that is detailed in the text.
Organic – the Tortoise
Slow and steady, typically a longer-term strategy but one which has its foundations very much in a stable environment of a successful business that is expanding on its already honed company structure and ideals.
- generally implemented by cross selling to an existing customer base
- serviced by existing systems and employees (including company culture)
- built on company reputation and experience, leading to acquisition of new customers or leading to existing customers buying more
- generally low-cost method
- controlled growth
- potential missing out on acquiring experience/knowledge from external sources
Essentially a low risk/low return growth policy
Acquisition – the Hare
Quicker and riskier, typically a much shorter-term strategy. Risk of cross-cultural clashes and acquisition of some disruptive elements but opens a vast array of opportunities
- potential synergies and therefore cost savings
- ability to choose the target company
- can reduce barriers to entry into a new market/sector
- Acquisition of new customers/knowledge base
- Generally, needs greater level of funding which attracts cosy
- Can have negative impact if job losses ensue due to overlaps
- Take the good with the bad i.e. warts and all on the acquisition
Essentially a high risk/high return growth policy
In reality a strategy doesn’t have to be as black and white as organic growth versus acquisition and the best strategies adopted normally take a little from column A and a little from column B. What is overriding in all the most successful growth strategies (which we have experienced via our own growth path or when dealing/assisting clients) is that structure is everything and preparing a growth strategy plan/document is imperative. Some of the issues associated with integration of companies can be ironed out in the planning stage and especially through solid due diligence, can some of the “warts” be identified pre acquisition.
As always, any strategy is only as good as the attention it is given and its therefore imperative to consult advisors/key management when setting a growth strategy, as ultimately team buy in will play a huge part in its success.
As a reminder we provide all the services needed to explore business strategy and as we have adopted a number of these ourselves, we have a high degree of practical knowledge on what works and what doesn’t. So if you are looking for assisting in devising or implementing a strategy contact us and work with an advisor that is well equipped to provide the advice needed to give the strategy every chance to work.