Acquisitions as an engine for growth

Would you like to double the size of your business, both in revenues and profits?

If you stick to organic growth, with some exceptions, you are likely to be looking at growth rates of less than 10% every year.

Let’s say you can grow every year for the next 10 years at 8%. That will double your size after 10 years.

When considering acquisition strategies I tell my clients to set size criteria of between 10% and 30% of their existing business. Much bigger than 30% will be very difficult to integrate successfully and of course the bigger the deal the bigger the cash risk.

So if you could acquire a business every year that was 30% of your size, you’d double the business in about 3 years. That’s probably not practical and I would not recommend that as a strategy!

You might, however, buy a business in year one and add 30%, then in year two consolidate that and grow at 8%.

By the end of that second year, you’d be at the same size as if you had grown organically for 5 years.

You’d probably be ready to make another acquisition and you’d be close to doubling your size after 4 years.

This is all just adding the numbers up – the magic of compounding growth.

Now consider the business you might buy where you know you can do better than the existing owners. How much better? Perhaps 20%? Do you know a business like that?

If you could do that, by the end of the second year your business would be nearly 1 ? times the size it is now.

Why aren’t you thinking about acquisitions? Get started with a workshop to explore the possibilities.