How to grow your business geometrically (not linearly/organically)?

Business Growth 27th June 2019 No Comments

How to grow your business geometrically (not linearly/organically)?

Growing a business organically from scratch may be time-consuming. How long does it take to achieve a turnover of, say £5mln PA, or 20mln PA? Many years, if ever, doesn’t it? The many years during which you will have challenges, problems, downturns, etc.

The other way, quicker way, and in my opinion, easier way, is growing the business through mergers and acquisitions or consolidation. I call it a geometrical growth. You may think that it is only available for large corporations? No, in fact, it is possible for any size business, for any business owner who has the need and willingness to achieve more. Below you can find a short description of what the above terms mean.

Merger – two or more corporations combine into a single corporation, and the resulting entity is one of the constituent corporations (corporation A merges into corporation B, with corporation B as the surviving corporation).

Acquisition – the acquiring company obtains the majority stake in the acquired firm, which does not change its name or alter its legal structure (corporation A takes over corporation B and establishes itself as the new owner of B).

Consolidation – two or more corporations combine into a single corporation, and the resulting entity is a new corporation (corporation A and corporation B combine into new corporation C).

Why M&A or consolidation create value? Combining firms can reduce costs and/or increase revenues through a variety of channels, such as eliminating overlap, spreading fixed costs over a larger production and sales volume, reducing staff costs and supplier costs, upselling, reducing competition thus increasing combined profits at the expense of customers, etc. It will also increase the enterprise value of your business in that the revenue of a new corporation is higher, which simply means your business will be worth more.

If you wanted to discuss with me any opportunity in your business regarding the geometrical growth, please get in touch with me here.

Marek Niedzwiedz