Secret to Increasing Your Business’s Revenue
“It can’t be done”, we hear you say.
Well, yes, it can and the secret is not in your own business (although that is a big part of it) but in thinking outside of the square and looking at “other businesses”. That’s right, even as a small to medium enterprise (SME), where you have organically grown your business, often the secret to achieving financial and personal freedom is to go to the next level through an acquisition strategy.
“It can’t be done”, we hear you say.
In fact, for many SME’s yes it can. Let’s think about; “why” you would even contemplate this strategy? Firstly, let’s look at some of the reasons why organic growth is an inhibitor to many small business owners never actually achieving the financial and personal freedom they rightly strive for.
- Whether you bought or started your small business, many experience the common inhibitor of a lack of critical mass. By this we mean; you have worked so hard to get the business to a point where you have customers paying and valuing your product. But to make a decent living, you work endless hours doing many of the key functions of the business yourself because revenue is not yet at a point where you can afford to hire a specialist marketing manager, an expert operations manager or a skilled financial controller. You make do with what you have and that in itself inhibits your growth. There is only so much you can do.
- Your time is spent working “in” the business. There is very little time to think strategically, to sit back and really consider how to get to the next level. You are busy “doing” as opposed to leading the growth of the business
- In operating at the revenue level that you are achieving, there is very little extra profits or capital to invest in going to the next level, further compounding your situation.
In short, you hit a ceiling that becomes a revolving cycle like riding a bike two mornings a week and hoping that one day you will be ready for the Tour de France.
The key breakthroughs that occur when an SME acquires another business is that your revenue, assuming you buy another business similar in revenue to yours, literally doubles. So, how does this help?
Firstly, the doubling up of your business revenue gives you greater critical mass. You have a larger client base, now you can bundle products (yours AND the business you bought), potentially increasing sales of your current business and the business you bought. Secondly, depending on the acquired business, you may be in a position that due to your volumes, you can negotiate better pricing with your suppliers, reducing your cost of goods ratio. And thirdly, there is likely to be a duplication of expenses. Some positions may be doubled up (i.e. just taking out the other businesses owners drawings/wages can be significant cost savings), two premises can become one and a half (in size and cost), marketing costs centralised and the list goes on.
The result can be that the combined revenue, reduced cost of goods and economies of scale in your expenses means an increased combined net profit between the two businesses (which can be substantial). Savings can be shifted into then acquiring desired internal skills such as a marketing manager, operations manager and/or a financial controller and that in turn produces renewed freedom for you to now focus more time into truly focusing on strategic growth.
If this makes sense to you, it just may be one of those “ah huh” moments which is where we often see business owners growing with a more specific end in mind; having clarity around the strategy even though the “how to” may still be unclear.
Read more in our e-book “5 Exponential Growth Strategies for SME’s” where a great case study of an SME who applied an acquisition strategy to achieve the above is detailed outlining their challenges, how they did it and the key things that were learnt. And of course, if you recognise your frustration about going to the next level and are unsure about what you can do ……….. call us at Advivo on 07 3226 1800 and we can talk about your specific options.