How Small and Mid-Sized Businesses Can Grow Long-Term

Most business owners of small to mid-sized businesses want to grow their businesses, sometimes to be the force in their industry, and other times as part of an eventual exit strategy. If it is the former, being a force in the industry allows the business to have a product that others do not, have a different sales platform that others do not, to make more money than the competition and grow their business because of that additional money. If it involves a future exit strategy, the business owner wants to maximize the amount that they will take away from the closing table at the time of the sale of the business.

For some, growth is accomplished by buying other businesses who may do exactly what the purchaser’s business already manufactures or sells, or the selling business may be an expansion into another area that is complementary to the purchaser’s business’ existing products. This can be a good way of growth for businesses, if certain considerations are taken into account, such as:

• Is the culture of the business that may be purchased the same or at least similar to that of the purchasing entity? This is one of the things that most companies who are purchasing fail to look at. If the culture of the selling entity is that they do not have great service, or they don’t treat their employees well, or they are a stagnant force in their industry, these can adversely impact the purchasing entity.

If employees are to be hired by the purchaser, instead of a growth mode, there may be a negativity that comes in the door with that new business. The selling business may have treated their customers badly, so they had to sell at lower prices to maintain the business. All these issues are inherent in the culture of the business which may affect the reputation of the purchaser and their existing book of business. Customers may wonder—who is this company and what do they stand for? Will they treat me well by shipping product that is satisfactory on a timely basis, or will I get the run around from their people? Don’t overlook this point, as many a purchase has failed to meld because of the culture issue.

• What is the pricing that the entity that seller has used? Does that company have the reputation of selling at bottom of the barrel prices, or do they price in the middle of the pack or better?
• Can the purchasing business easily compete to grow their own book of business, even competing to get the business of the selling entity without paying for the book of business? Or is purchasing the business the only way to acquire that part of the business?
• Is the purchasing entity really trying to acquire star performers from the selling business? Is that the only way that the purchaser can bring the star performers on board?

Regardless of whether a business buys an additional book of business to grow, or decides to grow organically, the business must prepare itself for that growth internally in the business. This means that each of the principal managers are totally aware of and accepting of and excited by the vision of the company, that they are equipped to handle and manage additional volume and additional employees, that they are trained in how to transmit the vision to new employees who come on board. The business also wants to make sure that they have physical capacity to take on the additional volume.

In addition, the bank line of credit may need to be enlarged on a regular basis to accommodate the growth. All of these items need to be in place prior to the purchase of the additional book of business or even growing organically. These are the basics that must be part of any growth platform.

Don’t forget the basics in your excitement about growing your business! Get guidance and help from someone who is experienced in these matters and can see you through these necessary business transitions and legal transactions so you can make sure you have covered your basis and will avoid any unnecessary problems.

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Denice Gierach

Gierach Law Firm

Denice Gierach is an attorney, CPA, Northwestern University business master's graduate, and has owned several businesses from real estate to manufacturing. She is the lead attorney at Gierach Law Firm in the Chicago area. With more than 30 years of experience, she has been a respected and sought-after resource for businesses looking to grow, sell, solve problems, and succeed long term. Her insights across business areas gives a fuller lens to business issues and solutions, and helps businesses grow and succeed with less time spent on legal issues and other time-consuming problems.

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