Leap-Frog Growth: Which is the Strategy for You?
We’ve spoken about organic growth before and why it’s a great fit for SME’s.
Organic growth strategies focus on using the company’s own assets, energy and resources to expand the business as opposed to growing the company through a merger or acquisition strategy.
The thing to remember is organic growth is just one aspect of growing a business and tends to be linear and measured in percentages. For example, a sales and marketing strategy may be measured by a 20% increase in sales revenue.
But if you’re keen to grow your business at a faster rate, there are strategies available that will deliver leap-frog growth.
Leap-frog growth is stepped growth measured in multiples. If you’d like to grow your business 20 times faster, rather than by 20%, this approach could be the answer.
So what strategies do entrepreneurs who are looking for leap-frog growth implement?
Mergers, acquisitions or partnership strategies are the most common. Bear in mind that, while these can deliver huge growth, they all come with risks as well. The majority of mergers destroy value…so be sure to research, get expert advice on how best to go about and manage these strategies and make sure a strategy such as this works with your business model before taking any action. As a general principle, do not simply start with a “plan to grow through acquisition”…be sure to have a clear strategy for your business first and then, if appropriate, use acquisitions as one tool to help deliver on the strategic plan.
- Mergers & Acquisitions
A merger usually involves combining two companies into a single larger company and can deliver benefits including better economies.
Far more common are acquisitions, which take place when a stronger company purchases or takes over a smaller, sometimes weaker organisation. For example, Proctor & Gamble’s acquisition of Gillette. This can be hugely beneficial and is one of the strongest leap-frog growth strategies.
Why? Because of the sweeping benefits an acquisition can bring. Acquiring specialised skillsets, business intelligence and industry knowledge and IP helps improve your organisation’s own skill base. Being able to access funds, valuable assets, new development, better production or distribution facilities are often less expensive to buy than build.
Smart acquisitions can also save an entrepreneur a lot of time and money. For example, if you are wanting to expand your business in a certain geographical area, perhaps acquiring a company that already operates in that region is a smarter use of capital.
Accessing a wider customer base, diversification of products and services can also improve the long term prospects of your business. Reducing costs and overheads through shared administrative, financial and marketing budgets help lower costs. You can also increase purchasing power through an acquisition strategy and reduce competition by buying up new intellectual property, products or services.
- Partnerships
There is less risk involved in a business partnership strategy but can still provide leap-frog growth. There are a number of different types of business partnerships. Financial, marketing and expert partnerships are a great way to get a business moving forward in steps.
Examples of business partnerships include companies working together on a marketing strategy. For example, an airline and a hotel chain working with a cruise ship company to market fly/stay/cruise packages to customers. This is a smart use of marketing budgets and channelling all the customers from all three companies into one marketing funnel.
There is also a cash injection partnership that can help move a business from static to stratospheric quickly. Think about the television shows such as Shark Tank or The Dragon’s Den where companies offer up a percentage of ownership of their business in return for the expertise and networks of the ‘Sharks’ or ‘Dragons’. This sort of exposure to high levels of business acumen can catapult business growth.
One of the success stories from The Dragon’s Den was the Generating Company. Two of the Dragon’s took 40% of the business for an investment of 160,000 pounds. A big investment, but since then The Generating Company has secured some big time clients such as BBC and Audi.
It comes down to research, planning and effective execution. Is a merger, acquisition or partnership the right move for your business right now? And if it is, how can you maximise the return on investment so your company experiences leap-frog growth increasing by 20 times the size instead of 20%?
Leap-frog growth strategies make you considerably more money at a considerably faster pace than organic growth, as long as they are well conceived in the first place and well managed in their execution.
It’s exciting.
And it’s smart.
If you’re ready to leap forward, Quantum Leap Your Business here. Click here to find out more about the 6 Steps to Building a Better Business Workshop.
