Dinn, Hochman & Potter, LLC

4 times acquisitions make sense for small business owners

Sometimes the best way to kickstart the growth of your business is to buy another business or property. You might not enjoy the same control as if you grew more organically, but markets are time-sensitive. Key acquisitions can help you capitalize on your ideas.

As the economy has picked up, we've seen mergers and acquisitions on the rise across the country, and Ohio is no exception. At the time this was written, Crain's Cleveland Business had already tracked 54 Ohio mergers and acquisitions. These mergers and acquisitions spread across 12 industries, proving that they're not just for big pharmaceuticals and multimedia conglomerates.

How might an acquisition help your small business

There are many reasons companies buy up other companies or their assets, but they don’t all apply to small businesses. Smaller businesses don’t often make purchases that allow them to compete on an entirely different economy of scale, eliminate competition or unlock foreign markets. However, even on a smaller scale, there are still several reasons you might spend the money and jump through the legal hoops to grow your business:

  • Improve your performance: Buying a smaller competitor, its back-office staff and its market share may help you cut down on overhead and improve efficiencies. Similarly, you might improve your margins if you purchase part of your supply chain.
  • Gain skills or technologies: Sometimes it can be faster and less expensive to buy another company for its expertise than to try to develop that same expertise in-house.
  • Potential investment: If you can recognize a winning technology, service or product very early on, you may be able to bring it into your business and develop it. The smaller company may appreciate the resources you can offer, and you can share the reward.
  • Transform your business: At some point, your company’s trajectory will change from growing company to mature company. To spur new growth, you’ll likely need to transform your business somehow, expanding into another vertical or changing your customer experience. Strategic purchases may help you stretch into these new areas.

Elements of a successful acquisition

The U.S. Small Business Administration offers some key advice for your business acquisitions. Before you start signing papers, you’ll want to do your homework, getting a solid evaluation and planning your use of the new assets. Then when it’s time to draw up the papers, an experienced attorney can help guide you safely through the process.

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