Growing pains of owner managed businesses

09/08/2022

Raising a business from the ground up is certainly not the easiest task, and as an owner who is directly involved in the day-to-day running of your business, you’ll feel the ache of growing pains.

Planning ahead can alleviate this inevitable pressure and allow you to prepare for the challenges that come with running a bigger business.

Before you can implement a growth strategy, you should consider the following:

Do you want to organically grow the business?

If you want to keep your business as close to you as possible, you should consider opting for an organic growth route.

Whilst this growth will be relatively slow, it enables you to maintain control of the business whilst you scale up your operations.

To meet your goals, it helps to have a business plan in place which should be continually monitored to make sure you stay on track.

However, you should note that as the business grows, the responsibilities you have will increase dramatically. As the owner and manager of the business, this can be a lot to take on.

Therefore, when opting to organically grow your business, you should take into account whether you have the capacity to manage a bigger business alone. Alternatively, you will need to bring in more people in managerial roles.

Or would a merger or acquisition be better for you?

If you want to rapidly grow your business, merging or being acquired by a bigger business is more likely to unlock more funding opportunities than an organic route.

Due to the different natures of mergers and acquisitions, which option is right for you will depend on your vision and aspirations for the business.

If you aspire to be acquired by another business, you can continue to manage your business under the umbrella of the larger business.

Whilst there are risks, acquisitions can open up opportunities, in terms of the market share for your company.

You will have access to more capital and individuals with the expertise that you need to take your business to the next level.

But acquisitions are not without their issues. You may find it difficult to adjust to the reduced control over the business, as decisions will need to be made in line with the views of the other owners.

So, before diving into an acquisition, you must evaluate whether your core values and aspirations align with those of the acquiring company to avoid disagreements further down the line.

A merger would allow you to grow your operations by joining with another entity to form a larger single business.

There are various types of mergers and the option you choose will depend on how you want to grow your business.

To grow your business in its current sector, a horizontal merger (in which you join with a direct competitor) may be the best option to increase your share of the market.

Whereas, if you wish to branch out to offer new products or services, a market or product extension merger may be a more suitable option.

As with an acquisition, mergers reduce the personal burden of running the business by yourself but will dilute your control over the business’s operations.

In our next blog, we will discuss the exit strategies for owner managed businesses in more depth.

Need advice? Contact us.