Almost all businesses are obsessed with growth. It doesn’t matter if you’re a family-owned sandwich shop or a multinational corporation: ideally, the line on the graph moves ever upward.
So, why is it that the overwhelming majority of long-term growth strategies fail? We’re going to take a look at examples of M&A and organic growth and examine the common denominators of poor growth strategies that result in disaster, as well as some helpful strategies to reduce risk and improve your likelihood of success.
M&A
The process can seem endless and fraught with obstacles, but once the deal is over the line, the effect is immediate.
Your business has grown; you have new sites, new customers, new technologies, and more. It can only go up from here, right? Wrong. In fact, company share values hardly ever increase after a merger or acquisition.
A changing of the guard in the C-suite and conflict between new and old teams often result in a new beast of a company with a serious identity crisis, unconfidently led by newly promoted or newly hired executives who are learning on the job, rather than a more experienced leader who helped shepherd the acquisition in the first place.
If a consolidation period preceded these attempts at growth, businesses would minimise risk and be in a better position to grow from strength to strength. What’s more, either a succession plan or better leadership continuity would increase the chance of success, rather than the previous CEO jumping from the plane with a golden parachute at the first opportunity.
Organic
Most companies prefer to grow organically. Successfully doing so proves to owners that they have firmly established themselves within the world of business and now have complete mastery over their operation in its current form.
What’s more, organic growth is, generally speaking, more sustainable. Since the pace is slower and more methodical, owners and other leaders can examine growth indicators and gauge how the business is adapting to its new scale, helping prevent a scenario in which they bite off more than they’re capable of chewing.
But there is more nuance to this discussion of organic growth because, put simply, some businesses are just better suited to scale in this way than others. If a family-run garden centre wants to open another site, it would need to mobilise a considerable proportion of its resources, which might be in short supply already.
On the other hand, an e-commerce clothing retailer, like Closure London is more scalable organically. They have lower overheads to begin with, operate 24/7, and can access different international markets, which places them in a stronger position to grow.
In Conclusion
It’s hard to deny the evidence. Growing your business at any sort of scale and by either of the options we’ve covered above is going to be difficult – there is no shying away from that. But that shouldn’t completely detract from the benefits they can offer, whether that’s a more immediate impact through M&A or a more methodical, adaptable organic approach.
The common denominator in all-too-common failures is that businesses often aren’t stacking the deck in their own favour enough in advance. Instead, the rewards of a thorough consolidation period are passed up in favour of short-term gains for shareholders.