Today, I’m going to ask you two questions that, at first, may not seem business related, but you’ll soon see that they are very appropriate for growing your company.

  1. What is easier – to buy something or to build something? Factoring in facets like time and energy, buying, in most situations, takes much less effort.
  2. Which is cheaper – to buy or to build? Many would say build, but if we are talking about a business, it is typically faster, safer, and cheaper to buy an existing business than to start one.

Now a follow up to question two: What if you are already in business and just want to grow?

The answer may surprise you – the same principle applies.

In fact, it is typically significantly better to buy due to synergy. Synergy is probably the most-often used (and least understood) word when talking about buying another company, but it is important to understand.

The concept of synergy is simply that the sum of the parts is greater than the individual. That is (with apologies to math teachers across Manitoba), 1+1 = 3. Two companies combined are worth more together than the two separately.

Synergy typically arises in two broad areas:

  1. Marketing synergy – Two products are sold to similar clients, or through similar distribution channels, so it makes sense to market them together. Take the financial sector as an example. Canadian banks have bought up insurance companies in order to market insurance through their networks (although legislation prevents them from doing as much as they would like.) Or think of Microsoft – the more things it can bundle with its software, the more prominent it appears in the market and more attractive it is to consumers.
  2. Operational synergy – There are cost overlaps that can be reduced by joining forces, head offices, etc. For example, if you buy a business for sale in Winnipeg, and you’re based out of our city as well, do you need to be running two offices with two sets of operating costs? Likely not. There are typically a lot of “synergies” in accounting, HR, finance and management, and as you go into a purchase, you’re likely to find that there are aspects of the business you are buying that would be doubled up. The savings, as you’ll learn, will add up quickly.

While these synergies may seem like something that happens in large-scale corporations, they can – and do – happen for businesses of all sizes. Companies buying competitors or associated businesses happen at all size levels and do so on a regular basis.

Because of our experience working with businesses for sale, Beal Business Brokers and Advisors is well positioned to help you as you purchase a company and grow your operations. Through our strategic planning, we are able to help you synergize your two businesses, evaluate where there is overlap and direct you to opportunities for promotion of your current and gained products, services and assets.

So if you are running a successful widget service company, why not buy a second? We can help you find the right one! Call 204.478.7266 x110 for more information.