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Size Matters

by on April 26, 2013

Do you want to be the Big Dog?

Size matters.  If you’re a small company, you need to get bigger.  As the CEO you know it.  That’s why you need your sales to grow.  And you want them to grow quickly.

If you’re bigger you’ll have greater amounts of funds and resources. If you’re bigger you’ll have more established customers. If you’re bigger you’ll enjoy more repeat business, which produces higher sales and profits.

Larger companies usually enjoy stronger brand recognition. Stronger brand recognition means customers will usually think of those companies first when making purchase decisions. Companies with greater brand awareness generally sell more products in the marketplace.

If you’re bigger you’ll be able to attract more human resource talent. You can pool resources to get more work done.  Work can get done more efficiently and with greater amounts of expertise.  If you’re bigger you’ll be able to afford to offer greater compensation packages, attracting the best talent in the industry.

In summary, if you’re bigger you have more revenues, which means greater access to sales channels, greater access to development resources, and greater access to financial resources. If you’re bigger you’ll have a bigger marketing budget that will fuel your sales pipeline and if you’re bigger you can sell easier and faster because more prospective customers will know of you.

You know it.  That’s why you’re so focused on growth.  But is it fast enough?  Are you growing faster than your competitors?  Are you trying to do it all yourself?

A quick way to accelerate your growth, maybe even double the speed in which it takes you to double your sales, is through acquisitions.  Acquisitions provide quantum growth. Acquisitions can generate cost efficiency through economies of scale, can enhance the revenue through gain in market share and can even generate tax gains.  Acquisitions help you enter new markets, fill a gap in your product portfolio, increase market share, and acquisitions can help improve profitability and EPS. That’s why companies like Oracle and Cisco do so many, they effectively buy their R&D.

But how do you, as the CEO of a mid-size technology company that has limited resources, both in terms of human and financial resources, approach M&A?  If you’re a good CEO you’ll want to consider opportunities that are strategic to your company, not just look at deals some random investment banker sends your way.

You can do it yourself or you can have one of your existing management team members do it, but you need to be focused on running your business. You can hire an investment bank but they focus on bigger deals and are paid a percentage of the valuation paid, so their incentives do not align with yours.  You can hire a full-time corporate or business development professional but how do you justify the expense if you only do deals every now and then?

The answer is to rent a professional or a team of professionals.  That way you get a highly experienced individual(s) on an as-needed basis without the hassle of committing to a full-time role over a long period of time.

The consultant can help you identify targets around the world in your desired area and your optimal size.  If you already have a target, the consultant can work with you to support getting a deal done.  Maybe you just need to ensure your deal gets integrated successfully?  A consultant can help with that.

No hassles.  No long term commitment. Hiring a consultant will accelerate your growth by quantum leaps and lower your risk.


If you’re wondering how you build a company that you can sell for a premium in a few years, contact me to discuss the Valuation Amplification Process.

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From → M&A, Strategy, Valuation

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