Scaling a business post acquisition

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March 03, 2020

by a searcher from Columbia University - Columbia Business School in California, USA

Curious to hear from operators who are focused on scaling a business post acquisition (new geographies, new products, roll-up acquisitions) vs simply streamlining operations and growing share of wallet in existing regions...

How much of an anomaly are growth stories like Asurion (i.e. turning a $8M firm into a multi-billion one or even $100M+)? Are there other companies you'd suggest I research to better understand how to run this kind of operating strategy?

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Reply by a searcher
from University of Waterloo in Toronto, ON, Canada
We haven't finished our search acquisition yet. But in the few cases I read, it relies on opening multiple locations/geographic expansion or acquisitions. I've ran or consulted for a decent number of businesses. I find one key to rapid growth is, how easy is it to "replicate" revenue?

For example, if you have an ice cream shop, then opening multiple locations can let you expand quickly. (Example only.. Definitely not advocating for ice cream shops.)
However, if you have a niche SaaS company, then it's harder to grow by "expansion". Your "foot traffic" is essentially search engine rank, Google AdWords/ads, tradeshows and ability to sell, which is not so easy to double. It can be done, but it's harder and riskier. (Basic example- If you're already at the top 3 hottest tradeshows for your industry, the next 3 tradeshows have diminishing returns.) If you did acquire another business, it would typically be a complementary business which is a lot harder to integrate.
In cases like SaaS or non-geographical companies, a good bet is resellers, dealers or integrators for rapid growth. Even big companies like IBM rely on resellers- other IT companies- to sell their products and go to market faster. Because one reseller or dealer has years of trust and in-depth understanding to a large customer-base. Going individually, customer-to-customer, is time consuming and hard. You cannot "hurry" trust.

Granted, if you're a startup and raised millions, you might be able to grow by massive cash injections into direct marketing and into your sales force. But this is not typical in search funds, from what I understand.

Final note is that having a strategic investor who can make introductions could also have a big impact. Especially if your business sells in larger contracts where a contract could be $200K+.

Hope this helps.
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Reply by a searcher
from University of Pennsylvania in Chicago, IL, USA
I think this is the most exciting aspect of entrepreneurship through acquisition (ETA). Asurion is an incredible story, and there are others as well. From my perspective, there should be a plan in place to scale prior to acquisition, and then you should lead decisively toward achieving that end after closing. It might work, it might not - in almost all cases you have to get into the "arena" (see Theodore Roosevelt's famous quotation) to see what is possible. I think Asurion underscores that. With an open mind and a growth mindset, good things will happen. I tend to think that those in the arena will have the best ideas of what to do. Ideas that are generated in a setting that is removed from the action, often are commoditized and represent herd consensus. I would also add that even if scale becomes impossible, a stable, enduring business is still incredibly valuable. Also the learning that happens, means that the next project probably has even higher odds of scaling. One other thing. Growth/scale takes a lot of capital. As such, try to build that into your plan, i.e. partner with investors/institutions that could nurture the idea far into the future.
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