Organic Growth vs Acquisitions: Which Way to Grow?

Business growth is the goal of every business owner. Whether you’re a small business looking to grow into a big one or a major company seeking to dominate the market, the way you grow is critical to your future success. Your growth strategy may be through internal organic growth or by acquisition; both have rewards, and both have perils.

Growth from Within

People assume organic growth is slower and are often impatient when it comes to seeing results. Natural growth is much harder if there’s a lot of competition in your industry. It may take a lot of work and hustle, but there are several approaches you can take to grow your business organically:

  • Sell more to your existing base
  • Bring in new customers from the same market
  • Tap into a new market or new industries
  • Expand geographically
  • Poach customers from a competitor

Internal growth has lower upfront costs compared to acquiring a competitor, but there is still an investment involved. Long-term, plowing your profits back into your customer service or sales departments can strengthen your customer relationships as well as attract new customers. You may find, however, that you’re spending just as much over time as you would if you spent a lump sum to buy a business.

Growing your business organically gives you the flexibility to grow as money, time and resources become available. A huge risk to internal business growth is that while you’re growing organically, your competitor’s growth may snowball through a business acquisition. You could quickly go from being a market competitor to being the underdog.

Related topic: Business Expansion

Growth through Business Acquisitions

Business mergers or acquisitions are a quick way to grow your business. It is ideal for short-term goals, but you will spend a lot of money upfront to bring in a large customer base quickly. This growth strategy has several risks.

Although external business growth brings an immediate increase in market share and greater access to capital and new markets, it also brings management challenges such as overreaching span of control, integrating systems and people, and branding. Acquiring a business can also pull you away from your core business. You could discover that you don’t like the employees, customers or the market, or they don’t like you. If you choose to grow your business externally, you need to strategically handle customer loyalty and the fear of a big brand moving in on local shops. You also need an effective plan for integrating management teams, company cultures and support systems.

You should not consider external growth if your business is struggling financially or the customer base of the business you’re buying has only a few major customers.

Links Financial: Your Partner in Business Growth

Whichever growth strategy you choose, the trade-offs and risks need careful consideration. The best approach also differs between industries. Links Financial can help you evaluate your options and create a successful strategy that grows your business safely. If you choose to grow through acquisition, we can help you secure the business acquisition financing you need to ensure a successful result.

What to read next: When Should Buy a Business (or Not)?

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