Go Organic, or Get Juiced? Two Ways to Grow Your Business

By Andrew J. Birol, President, Birol Growth Consulting, Inc.

If you turned on the TV or read the sports section this week, you might have spotted José Canséco talking about his new book, Juiced, which uncovers some not-so-secret secrets of Major League Baseball. Canséco admits something most of us have suspected: that the crowd-pleasing, ball-smashing, muscle-rippling power of today's sluggers isn't all about nutrition and Nautilus.

Baseball is on steroids. Can we say the same for business?

Like many professional athletes seeking greater fame and fortune or simply trying to stay competitive, businesses often look for short-cuts. A company runs into trouble. Product quality or delivery is slipping, customer service efforts are uninspired and inadequate, and core customers look elsewhere to have their needs met. Where is the owner? Too often, he or she remains dispassionate, unresponsive, or simply oblivious to all that's going wrong.

When the owner finally wakes up and smells the crisis, he or she has two choices:

  1. Address the problems, commit to fixing them, and grow the core business organically, or
  2. Seek artificially-enhanced growth through mergers and acquisitions.

It's easy to see which is the path of least-resistance, right? Organic growth is the natural result of achieving excellence, and excellence doesn't come cheap. It requires honesty, conviction, commitment, and patience. It often demands owners make some pretty tough choices. With so much at stake, and with lawyers and investment bankers egging them on, many owners look away from their existing problems and seek the thrill of new conquests.

So, what happens? If the owner's urge to merge is stymied, he has wasted a lot of time and energy while neglecting the core business. If, on the other hand, the owner manages to wrangle a deal, it is often at the expense of his firm's long-term health. He now owns two dysfunctional companies!

While mergers, roll-ups, and acquisitions aren't dangerous by nature, they are no magic cure-all for struggling businesses. And if the companies aren't healthy coming into the deal, “steroid growth” can carry hazardous side-effects. How do you know when your company is strong enough to annex other organizations? When is it better to roll up your sleeves and do the hard work necessary for sustained, organic growth?

Despite the thrill of the hunt, you know you should go organic when:

  • You have nagging business problems which require your full attention.
  • Your core business has negative cash flow.
  • Your core customers are dissatisfied with any aspect of your service.
  • Your business is unprofitable for any reason other than insufficient volume.

On the other hand, if your business generates its energy from good, all-natural sources, the right supplementation can build muscle mass and leverage its core competencies. Consider turning to outside sources of growth when:

  • Your core market is saturated.
  • You can't meet emerging demand outside of your core territories.
  • The marketplace demands that additional services and/or new products be bundled with your current offerings. Rather than make them yourself, why not buy a company that does?
  • You have created a solid infrastructure, technology, or capability but need additional capacity.

The bottom line? Buy another company only to create more of a good thing. If your customers, products, or services are weak, you can't restore them merely through acquisition. But if you have a solid business, you can buy more customers, expand capability, and add products or services to leverage your firm's strength.

Sooner or later, you will get a call from someone who can't wait to tell you how much money you can make by becoming a mini-mogul. From strategic roll ups to creative asset financing, there are a million ways to do the wrong thing. As many pro athletes have discovered, anabolic steroids increase muscle mass at the expense of the rest of the body. If you wouldn't put yourself at risk for depression, premature baldness, impotence, liver failure, and cardiac arrest, why would you take a chance with your business?

Perhaps Voltaire's Candide should be required reading for major leaguers and business owners alike. After scouring the world for fame, fortune, and love only to find despair, Candide achieves fulfillment by tilling his own garden. For most businesses, the best choice is to build excellence from within. Strive for organic growth at a rate of 10 to 20 percent per year. Know your marketplace, serve your customers, and refine your firm's Best and Highest Use®. This will give you all the juice you need to keep your business growing.

Articles by Birol Growth Consulting are © copyrighted and all rights are reserved. However, articles may be reprinted with prior written consent if attribution is included as follows:

© Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners grow their businesses by growing their Best and Highest Use ®. Andy can be reached at  (412) 973-2080, by email at abirol@andybirol.com, or on the web at www.andybirol.com.

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