Most business owners want to grow their business and there are a number of ways to do this. You can hire more sales staff or add distributors; if you’re a wholesaler or manufacturer, you can start a retail operation; you can expand into online sales; you can increase your use of social media. But growing through acquisition – buying competitors or complimentary businesses – should definitely by one strategy to consider.

Acquiring competitors is a growth strategy that has been used for years by franchisors, distributors, technology companies, online marketers and many others.

Your acquisition targets do not have to be limited to competitors. Buying businesses that offer products or services that are related or complimentary to what your business already provides allows you to grow horizontally and well as vertically.

One of the best examples of growth via acquisition is Apple. Since 1988 Apple has acquired 94 different companies, large and small. Each one had a technology that Apple wanted or a market that Apple wanted to be in. Each of those acquisitions enabled Apple to expand its existing market or enter a related market. Many of those acquisitions resulted in Apple acquiring technology and intellectual property that it might have taken years and millions of dollars to develop. By acquiring companies that had already developed that technology, Apple saved time and money while instantaneously possessing technology that it needed to implement its business plan.

Franchisors do the same thing all the time. Though they certainly grow by awarding franchises, they can grow much more rapidly by acquiring competing businesses, either quality “mom and pop” shops that have the perfect location in an area they’ve targeted or by acquiring an existing regional chain and re-branding it.

Acquiring businesses – competitors or firms whose products or services compliment yours or fit your strategic plan – allows you to quickly grab market share, enter new markets, distribution channels or industries that you have targeted and build a formidable barrier to someone else entering the markets or channels you’ve targeted. You become the Big Dog in a hurry.

If you think growing through acquisition is the right strategy for your business, there are several fundamental guidelines you should consider when getting started.

1. 1. Existing Traffic: If the brand you are considering acquiring is a brick and mortar business, it must have healthy and growing existing traffic. “Location, location, location”, the realtor’s mantra, is paramount. Buying a beautiful facility in a crummy location won’t do you much good. Make sure the business is easily accessible.
   2. Online Presence: Your target company must have an established online and social media presence. Check its web traffic and analytics. Are they improving? Stagnating? Declining? If the location is good the product is good and the service is excellent, can you improve the web traffic? If so, this might be an excellent candidate for acquisition.
   3. Potential for Growth: Needless to say, this is crucial. Even if you’re buying one small store, whether it is going great guns or not, you should see potential on the horizon. If you don’t at first blush, digging deeper might reveal that it has a location problem or maybe lousy customer service. Maybe the business you’re buying simply has a bad reputation that it hasn’t been able to overcome. Whatever the problem is, you must be able to identify it and develop a plan to surmount it. The point is that you want to buy a business that it likely to grow.
   4. Management Talent: Is the business well-run? Do the managers – or the owners, if they’re staying on – appear to know what they’re doing? Are the employees friendly, eager to come to work and dedicated to the company they’re working for? If the business is running smoothly, there’s no reason to fire a bunch of people and look for new staff. That’s why it’s important to purchase businesses that are well run. If you plan to rebrand the businesses that you buy, customers may be a little unsettled at first. But they will feel much more at ease if they see the same people that they’ve always dealt with.
   5. Price versus Value: One of my favorite Warren Buffet quotes is, “Price is what you pay. Value is what you get.” If you are actively looking to acquire other businesses – competitors or “complimenters” – you are by definition going to be looking at businesses that are probably not for sale. To entice the owners to consider selling to you, the price you offer must be high enough or the deal sweetened with other inducements so that the owner will want to sell – but still low enough to provide you with value. This takes some doing and a professional business broker can help.

There are certainly other issues to consider and they may differ depending on the industry you’re in but using the five outlined above should get you started.

There is a ton of stuff that you’ll want to see as you proceed with your due diligence of the target business. I’ve put together a list that covers a broad range of issues – from patents and trademarks to financials and intellectual property – that should cover nearly all the miscellaneous stuff you need to see. It’s FREE. Just tell me where to send it.