When I hear people talk about their IT businesses (consulting, Managed Service Provider, etc), I often hear them talk about their plans for growth. How they want to hire staff. Advertise more. Get more clients. Undercut other providers on hourly rates. The list goes on. I’ve been asked for my advice on a number of occasions, but one thing I have to yet to hear in a growth plan seems to be something extremely unconventional for the small business IT industry: acquisitions.
I can speak to this because I just went through it myself. My business, 3rd party IT support (a.k.a. Managed Service Provider) was approaching its fifth year in business. I had grown the business organically since its inception, and was looking to change that. By organic growth, I mean that I expanded my client base using traditional advertising methods in a sustained fashion, ( Feather Flags, for example.) I didn’t offer some crazy discount to get a bunch of clients to jump on board in a short period of time. I didn’t go out and try bad-mouthing my competition and ‘stealing’ their clients away. I simply made it known that I was out there, was patient and did good work. Some advertising, along with word of mouth, got me into a pretty good position financially where I then had the ability to make some more substantial investments in my company’s growth. This left me at a crossroads. Do I invest heavily in marketing and try to get clients to come to me ? This is the standard approach that I see many technology professionals take. But there is something that is very common in the general business world that seems to be overlooked when it comes to the IT industry (specifically in the small business sector), and that’s acquisitions. I began looking at the competitors in my area. I met with a number of them, seeing if they were interested in selling to me. As luck would have it, the owner of my direct largest competitor was looking to get out of the industry. It took several months, but a deal was eventually reached and agreed upon. Literally from one hour to the next, my business grew over 150%. For the price I paid to acquire my largest competitor, there was no way I could have grown that much by investing in traditional marketing, or many other growth initiatives.
Acquisitions are a normal part of the business world. Apple acquired Beats. Facebook acquired Oculus Rift. Microsoft acquired Nokia (mobile division). As business owners and managers, we need to be thinking of acquisitions as part of our overall growth strategy. It doesn’t matter if you’re in the ‘small business’ world or not, you always need to be thinking strategically and making decisions that will give you the best return on investment possible.