Business development · 27 August 2015

From acquisition to franchising: The different routes to growth

Whichever route you choose the starting point must be preparing a business plan
Whichever route you choose the starting point must be preparing a business plan

Growing your business can present challenges even to the most experienced of entrepreneurs. Our business planning expert Shelley Stock Hutter partner Bobby Lane gives some pointers if you are looking to take your firm to the next stage.

Have a plan and vision

Make sure you have a clear strategy of what you want to achieve and what your end goal is. Whichever route you choose the starting point must be preparing a business plan. Doing so will focus your mind and energies on what you are trying to achieve, the reasons for doing it and the financing that you will require. This process will also help you identify the various options open to you. As a minimum the business plan should include:

  • Services and products
  • Market analysis
  • Organisational structure
  • The business vision and strategy
  • Marketing plan
  • Financials

Growing organically

Growing organically is the hardest way to grow a business, but carries lower risk. This means putting all of your efforts into growing your income within the existing business.  You will need to look at all aspects of your business  and identify ways of delivering additional income.

Some ideas for how this can be achieved include:

  • Increasing marketing efforts to bring in new clients. This could be via sales promotion, local marketing or a planned PR campaign
  • Identifying new staff who can join  and will bring their own client base
  • Identifying new potential revenue streams.

Going down the franchising route

Alternatively a further route to growth is through franchising. If implemented correctly this is a fast route to growing your brand and expanding your operations without the huge capital outlay. However, you do not benefit from all of the profits from the new site as the franchisee takes the majority of the profit after paying your franchise/management fees. Another thing to consider is if you get into bed with a bad franchisee this could hurt your brand. A good source of information here is the British Franchise Association website.

Acquisition

A faster route to growth is via the acquisition of another business. This is a far riskier strategy as you are buying an existing firm or its assets rather than setting up from scratch. In this case not only do you have to buy the company but you also have to manage the transition into your business.

This is where it becomes vital that you have a strong legal and accounting team around you that are able to look into the potential target and identify any issues that you may face through a process known as due diligence.

The funding for a purchase can come from your existing cash within the business or from borrowing. This could be friends and family or more likely a bank. Given that you will be a trading business with a track record it is far easier to raise money from a bank than if you are a startup. Also raising money to buy an existing trading business is easier to achieve than obtaining funding for organic growth.

Two becomes one – the merger

Another option to grow is merging  with another business. It may be that a lease is coming to an end, a partner is looking to retire or a business is simply looking to scale up and merging two operations is a potential way forward. There will be some duplication with job roles so you will have to consider how to manage the staffing side.  Also be aware merging two creative cultures is not always a walk in the park and takes a lot of time and effort.

Whichever strategy you choose be prepared.  And the preparation begins with making sure  your business plan is robust and identifies the right strategy for your needs. This will be crucial if you need to obtain further funding and build the business.

Finally, be careful in the excitement of the expansion not to forget what made you successful in the first place!

Image: Shutterstock

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ABOUT THE EXPERT

Bobby Lane is a partner at audit, accountancy, outsourcing and business advisory practice Shelley Stock Hutter, where he has been overseeing business growth since 2003. He’s a regular speaker and expert on professional new business and marketing. Having qualified as a chartered accountant while with BDO, he’s served as a business agony uncle on BBC Radio London and has particular expertise in the media, fashion, leisure and health/beauty sectors.

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