| By: André Larabie, CBC, MBA, PhD |
Making a business grow is one of the biggest challenges that anyone can ever have, but it’s also one of the most rewarding–there’s nothing more beautiful than looking at something that you have created and realize how much it has grown thanks to your own effort. That’s why we have suggested the 10x Rule, where that difference can be a lot more significant.
The 10x Rule is a tactic that is based around the concept of amplifying your business’s structure ten times in a certain amount of time, which is usually a two year period. The idea behind this is to force yourself to be in a zone where your expand your brand to reach an specific goal and to have a better understanding of what makes a business grow, with one of the most popular and interesting strategies behind the acquisition of another business.
What is the acquisition of another business in a more detailed manner? We will explain everything you need to know on this article.
What is the acquisition of another business?
If we want to be simple about it, the acquisition of another business is the procedure of buying a company to strengthen certain areas of our own and to have resources that we couldn’t have otherwise–a modern example of this could be the recent merger of Warner Brothers and AT&T, with both companies providing something different for the other (Warner offers IPs for entertainment to AT&T and AT&T offers commodities in the cellphone business to Warner).
The procedure to acquire another business, whether it’s while implementing the 10x Rule or through a conventional context, is basically the same: you analyze your company and the fields of business where you would want to have a foot in, so you start searching for companies that may help you in that regard.
The reason we do this is to move forward in our degree of influence and expertise in that new field of business. Let’s take the AT&T example once again: they are a phone company and when they decided to merge with Warner they got very different types of entertainment IPs that AT&T would require decades to build to have a similar degree of popularity and influence. Instead of expending years of that, they invested on acquiring another business and now they have the likes of Batman, Superman and the Looney Tunes as part of their entertainment IPs.
Of course, this is not something that happens just because you want to; there has to be a process of negotiation and having the necessary funds to make it happen. There is also a lot of logistics to deal with because there are employees that would have to be fired since many of them would be duplicating the same roles and functions (for example, two Accounting departments when you may need only one).
How does this influence during the 10x Rule process?
Doing a business acquisition process while implementing the 10x rule is something more challenging than usual because it can have many different ramifications in your business and that’s something that needs to be taken into account. For example, there are some aspects in which a business acquisition can help with your plans of making your company grow ten times, such as the following:
- A much capable understanding of a new field of business for you. Like we said before, now you have a company that is perhaps seasoned in an area where you didn’t work in before, so this gives you a lot more in the entry level and no need to do a small build up procedure as you would have had to do otherwise, which is precisely in key with the 10x Rule.
- A lot more personnel. Having a wider staff can also help you to double on the amount of functions that you wish to implement to expand your business; this means that you have a lot more people to do a lot more things and this can have very useful ramifications at short and medium term for your business’s growth.
- Fresh ideas and new points of view. This is something that is not mentioned a lot but that it can have a very positive impact on the way that your business performs; working with new people can give you the possibility of coming up with new, much more effective strategies and that way provide much better results.
- A lot more capital. You now have access to a certain amount of money that you didn’t have before and that obviously provides a lot more possibilities to expand your business; you can implement investments that perhaps you couldn’t afford before and that way grow as a brand at a faster pace.
Of course, this doesn’t mean that there are no drawbacks or issues. There are many issues that need to be taken into account before acquiring another business:
- Lack of communication or transparency. These types of transactions are actually quite challenging and it can lead to a lot of misinformation, a lot of bureaucracy and many different elements that make things very complicated for you while trying to expand your business, so this is something that you need to analyze.
- Contrasts in philosophies and ideologies. Every business has its own way of doing things and it may work for them or not, but once you acquire a business you need to understand that these employees have a certain way of doing things and there has to be a compromise of sorts to get the most out of them in the fastest possible manner to keep with the procedure of expansion.
- Legal issues. This is very important because it can affect harm your business and its prospects really hard; you need to know the different laws that you might break when acquiring another business. Make sure you to surround yourself with a capable legal team that can give you the expertise and knowledge that you need in these situations.
Acquiring another business while implementing the 10x Rule is certainly challenging, but you can use this to expand your company if you understand what you need to know and prepare yourself to make it happen.