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Dr. Merlot’s Perspective: Motivations and Strategies for Business Growth

Loyd and I found ourselves both with a Friday free from client travel, so we decided to meet for a round of golf. I always love an opportunity to talk some smack to Loyd about his golf game.

We were rounding the turn to move to the 10th hole and ran into a friend of ours, Jack. We took a minute to catch up, giving updates on family and business. As Loyd and I were about to pull away, Jack asked if he could ask us a quick question about his business. Jack was scratching his head, so I could tell he was really struggling with something. In short, Jack had been in Board meetings the previous day, where most of the conversation focused on strategic planning and growth. Jack’s business had a strong customer base, reputation in the community and product/services. To him, he felt everything was great and his mentality was focused on sustaining success, but his Board members were more focused on growth. As such, Jack felt at odds with his Board and was struggling with the direction of the strategic plan. Other than a date confirmed for the next Board Meeting, there was no resolution or next steps identified at the end of the day. Knowing our backgrounds, Jack asked:

“If everything is going well, why is business growth so important, other than to fill someone’s ego or make more money? I need a compelling reason to take on the risk."

I opened my mouth to speak, but Loyd beat me to the punch.

“Jack”, Loyd said, “you are not alone in this conundrum, so feel a bit a peace that we have seen this a lot and many business leaders struggle with these same issues. And, I can tell Dr. Merlot is biting at the bit to tell you what he thinks. But, judging by your look of frustration, let me first give you my thoughts, as sometimes Dr. Merlot’s straight talk can get intense.”

“As business succession planners, we profess that growth is a characteristic of vitality and strength. From an organizational perspective, a business must grow to adapt to a changing market, changing customer needs and competition. There are ever present market forces that affirms and promotes those that are growing and eliminates those that are not. Survival of your business necessitates constant drive for organic growth in sales, product lines, technology, etc. Just focusing on protecting what you have and not striving to improve, means your days as an enterprise are numbered; a simple issue of survival of the fittest.”

“Ok”, Jack exclaimed, “That is what my Board members were saying… I just don’t think I was wanting to hear it. One of them mentioned your book, ‘Seeking Succession’, Loyd, so I was hoping we would run into each other today. I know you are both wanting to get to the back nine, but while I have you, one more quick question”, and Jack asked:

During our meeting, opinions and strategies for growth were flying around the room like seagulls during spring break. With all the buy/sells we are hearing about, are acquisitions the best way to fulfill the growth demands of the market place? Or is it more fun and/or easier; to go buy some deals versus pressing our existing business(es) for more growth, constant improvement?

I could see Loyd about to say something, but you can’t keep a good man down. So, I quickly jumped in:

“Good questions Jack, and Loyd is right – I am a straight talker; but we have spent some time together on the golf course, so you’re used to it."

"First, let’s get our semantics straight. You are asking if quantum growth is an effective way of meeting the increasing challenges of the market place? In case you are pressed for time or before I start making wine, let me answer with a big fat NO!"

"Now, allow me to press some grapes and explain. Sure, buying a new deal creates excitement and ‘big shot’ euphoria associated with negotiating with sellers, meeting new vendors and considering the retention of managers. Looking under the hood of a competitor or an interesting business opportunity can be fun. Everyone patronizes you because you have the cash that will make them liquid, pay commission, elevate their careers, etc. Vendors and creditors also join the festivities proclaiming your genius based upon (go figure) your willingness to spend a truck load of cash. Your own imagination fuels the ego flames as you envision how this acquisition, more acquisitions, increased sales, more locations and an abundance of profits will enhance your positioning with the ‘Top 100 Big Shots’."

"However, buying a new business is not a substitute to leading your managers and employees to constant improvement in every aspect of your operation. Buying a new business will not change the reality of mediocre performance in existing operations. In fact, a change of focus due to an acquisition can convert your mediocrity into inferiority. If in your inopportune absence, mediocre successors have to deal with the distraction of an acquisition, the journey may have been doomed before they ever came aboard."

Quantum growth is neither easy nor cheap. It comes at a significant cost, distraction and vulnerability, beyond dollars and cents. Consequently, if short cuts or ego are driving an acquisition, I would advise a business owner to go home and focus on improving his core business. Avoid the distractions and frustrations that inevitably emerge with the removal of the make-up and veneer created by the seller and broker. My advice is that if you are not ready to ride the bull, for heaven sakes, don’t go buy one. From the cheap seats, it may look like fun to join the acquisition rodeo. However, once you wrap your legs around that animal, grab hold of that rope and fully understand the impact acquisition trauma can have on your core business, it is a different perspective. Don’t wait until you are groveling in the dirt, looking up at some clown like me to conclude that quantum growth is no way to placate bored successors or avoid the grind of pursuing excellence in your existing business. The risks are too high and the net gain is too little.”

I took a pause to see if Jack was still with us, or if I had crushed him with my soap box. There was about a minute of silence, then Jack looked up and said, “All of that makes perfect sense, and you have given me a lot to think about. I will be much better equipped to challenge the perspectives of our Board, who are aggressively pushing growth through acquisition and are next generation leaders. I believe we have some work to do with leadership development and team synergy before we jump on the acquisition wave. Thank you for your perspectives. Perhaps we will run into to each other at the Grill for a glass of wine. Dr. Merlot, I am sure you will have some good stories about Loyd’s golf game!”

 

Dealing with complex business, family, generational, recruitment or growth questions? Ask Dr. Merlot: This email address is being protected from spambots. You need JavaScript enabled to view it.

 


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Location (Map)

Orlando, FL 32804, USA
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