Is Buying and Merging Another Business into My Family Business a Good Idea?
17th December 2019
Family businesses can be difficult to get right. There are a lot of challenges that come with working with family members. If, however, you are able to get things just right, you can have a winning business model on your hands.
Once your business is going well, you will probably have thoughts to expand. Buying another business to merge with yours is an obvious option but don’t forget to apply the lessons you have learnt in growing your business to the merger.
Here, we have a look at the advantages of growing your business through a merger and the things that you need to watch out for if you want to make it a success.
Enter new markets but don’t forget your old ones
A great reason to merge is to allow you to access new markets. These new markets can come through increased geographic markets. Or they could simply be a new customer base that you were not able to appeal to or access before.
As soon as you are able to combine your customer lists with another business, you need to keep your customers at the forefront of your mind. Mergers, traditionally, come with a consolidation of key financials, physical assets and other key resources. It is a good way to grow your business, however, as you expand into new markets, make sure you don’t forget your old ones.
Your customers have been benefiting from the service and the idea of a family business. Therefore, you need to make sure that after the merger, you are able to keep the service and offerings your customers loved even though there has been a change to parts of the business.
Find a business that will fit with the culture of your own
When it comes to a family business, the culture of the business is usually a defining trait for success.
Merging with another business, therefore, will mean finding one that you will be able to merge with the day to day culture of your own. Consider what the best practices are, the skills of the staff and the routines and traditions of the different businesses.
Find out what the different members of the team value most. Get to grips with what is important to the employees because they, ultimately, make up the business. At the same time, be careful to retain the unique culture that has been part of driving your family business forward up until now.
Keep your eyes on the future while you merge
Oftentimes, when a family starts a business, there is the hope that it will be passed on from one generation to the next. If this is the case with your business, you will have to make a point of deciding how important this is to your plans for the future.
If you decide it is of significant importance, you will need to factor this into your merger plans. How will merging with this particular business impact on this? Will there be room for your children and grandchildren in the business even after the merger? Keeping ownership of the business in the hands of the family can be done through a trust or passing on your own ownership when the time comes. However, keeping management roles for family members can be slightly more difficult once the roles have been filled by professional management.
In a merger, you may have taken on members of the other business’s management team in order to adequately run the business during this time of growth. You will need to foresee the role that family will be able to play in this management team in the future. Employees who are outside of the family that work for the business can resent the family member that walks straight into management. Plan ahead and allow for a transition of family members into managerial roles if this is the route you have decided on.
Within your business, the economic decisions that you make can have far-reaching implications for your family. It is imperative, therefore, that you plan carefully and with a calm head. Be patient and wait until you have found the right business to buy before you jump ahead with an acquisition.
If you are able to find the right one, though, you could be able to benefit from economies of scale and grow in a way that will secure the future for your family.
Matthew Hernon is an Account Manager at Dynamis looking after Business Transfer Agents and Franchises across BusinessesForSale.com and FranchiseSales.com.