Let’s be honest, there are only three ways to grow your small business. There are tons of variants to those basic three themes, but when it comes right down to it, three is the number. We’re going to dive into that in a few minutes, but right now, let’s talk about your business.
Most importantly, are you an entrepreneur or self-employed? That in itself is a critical distinction. An entrepreneur wants to grow, somebody who is self-employed generally has merely built themselves a job. That’s not to say that one is not the other based on circumstance, but at some point, a small business owner has to decide for growth or mere sustainability.
If he or she decides to grow, that is where the big decisions need to be made – one of those three growth paths needs to be chosen and those decisions have far-reaching implications. What are they? Buy, build, or partner. Pretty simple, I know, but that really is the decision to be made.
Buying? You can grow your business by consuming another business and their assets. Franchising is another version of this technique, and if the company you buy has great systems and assets, this could truly be a money making machine. The downside? A service business may not have the systems in place to grow, so you might only be buying somebody else’s headache.
Building? Guess what? You’re doing it now! Just like buying another business, though, the most critical thing you can do to expand is to design and implement systems for your small business that will continue to run it even if you are not involved in daily operations.
That leaves partnering, which we really like. No matter if it is through a joint venture agreement, a limited partnership, or by an equity sharing agreement using stock certificates, partnering offers huge rewards because you can double a business’ value at the same time that you diversify that business.
Obviously, two lawyers partnering to build a new firm is nothing new, but by choosing attorneys that are specialists in other areas of law, a single partner can increase the value of the firm’s services to clients by offering both tax and real estate representation. Thus, through that partnership, the firm has diversified their services and their client base (and most likely reduced overhead as well).
Another example would be a lawn service that partners with a pressure washing business. While the individual owners may have different specialties, they can serve common clients through their current book of business and in slower seasons, the focus of the company can be on pressure washing services while in the spring and summer, landscaping takes precedence.
There are plenty of ways that partnering in a business can offer more value to your clients and increase the bottom line, but a huge consideration is always going to be how is that partnership constructed? We’ll dive into that next week (or issue) when we explore how that equity stake can be shared.
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