Whether you are a small company looking to grow your business or a large company looking for market dominance, you will need sound planning, consistently astute decision making and successful execution to achieve your goals.
Growth strategies are numerous and diverse but in general the three ways to build a business are; through sales, by buying other companies, or by buying their customers.
To build or to buy?
Both strategies present risks and trade-offs which need to be fully analysed and addressed before progressing.
Inorganic Growth
This roll-up model is best suited to industries that rely on recurring revenues. Whether you are buying the whole company or just their customer contracts, the objective is to buy them for less than the terminal value of the combined group. In industries like telecommunications where resellers are valued on multiples of gross margin, it is common for suppliers to buy their resellers for the margin improvement created when a link in the chain is removed.
A sudden shift in size presents multiple challenges such as integrating new customers, changing the billing process, managing an enhanced product portfolio and new suppliers. Success comes down to skilful execution and integration with minimal investment in new systems and staff.
Organic Growth
Pursuing organic growth takes time and nurturing. You may start with an idea and a portfolio of services and go off on a profitable tangent, developing new propositions with higher recurring margins in new niche markets.
It takes time to fully understand your market, where products and services exactly meet the needs of your audience and offer something above and beyond the competition at a margin that works.
Risks occur when expansion outpaces the ability to effectively manage the new business. Growth from new revenue streams can easily divert focus and resource from core business, which in itself can be risky. On the whole, organic growth may be slower but easier to manage.
New revenue streams
Communications is a cyclical business with constant changes in technology costs and regular product replacement. The cloud provides a common battlefield for IT companies for whom core business is server and desktop management and voice companies who supply calls, lines and phone systems. Both sectors are starting to sell hosted voice, cloud backup and hosted desktop supported by upgrades to their customers’ internet connections.
Jola is a channel-only business that supplies internet connectivity, hosted telephony and mobile solutions to SMEs via a channel of voice and data resellers. We come from a channel ISP background and have developed automated quoting and ordering tools as well as unique management portals to give you the control you need to manage your customers.
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