Exit strategies: Sell-up or expand?

21 May 2013
Business owners in every sector are always faced with tough decisions - especially if business is bad, things aren't working out as expected, and the books aren't balancing out. However, what if your business is going really well? Workload is growing steadily, the finances look healthy, and your accountants are happy. So what's your next move? There are a number of options:

Expansion - through franchising, setting up branches, via the internet
Sale - sell shares of your business
Merging - merging with a larger company

If you've decided to try and expand your business, consider all the different ways in which this can be done. If you're going to set up another outlet or branch, for example, ensure that you survey the area (footfall will play an important role for retail businesses) and 'do your homework' in regards to how the proposed expansion will fit in with your business plan.

For Khalid Maniar, founder and managing partner, Horwath MAK, there are a number of steps a company should take. Many of these steps involve internet connectivity and online marketing. "A product or service must appeal on the net, for example an airline ticket. There must also be convenience to buy through the net, as opposed to conventional modes," he said. "Some savings should be offered when buying through the net," he continued, and as much detail should be provided on the product/service as possible. After all, a product or service won't seem appealing if nobody understands what it is and how they can buy or book it.

Accepting credit cards online for your product or service is also essential, Maniar continued, and the display of products or services on your site should be analyzed and/or amended if necessary.

Another good way to encourage expansion is to get in touch with your customers or audience. Ask them to suggest new products or the improvement of existing products, in return for a daily or weekly prize for their suggestions, Maniar proposed. A final point is to "change the product mixes by continuously updating products," he said.

Before taking any of these steps, research your market. While you might have undertaken some market research before you started the business, times will have undoubtedly changed since inception. Overall, analyze whether your projected figures will hold steady if you decide to expand. What will your ROI be with an additional branch under the company's umbrella, for example.

On the other hand, having built up a business, expansion might not be for everyone. Selling your business might bring you satisfaction and should provide enough capital (in theory) with which to start your next venture.

If you don't want to totally give up on the company you've built up, however, consider a merger. There are always positives and negatives in the business world, and handling or undertaking a merger is no exception. Companies usually merge with a larger entity, and are immediately rewarded with an increased network of customers and a larger audience, the benefit of experienced management, and increased resources.

However, consider how merging will affect your brand and the control you have over your business. If you're precious about your brand, name, and reputation - which are aspects that you've probably built up successfully - merging might be the worst option. Often, brands will be lost in the melee of a merger, with the larger company swallowing up the smaller. Make sure you know what you're getting into before taking that leap.

Tips for expansion, by Khalid Maniar, Horwarth MAK.

The product or service must appeal on the net e.g. airline ticket
Add the convenience of buying through the net, as opposed to conventional modes
Provide as much detail of the product/ services as possible
Offer savings when buying via the net
Most credit cards should be accepted
Display the product in new ways, to attract new customers/a larger audience
Seek suggestions for new products or the improvement of existing products/services, by offering daily/ weekly prizes
Change product mixes by continuously updating the product