Using Business Mergers to Finance Growth
Growth capital isn’t come by easily. You can either save up for years, slowly shaving a little cash off the top of each month’s revenue, or figure out a way to finance your company’s expansion. While loans might be the most popular option, business mergers are becoming the favorite among entrepreneurs who don’t want to borrow a bunch of cash and then deal with the subsequent interest payments. Pairing with a separate company can greatly reduce the overhead costs associated with growth, while still allowing your business to maintain it’s identity.
Two Companies Under One Roof
The idea of sharing a space sounds burdensome to some people, as they picture two people in every cubicle. The reality is that partnered companies still essentially operate in their own space while sharing a building or floor and split the payment with another company. Depending on the size of the unit, workers might not ever see each other or interact. Each company is still a separate entity, conducting business as usual, yet sharing costs and working towards the mutual goal of expansion.
For business owners who are more inclined to share close quarters, some business mergers do involve shared office space and equipment. If each company can bring resources to the table that all can benefit from, the situation is that much better. In some cases, when scheduling and finances allow, certain staff members can cover overlapping duties and essentially work for both companies. This option requires that the two businesses be in very similar situations and on fairly equal footing. In general, you don’t want to combine forces with a company that’s so different from yours that conflicts may arise. The more you can grow in unison with your new cohabitant, the better off everyone will be.
To keep both companies’ interests at the forefront of this agreement, terms will be arranged so that everyone knows what to expect. Generally speaking, business mergers last around two or three years, contractually. The adjoined companies may choose to continue the relationship beyond that, but most business owners want to make sure they aren’t connected to another operation for too many years. This is why it’s important to find the right partner before making any extreme business decisions.
If your company can provide the necessary growth capital without become indebted to a bank or investor, you’re already one step ahead of the game. Business mergers offer a great opportunity for business growth without that added burden of debt.