In a recent 2015 post, I noted that more mid-sized businesses in the Canadian market are turning to complementary acquisitions with fold-ins or add-ons that allow the buyer to add on the revenue of the acquisition without the costs the seller (and their smaller business) had.

As we enter the New Year with renewed resolve and resolutions, I've been asked to say more about these financial benefits. Think of them as goals for fiscal fitness!

Here are some 20 ways companies acquiring smaller firms reduce costs and gain operational efficiencies:

“Where Are All the Baby Boomer Sellers?” asks a new Axial Forum article by Robert Flynn.

In Canada?

Maybe.

Flynn notes that in the U.S., “business for sale listings (mostly Main Street and often with less than $500,000 annual revenues) on the major transaction sites, as well as the middle market business brokerage firm listings are down in almost every North East state we track compared to five ago.” Yet “the 2013-15 period was predicted to be the peak of the baby boomer selling boom.”

On the other hand, while we still have way more buyers than sellers in Canada, our market for buying or selling a business is heating up. And in that market, the older boomers are selling and the younger boomers are buying.

When real estate is owned by the business or business owner

You own a business. You or the business also own the real estate used by the business. You do not have to include this real estate when selling your business. Retaining or selling the real estate separate from the business has its advantages.

Often the business itself is sold and a lease then put in place at market rent. This reduces the amount of capital that a potential purchaser requires and creates a wider market for the business. The owner can then sell the building with the lease in place and the purchaser does not have to be someone who wants to run or own the business that it houses.

As a result, there is a larger group of prospective buyers and the building sells for a higher price than could have been realized if sold along with the business. The goal is to sell the business before selling the real estate, or if it is listed in combination with the business, at the same time.

You and your wife own a business. Like many of our clients, you run the operations while your wife does the books. The business provides full employment for one or more of your children, too.

 A franchise is a business that is built for someone else. Thinking about your own business in those terms can give you fresh perspective on what will make your business more sellable when you’re ready to go to market. And acting on that insight will make your business more productive and profitable in the here and now.

So with that in mind, and legal matters aside, imagine what it would take to franchise your business. Does it have a proven system of business success that is teachable, trainable, reproducible and repeatable?

Maintaining the quality control and consistency across a franchise network can be a challenge, but it is a necessary one when it comes to the customer experience.

Branding and consistency become key factors in success in franchising.

Hiring the right people for your business is hard. And often, costly.

But having the wrong person in a job costs a lot more.

The real cost of a bad hire depends on what you take into account.

Sales Leadership expert Ron Karr recently showed how, in one year, a bad sales hire achieving only 50% of their target could cost a company $697,000! The hypothetical rep had an intermediate to senior position, a base salary of $100,000 and a quota of $1,000,000. Half of the cost was attributed to lost margins, which could represent hundreds of thousands of dollars of lost gross profit—in this scenario estimated at $350,000 (75% of the $500,000 in lost revenue.) Wasted leads and/or lost customers represented another $150K to the company.

But that doesn’t apply to me at all, you say: “In my small business, my employees are paid by the hour and they’re providing services, not sales. It doesn’t cost that much to replace someone if they don’t work out.”

I have done both.

In the 80s, I anticipated that the companies running large IBM mainframes had such a large investment in the systems supporting their business that they would be reluctant to change this technology for many years to come, even though new technologies had come to the fore.

The technology that these companies already had—and were comfortable with— was effective.

So I invested in the building of products that substantially improved throughput as well as the management of large complex systems using their existing technology. My assumptions and predictions turned out to be accurate and we prospered. Thirty years later these clients are still using the technology.

However, in 1990, I built a sophisticated class A office building with the intention of filling it with local technology firms. I failed to anticipate the economic collapse in Ottawa's technology industry that occurred in 1992, the year my office building was complete. By then, there were empty buildings all across the city. I lost my shirt.

I have never forgotten the lesson learned and I want to share it with you today. The long term trend was for growth in the technology industry but the short term economic adjustment killed me before the long term trend could manifest itself.