By Dorothy York, President and CEO of North American Precis Syndicate (NAPS)
Remaining independent has become more challenging for small businesses, who are not immune to the economic impact of the pandemic. Many are being snapped up by savvy investors who are seeing the long-term potential of solid business foundations and acquiring those at bargain prices, as necessitated by recent changes in demand, due to the lock-downs and isolation restrictions.
Rivals are joining forces to take advantage of synergies and eliminate the high cost of overhead, at a higher rate than usual, because of the Coronavirus induced business pressures.
Even a business that is losing money can be attractive to an investor, under the right circumstances. If the business can be operated by the back office staff of an investor, at reasonably good margins, which is likely when the entities are combined, the advantage is, not only higher earnings potential, but also that a more competitive, streamlined organization can emerge. The public may be better served by the merged businesses, which can retain top talent and be positioned for growth.
In many small businesses, relationships play a major role in the success of the business and management understands the value of holding on to the individuals who contribute to the success of the organization by earning and developing opportunities.
Differentiation of services can make for a stronger unified force, once different entities join together to serve the public that they were formerly competing to obtain. Some investors may reason that they can try to emulate or duplicate the services of others, to match those offerings, but it is usually easier, and more cost effective to take on, retain and grow an existing pipeline of business, rather than try to compete for that.
Some umbrella organizations own several companies or brands that compete with one another, and that is a strategy that may result in more business overall, because consumers like to have choices and it can be done in a way that can protect the reputations of the competing workforces.
Consumer or client satisfaction could be increased with a stronger organization that can devote more budget to research and development, technology upgrades, innovations, and less to overhead, like rent, accounting staff and IT considerations.
Brand loyalty is more easily achieved with a continuity of diverse offerings, rather than a more homogenous, bland flavor. It’s possible to oversimplify a business beyond recognition so care should be taken to maintain the unique qualities that made businesses successful to keep retention levels of the combined entities high.
Some businesses prefer to partner, rather than combine. That could be suboptimal, at best, if one entity engages in predatory behavior, such as poaching business or hiring away top talent.
Under optimal circumstances, if managed properly, the potential for long term growth and expansion could be scaled and dramatically improved, with a combined entity.
We have seen many news organizations and agencies go through this process recently, some more successfully than others. It’s important to have excellent and independent advice from experts before entering into any legal agreement or contracts with third parties.
We are optimistic for changes in the near future that will result in a stronger economy and a better society. In a creative organization like ours, the work expands to fit the time allotted to it and is constantly growing as bright, innovative, new ideas emerge.