Increasingly, strong locally-owned businesses are stymied in their growth because of challenges from national competitors. They do, however, have a network of similar businesses in other cities and states. In many cases they know each other through trade associations, often share information and may socialize periodically. By consolidating into a national or regional company they can maintain their local knowledge, expertise and autonomy but derive some or all of the benefits of their national competitors. They maintain the attributes of a local company but with the capability of a national or regional organization. The expanded opportunities can include a national business referral network, reduced operating expenses, expanded local and national advertising, and an expansion of product or service offerings with an alliance of like-minded colleagues.
Michael Smith of SBC has been responsible for guiding several of these consolidations/roll-ups from inception to success and, in some cases, his clients have become industry leaders.
The methodology for the consolidation process is customized to meet the needs of the participating companies and the unique considerations of their industry.
METHODOLOGY FOR CONSOLIDATION PROCESS
The initial process includes identifying a number of individually owned businesses (ideally 6 to 12 companies) that have an interest in exploring the concept. Each company should be in the same base core business as the other participants. It is possible, and often occurs, that each company may offer other services and products, which are not necessarily offered by other participants. In many cases this is more of an advantage than a liability in that these other services or products might be future offerings of other participating companies as part of the new national or regional entity. The process includes:
1. Exploratory Meeting – each of the candidate companies participates in a one-day meeting to explore the benefits and drawbacks to a possible consolidation. As your consultant, Michael Smith interviews each participating company to ensure he has in-depth knowledge of each company, their services/products and how they currently operate.
2. Follow-Up Meetings – if the group concludes that there is merit in proceeding, then Michael facilitates a series of meetings, which culminate into the launching of the new company. These meetings are focused on developing a comprehensive plan for launching the new company and include the discussion and key decisions regarding the following type of issues:
- Forming and determining the best type of legal entity
- Governance structure
- Management structure
- Product and service offerings
- Strategies for short-term and long-term cost savings
- Annual operating budget
- Developing new markets and adding new members
- Operating guidelines
- Developing the name of the new entity
- Proprietary boundaries
- Marketing plan
- Plan to launch the new company
3. On-going Consulting Assistance – Michael and Maggie continue to assist the new company as needed to ensure a successful launch. This often includes assisting in selecting a COO, implementing a marketing plan, and developing a longer-term strategic plan.