The U.S. economy is still rising, and business leaders across the country have experienced a decade of increased confidence and optimism. The unemployment rate is the lowest it’s been in half a century, and the GDP has seen a steady increase for the last ten years as well. During periods of expansion, a myriad of new business opportunities arise, but the majority of entrepreneurs who focus only on organic growth can only take full advantage if they are willing to step outside of their comfort zones and devise a new plan the includes learning how to do good deals in strong markets.
In this week’s episode of Fueling Deals, I lay out a strategy for using inorganic growth to rapidly expand your business in an up-economy. Inorganic growth requires foresight and planning because even with a strong market, there can be major hurdles to finding the right opportunity. Without knowing what to look for, you may fall victim to the pitfalls and challenges – like losing deal discipline – of doing business in a strong economy. That is why I am discussing the special indicators and gaps that I look for when identifying the most lucrative deals under these circumstances.
Identifying Opportunity in a Strong Economy
Consumer confidence, unemployment, availability of capital, and the stock market are all great indicators of where you stand in the business cycle. But, it is difficult to bet on the market, which is why I want you to look to do deals in every phase of the economy. In a previous blog and my last Fueling Deals solocast, I laid out thing to consider for doing deals in a down economy, so this time we take a look at the opposite end of the spectrum in this week’s episode of Fueling Deals.
In an up-market, the availability of capital, cost of capital, and relaxation of investment criteria provide a strong base for crafting a deal-based growth strategy. These circumstances shift the balance toward the entrepreneur and businesses getting the investment due to fundamental supply and demand but also due to the pressure investors often have to deploy capital and get returns.
More money with fewer restrictions can be extremely lucrative, but I must stress the importance of defining strict criteria for your deals to avoid getting into trouble. If you identify opportunities that allow for shortened pathways to fruition, a good economy will only accelerate that process whether it is M&A, joint-venture, strategic alliance or anything else. If, however, you unconsciously bath in the available capital without considering its contingencies and requirements or you take too much money too soon, you can easily make a bad deal.
Deals rooted in synergy and recognizing additional efficiencies and opportunities in a target company will play out faster when the market is up, but if you overpay in any market, it is a bad deal. You need to know your objectives and the upsides going into it, and if the deal is fundamentally sound, you will have enough cushion to ride it out even when a recession hits. I hope the insights in this episode will help you compose a plan of attack for business growth in a strong economy.
For more informative episodes of Fueling Deals that can help you grow your business rapidly and inorganically through deals, please visit www.fuelingdeals.com.