For the past few years our company has been trying really hard to expand into the US with little success. We have a great customer base in Europe, a growing customer base in Japan but we just can’t break through in the US.
We tried setting up a dedicated sales office, going to trade shows etc. and the US sales are still barely a trickle and we are still losing money on the US branch office.
I thought about ways to quickly grab more US business and I wondered if it would be a good idea to start buying up smaller companies who currently distribute or broker the products we manufacturer. There are several interesting prospects in our field where there is a reasonably successful business that has been making a good wage for the owner, but the owner doesn’t seem to have the inclination or ability to take it further.
Maybe there are some people here who have bought or sold a business and have some experience to share?
I haven’t bought or sold a business but I’ll throw in my two cents anyway. If you are going to purchase a company you should try and identify how much it depends on the owner and key staff. It would be better if it has a system in place with a range of corporate clients. You’d want to avoid the fate of buying a company and the key people setting off soon after and launching as your competition and talking the customer base, but I know you are aware of this already. I think it’s a good idea to try something different if you haven’t been getting traction by other methods previously. The other things it will give you is more margin and a closer connection to the customer so you can develop products with your customer on a project basis and customer service should be much more efficient…that ties them to you in a much deeper relationship.
I guess you know this already, too, but US business is pretty regulated. I don’t know what you do/sell, but you should maybe find out if the reason some of the businesses you’re thinking of buying don’t do better than they do because of legal/regulatory restrictions of some sort. Also, talk to someone about US tax laws.
hh, those are great points but we would really be buying just the name/goodwill and their customer base. The sort of company I am looking to buy would be a small or medium sized middleman between manufacturers and end customers. Their methods wouldn’t matter much because we would be doing the manufacturing and using our own processes.
I would mainly be worried about alienating the existing customer base but if we can improve quality and reduce prices while keeping the same staff I don’t think there would be many complaints.
I know where most of these companies are at because we were in the same position a few years back. It’s hard work to get a company up to the point where you can make a decent living, but it’s even harder to let go and turn it into a larger business with less active input from the boss. Once small business owners hit a 6 figure income there’s no huge incentive to make a potentially risky expansion and many people are content at that level.
Have you identified why you were struggling in the US? Also, have you a solid reason for wanting to expand into that market and do you have the manufacturing/QA capacity to do so?
A few years ago a company I work for dipped their corporate toes in the US waters (via local distributors/reps) and found themselves getting burned. Americans are an awfully litigious lot and will sue your ass if you don’t come up to expectations, even if those expectations are completely unreasonable and/or have nothing to do with the agreed specifications.
If you insist on doing it, I’d say you’re doing the right thing by simply find local businesses to handle all the hard work. Nobody understands Americans except other Americans.
Hmm… that is a good question, and I really don’t know why we have not broken into the US market. It’s a damn hard market to crack. I think the problems are sheer market size and number of competitors offering similar products. If there are 100 companies you know about and someone you don’t know about is offering what they claim to be a higher quality product for a lower price, you would probably be wary and stick with the companies you know at a slightly higher price.
Mr He, I think you will find it easier because of the nature of your product. We have to sell lots of small orders to lots of small businesses while you are targetting a few larger deals. Which show are you heading to?
Sounds about right. Unless you’re a big player in a niche market, or have some killer product, it’s going to be tough. It’s a bit like going into China - sure, there are a billion-odd consumers, but how much bottom-line profit are you really going to end up with in your pocket, in exchange for how much hassle?
I suppose my original point was, do you have some deeper reason for wanting to try the US market apart from the mundane one of making your company bigger? Will you personally have a better life? Will you make life measurably better for your employees or for your local community? Or will you just end up producing more plastic crap that ends up in a landfill? Someone mentioned little businesses who are happy to stay little because their owners are making a good living - and why not? As my mum is fond of saying: nobody on their deathbed ever said “I wish I’d spent more time at work”.