You've worked hard to create a successful business, and now you're ready to
take it to another level. There are plenty of ways to expand; you just have to
decide which method is right for you.
To help you work through the problem, we shed light on several entrepreneurs
who found ways to grow their businesses and boost their profits.
1. Merge with or acquire another business. When Jayne Hancock Group
acquired 14-year-old Townsend Inc. in July 2007, it was simply the next logical
step in a 2-year-old relationship.
The two agencies had been working under the same roof for two-and-a-half
years. Jayne Hancock's firm was a fast-growing marketing group specializing in
media, sports and technology, while Jackie Townsend's was a leading technology
PR firm focused on branding and PR.
"It was almost like a no-brainer. It was almost like, we can't do this and
not come together," Hancock says.
The company that emerged out of the acquisition,
JHG-Townsend, helps companies
create their branding and messaging, then helps them apply it in traditional and
new media markets.
Hancock and Townsend decided against a co-CEO setup for the new company.
"You don't want any cloudiness about the structure and who's going to make
the decisions," Townsend said. So Hancock took the top position, and Townsend
became executive vice president.
Both say the merger thus far has been terrific. "Everybody's starting to feel
and see an energy that we all visualized by doing this," Hancock says. JHG
projects $8 million in earnings for 2008.
If you're considering an acquisition, Townsend says you should get to know
your potential partner well before committing to a relationship.
"Know what it's going to be like to work things out in the tough times," she
says. "If you know you can get through the difficult conversations you need to
have, then you know you can get through a partnership." Such conversations,
Hancock says, involve strategic or operational decisions, ranging from investing
in new systems to opening a new office, bringing in a new hire or making an
acquisition.
2. Spin off new profit centers. Jocelyn Silverman started
304 Media, a
boutique advertising agency, six-and-a-half years ago. Since then, she's
branched out with two more companies:
Short Run Cards and
Creative-Juice.
Short Run Cards can produce small runs of plastic, personalized VIP cards in
only two days. The cards are used for loyalty programs that offer discounts or
points to cardholders. Creative-Juice offers creative outsourcing solutions that produce design
services for larger advertising and PR agencies.
Short Run Cards came about after 304 Media ordered its own set of VIP cards.
"No one could do the turnaround on the cards," Silverman, 28, says. So, like
many an entrepreneur, Silverman decided to do it herself. She purchased
equipment, and leverages her employees' free time to design the cards and print
them in-house. Now 2-and-a-half years old, Short Run Cards made a small profit
its first year and has gained traction each year.
Creative-Juice was born out of necessity in March 2007, to make up for the
loss of a client that provided 30 percent of 304 Media's business. The gamble is
working well.
"Every month has been better than the last month," Silverman says. The three
companies combined grossed nearly $400,000 last year, and Silverman anticipates
a 40 percent increase in 2008.
With the success of her spinoff businesses, Silverman will launch another
related business,
StorkMagnets.com, this month. It will produce birth announcement
magnets online. It's the ultimate example of leveraging resources, Silverman
says, because all of the design and programming are already complete and the
website is completely automated. In fact, Silverman expects StorkMagnets to
quickly become her primary source of revenue.
"We have received incredible feedback through our initial testing and have
several people anxious to place orders," she says.
3. Use subcontractors. Kris Putnam-Walkerly founded
Putnam Community Investment
Consulting in 1999 to help foundations and other nonprofits develop
effective grant-making programs and initiatives. She has a full-time office
manager and an executive assistant but relies on subcontractors to provide the
consulting expertise needed on various projects.
"It's an effective way to bring on people for a short period of time," she
says. It gives her a wide pool of experts. It also allowed her to grow the
business while raising children "and not grow into a crazy person," she says.
All subcontractors use an e-mail address linked to Putnam and also rely on
Putnam's 800 number to make the organization look seamless.
4. Open a second, virtual office. Putnam achieved a new level of
growth in 2007, when Putnam-Walkerly moved from Oakland to Ohio to join her
fiancé. She opened a virtual office in San Francisco in place of her Oakland
office and announced that Putnam was expanding nationally to serve clients
better.
"It didn't hurt my California business at all," she says. In fact, Putnam-Walkerly
says, she grossed $800,000 in 2007, twice the amount amassed the previous year.
She hopes to exceed $1 million this year.
The virtual office in San Francisco keeps expenses down. The rental company
provides a phone number and a receptionist, plus office space and equipment that
Putnam-Walkerly can use when she's visiting California.
5. Launch a new division. Kristen Marie Schuerlein is founder and CEO
of Affirmagy,
which sells cuddly blankets with inspirational messages. Affirmagy, which
launched on Valentine's Day 2005, sells direct to consumers through its website
and also wholesales the blankets to independent retail shops, including church
bookstores.
After a couple of churches used the blankets as profitable youth group
fundraisers, word started to spread. Shortly thereafter, Schuerlein realized
that 60 percent of her wholesale sales could be attributed to church
fundraisers.
"My business partner and I looked at each other and said, 'Wouldn't it be
extraordinary if we built a turnkey way to be in service to this community of
people and grow our business through fundraising?' "
That idea led to
Positively
Fundraising, launched as a separate division in March 2008.
"It's an effortless way to encourage and take advantage of the natural buzz
and word-of-mouth that was taking place with our product," Schuerlein says.
It's also in alignment with Affirmagy's core philosophy of service to others.
"From my perspective, it's a really cool way to grow my company. It feels
right," Schuerlein says.
6. Form a partnership or strategic alliance. With two successful
locations, a proven brand and $2 million in sales, Newport Beach,
California-based
Wonderland Bakery was ready for the next step in expansion.
Mother-daughter team Sondra and Allyson Ames became a strategic partner and
exclusive vendor for
Errand
Solutions, a Chicago-based company that offers on-site concierge services
for more than 300 corporations, hospitals, residential communities and hotels
nationwide. Services range from car washing and dry cleaning to watch repair,
gift cards, gift baskets--and Wonderland's baked goods.
Errand Solutions receives a percentage of the revenue Wonderland generates.
"So for a very small incremental cost," Sondra says, "we're able to expand
without liability or overhead."
Wonderland established its first Errand Solutions outpost just before
Valentine's Day at Allergan Inc., a national pharmaceutical and medical
technology company in Irvine, California. The holiday proved Errand Solutions'
busiest since it arrived at Allergan a year ago.
"There was a constant line of people buying the baked goods," says Lynnda
Purcell, the concierge manager. She said foot traffic through the lounge
increased 200 percent as buzz about the baked goods lured curious employees to
ogle the new products.
Since then, Wonderland Bakery has premiered at five Errand Solutions
locations in California and seven locations in New York. Sondra says she plans
to open eight to 10 sites a month through the end of the year.
7. Go public and buy a complementary company.
Vertical Branding
Inc. began in 2001 as a beauty-products company, retailing its goods on the
internet, on home-shopping TV channels and through a Netflix-type program that
delivered products to customers every 30 or 60 days. Needing an infusion of
capital, the company was acquired by a publicly traded company in 2005. With the
money raised, VBI purchased the assets of a retail distribution company, Adsouth
Partners Inc., in August 2006.
"It had five product lines we really liked and vendor relationships with
major retailers," VBI founder and CEO Nancy Duitch says.
VBI began marketing the Hercules Hook--an easy-to-install hook that holds up
to 150 lbs.--even before the asset purchase was completed. By August 2006, the
product was achieving multimillion-dollar sales.
8. Go Global. "In today's marketplace you always have to reinvent
yourself," Duitch says. Late in 2007, VBI decided to go global.
"It's expensive, and it requires lots of compliance," Duitch says. "But in
the long run, the benefit will outweigh the hassles."
Duitch finds that her products translate well to other countries, including
Korea, Japan, China, Egypt, Spain and Italy. The key for VBI is focusing on
useful products that are relatively inexpensive and environmentally friendly,
such as ZorbEEZ, which reduces the need for paper towels.
Sales were approximately $37 million in 2007, and Duitch expects them to
reach $47 million to $50 million this year.
Her success tip: "Small public companies have always got to be looking at the
environment and how to get the benefits of what's going on in the world. If you
take a look at what's happening today in the world as opposed to tomorrow,
you'll never win in the long run. That's why we're always taking a look at
what's happening in six months, in nine months."
Questions to consider: What's going on in the world? What's the government
subsidizing today? What products sold well in the last economic downturn?
9. Be responsive to customer needs. Liz Neumark was a fledgling
photographer in 1979 when she started
Great Performances
as a staffing firm specializing in the catering industry to support herself and
other women in the arts. Today, Great Performances is a $35 million catering and
events company with exclusive contracts with many of New York's finest cultural
and artistic institutions. Clients include Brooklyn Academy of Music, Sotheby's,
Jazz at Lincoln Center and The Plaza. Neumark has more than 200 full-time
employees and a part-time wait staff of 500.
Neumark shifted from being primarily a staffing company to being primarily a
catering firm when clients began asking her to supply the food as well as
waitresses. By 1992, she had a 22,000-square-foot commercial cooking facility in
SoHo. At the same time, Great Performances was focusing heavily on what Neumark
calls "venue relationships" with cultural institutions that were producing
special events for financial reasons. A few years later, as venues began seeking
exclusive relationships with banquet partners, Great Performances was in a
perfect position.
Great Performances' major growth occurred in 2000, when it landed its first
exclusive contracts. At the same time, the company also bought out a competitor
who didn't want to manage his business any longer.
In 2007, Great Performances had to bring in an investment partner. Says
Neumark, "It required a big investment to operate the Plaza Hotel's banquet
spaces," which opened in January 2008.
The company is also benefiting from
Katchkie Farm, an
organic farm it owns and operates in upstate New York. Customers appreciate the
fresh produce, Neumark says. What's more, the site has become a venue for
corporate events and weddings.
Neumark says there are two pieces involved in growing a company: "The first
is doing the homework, the projections--everything your banker and your lawyer
tell you to do. The second thing is to follow your dreams. And dream big."