Synergy, by definition, means two or more things interacting to produce an even greater effect. And by synergy in business, we mean the combined effect of the several parts of your business that you’ve been working on, that come together to create greater business success.
Let’s recap our 6 steps to building a better business:
- Mastery – moving from chaos to control
- Niche – reaching a predictable cash flow
- Leverage – creating systems for efficiency
- Team – structuring your business for growth
- Synergy – multiplying your business
- Results – exiting your business
We’ve shared our insights on the first four steps in our previous blogs. To get up to speed, click here.
Step five, synergy, is specifically for business owners who want to take their business to the next level, but still want to keep the business.
How do you know if you’re ready for business synergy?
If you are at a stage in your business where you don’t have to be involved in the day-to-day running of it, you are perfectly positioned to focus on synergy in business, and move yourself from being owner, to investor and ultimately entrepreneur.
What are some of the methods to achieve business synergy:
- Mergers and acquisitions – buying or teaming up with a complementary business and joining forces to grow faster.
- Adding substantial new products and/or service lines. These will usually complement the products and services you already have, but they can be a completely new range.
- Geographical expansion – selling interstate or internationally and having offices located in these areas. Expansion allows you to reach a larger base of target customers and therefore increases your revenue.
- Franchising – creating a business model that can be replicated and sold to franchisees. You retain control of the core business elements but do not need to be involved in the everyday running of the franchised stores.
- Starting a new complementary or related business that fits in with what you currently do. You have an advantage of already knowing the market and what does and doesn’t work, and knowing the needs and wants of your customer base.
Your first challenge as you move from business manager to owner and investor, is to try to maintain your new role, rather than working in the business day to day. To help you achieve this, use your systems that keep the business running without you, and keep your long-term goals top of mind.
To achieve synergy in business, you’ll need skills such as a broad understanding of various business models, investment strategies, higher-level financial management and a wider range of businesses and industries. You will also need to focus on measures such as return on capital, enterprise value and portfolio mix. Most of your time will be spent working outside your existing business as you start to explore the many and varied options for multiplying it – i.e. creating synergy!
The two unavoidable constraints on all business owners and managers are capital and time. However once you become a true business owner and your existing business operates without you on a day-to-day basis, you’ll have more time available, and your income is no longer limited by your time. As you move toward becoming an investor (i.e. making money from your money), the former limitation can be virtually removed. As you become an entrepreneur (i.e. someone who makes money from other people’s money), you can largely escape the second limitation as well.
At this point of business synergy, your scope for success and what you can achieve is almost unlimited!
If you’re looking for some advice about how to multiply your business…
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