Pros and Cons of Growing Through Acquisition

Mergers and acquisitions are quickly becoming the fastest and easiest way to increase the size of a company. To make sure we’re speaking the same language, for this article we will be using ‘acquisition’ when referring to one company purchasing another company, be it through shares or assets. The three similar forms of combination that people tend to confuse are acquisition (both companies legally survive), mergers (one company survives), and amalgamations (neither company survives). While there are benefits for each kind of synergy, in this article, we will be discussing the use of acquisition.

PROS

  1. Reduced Entry Barriers
    • When acquiring a known brand and placing it underneath your own, the clientele loyal to the brand are more likely to simply continue with the kid-tested, mother-approved brand rather than change. People are naturally averse to change, and so if you can acquire a company that already has a strong following, you are likely to benefit from much of their hard work.
  2. Increased Portfolio
    • Especially when you are acquiring the portfolio of one of your competitors, the benefits are likely to outweigh the costs. By quickly increasing the size of your portfolio as well as decreasing or negating the size of that particular competitor, your market share will naturally increase, and your brand will see a recognition uptick.
  3. Fresh Ideas and Perspective
    • With some acquisitions come the acquiring of not just the assets, but the staff of a company. Like all types of synergy, there are pros and cons to consider in this as well. However, as we like to focus on the positive here, some of the benefits of acquiring new team members are:
      1. Passion – With new blood in the water comes excitement. Some team members may learn from the experience of others, while some thrive off the stamina they now see alive in the office.
      2. Competency – I know, I know, dare we say this one? But honestly, with new team members can come new competencies you didn’t even know your team was lacking as well as improved competencies that can come simply from the collaboration.
      3. Ideas – Many times complacency can be poison, and comfort within a team, as much as it can be an aid, can be a bane. Spicing things up every now and then by adding new teammates, or even by using an off-site training, or an early morning team exercise can get the brains of your team working in different (better) ways!

CONS

Even though the word ‘cons’ may be a bit strong for this list – the word CHALLENGES may be more appropriate – a wise person once said, “With every pro there is an equal and opposite con” … or something like that.

  1. Culture Clash – Remember those days when it was just you, pouring over the financials and staying up all hours of the night to ensure the success of your small yet thriving business? Well, then you realized you could delegate and cover more ground. And with each person comes a new personality. When acquiring, staff maintained may be coming in feeling ‘less than’ or even ‘more than’, and this can lead to a new culture of conflict.
  2. Miscommunication – When acquiring another company, the other company and your own likely had different end goals, as well as processes for achievement. One way to alleviate miscommunication is in quickly calling together all the staff in order to work toward mutual understanding and bonding. This can lead to improved morale and will positively impact efforts being made.
  3. Duplication – One of the frustrations and fears when a company is undergoing merger or acquisition is… “Am I being replaced?” Along with the influx of new staff may come the same job titles and positions – this is duplication. Owners and managers must instill confidence in their staff during these confusing times, and be diligent in weeding through their current and oncoming prospects, ensuring they choose the best ‘for the future of the company’, rather than simply the best ‘well they’ve been here doing that job for ten years’. This is emotional, and difficult for everyone. It can also lead to decreased profits if not controlled quickly and accurately.

BUT, even with these negatives, Mergers and Acquisitions are still popular way to growth – highly due to the appeal of instant growth. When strategically planned and played out, a deliberately executed acquisition can be one of the best ways for a company to achieve growth.

OWNERS and Tenants BEWARE!

As Property Managers, we’re trained to identify the small details: The tiny cracks in the pavement, the leaking faucet, the extra splash of paint, the recurring roof leak… catching things proactively before they become a bigger headache for Owners is what one way we can help. But sometimes, there are such glaringly obvious headaches already in place that ANYBODY should see them. Sometimes, people see the problems, or even people CREATE those headaches, and then either people don’t talk about it or they blame someone else.

TENANT COMPLIANCE

TENANTS, please learn to talk with your PM team. Because OWNERS, unless you have cameras or it’s a single tenant, people play the blame game and no one will ever know for sure who leaves the dumpster lid open – welcoming in nasty neighbors, crows, vultures, rats, and insects.

This single mistake, leaving the dumpster lid open, affects ALL tenants adversely. Not only does the garbage smell permeate the area, but now there are rodents and birds on site, shuffling around and hungry. This is unhygienic, simply looks bad, and especially surrounding restaurants, makes customers want to stay as far away as possible.

This costs money. Big time. And on that same train of thought, having rodents and pest and birds surrounding the dumpster corral leads to trash and animal waste throughout the corral… which means if the ownership18. Owners and tenants - beware! wants a clean and appealing center or store, it will require power washing, cleaning, and operating costs go up for everyone!

Bottom Line: Save some money. Help your tenants help YOU save money. Empower them and let them know they can decrease their overall costs, and yours, and thank them for it!

Entrepreneurs UNITE

Have you ever had that PERFECT idea, searched to make sure it was actually unique and not just a reiteration of something else, and then LAUNCHED your own business? Maybe you’ve been your own boss for a while now. Maybe you want to be. Regardless, keep reading to find some of the common mistakes and tips to get past them. Because chances are you’ve heard a similar statistic: 70% of startup companies fail within the first year.
Too many times, startup companies and businesses fail before they really start up. Why? Is it because it wasn’t a good idea to begin with? Usually not. The idea is typically a solution for a commonly experienced problem. That’s perfect, and that’s how most ideas get their start. The light bulb, glasses, even planes, trains, and automobiles. So no, usually it’s a good idea, born out of personal experience or perceived need. But it’s the actual implementation that trips people up.
We work with entrepreneurs all the time. Some of them have got it… while some of them don’t understand what owning your own businesses really means… you know, when you’re the only one on the payroll, it’s nice, because you get 100% of the profits. But it also means that you do 100% of the work.
That means that getting into work late or just not showing up is no longer ‘vacation’, it’s self-sabotage. Because that job, and here’s a pro tip, it won’t complete itself no matter how hard you wish it would. Showing up late only hurts yourself now.
One of the main tips shown below is to make sure you balance your passion with wisdom. One is explosive, the other a slow consistent burn. Both are necessary and even required for success, but having too much of either and not enough of the other is a surefire route to disaster.
Leave a comment below with your favorite tip for starting a small business, or your own tip that we missed!

Pros and Cons of Gross Leases Versus Net Leases

In the world of Commercial Real Estate, there are really two types of leases: Gross, meaning all inclusive, and net (sometimes called triple net or NNN), meaning broken down. There are pros and cons to both types of leases, and reasons people may prefer either one.

GROSS LEASES

Gross leases are the simplest form of lease, this is where tenants pay their rent (typically a price per square foot), utilities (water and electricity), and that’s it. Typically, this is also a more expensive base rent, but because it leaves the expenses completely up to the Landlord, Tenants are paying for convenience.

TRIPLE NET LEASES

The most common type of lease nowadays is a somewhat more difficult to understand type called a Triple Net Lease (NNN). These use budgets to estimate the costs for the Owner/Landlord and seek to distribute these costs fairly to the tenants. In a fully leased shopping center for example, Owners/Landlords should have minimal operating expenses (or OpEx), because each tenant pays their proportionate share of the center’s OpEx. One difficulty here is that budgets are an estimate, based on reality, but the struggle comes during the first year when there are not previous years to use as support.

  • Protect the owner from market fluctuations. Two of the 3 ‘Nets’, Property Tax and Insurance, are uncontrollable, with the third ‘Net’, Operating Expense, somewhat controllable based on the rates Landlords or Management Companies negotiate with vendors. If the prices change, the tenants cover the increase. In a gross lease, the owner covers this expense.
  • Provide clarity to tenants for how their Common Area Maintenance (CAM) is being spent – tenants receive a breakdown of the three ‘Nets’, rather than one whole CAM rate or even more difficult, just paying a higher rent to make up for increases. This allows tenants to understand that for example the Property Tax or the Insurance was more expensive this year than last, causing their unexpected expense.
  • Act as a pass through – expenses for property tax, insurance, and operating expenses should not be expenses for the ownership for a fully-leased center. Rather, these are spread out among the tenants proportionately depending on each tenant’s share of building square footage (according to the leases). At the same time, they are a “pass through” because they are also not income for Ownership – they simply offset costs for doing business.
  • Run the risk of reconciliation – annually, property managers run a reconciliation report for operating expenses for the previous year. If the budgeted amounts that the tenants paid was lower than the actual amount paid, tenants will be invoiced for the difference. However, if actual costs were lower, tenants receive a refund! This actually turns what could have been a CON into a PRO. I won’t lie to you: expenses add up over time, and a year of expenses is difficult to estimate perfectly. This means that depending on the language in the lease, tenants could experience a yearly reconciliation. But tune in for a different article on lease language – that’s too large of a topic to just touch on here.

Now, I’m trying something new this time, curious on your thoughts for these visuals. Do you like them? Do they help with digesting the dense information above? Comment below – and tell me if you have any experience with leases like these!

15 NNN scenario - proportionate share
NNN scenario – proportionate share
15. Gross Leases NNN comparison
Gross Leases NNN Comparison

3 Ways How to Market Your Business Using Social Media

Let’s be honest. Looking around today you can’t help but notice smart phones literally everywhere. And on those smart phones, social media: Facebook, Instagram, YouTube, Twitter – You name it, most people have at least one. In fact, if you want some seriously scary ‘this is the world we’re living in’ data, how’s this strike you? There are approximately 7.5 billion people on Earth – of those, 4/7.5 billion (that’s 53%) are on the internet. Of those with internet, 3.2/4 billion = or 80% are ACTIVE social media users. Most of them using a mobile device. So yes, social media – maybe you hate it, but your business and your wallet want you to LOVE IT. And if you love yourself, you’ll learn to at least tolerate it as well.

16. Statistics about media in todays world.png

Let’s jump right in with our tips for success:

  1. Build Awareness – As noted above, most people in the world have a cell phone nowadays. That means that no more are people printing off MapQuest to find your storefront. Instead, they’ll probably do it by clicking on a map they find on one of your responsive pages, guiding them and their money directly to you. Social Media allows for you to have fans and ratings and an incredibly BOOSTED VISIBILITY for little overhead in terms of both time and money.
  2. Communicate Authority – You likely don’t care if you customers are awed by your tech savviness, but I know you care if your tech illiteracy creates a barrier to them giving you money. SO, first step is to prove your expertise. A frequently updated site with relevant and NEW content will not only land you in the early stages of a Google search, but it will land you firmly in the minds of your target audience.
  3. Provide Engagement – One of the things I am consistently impressed with is any company that knows its bosses well… Because the boss is ALWAYS the customer. The best way to get to know anyone is to speak with them regularly. So double check – does your site allow for feedback? Does it have a ‘Chat Now’ option? And don’t always be a consumer of data from your consumers. Give them a little bit of yourself, too. Maybe one day, upload a video letting people see a sneak peak behind the office walls – experiencing your team lunch together with you. Or go Facebook Live sometime, answering questions in real time. Another aspect to engagement is providing support, answering questions, listening to criticism, and making customers feel heard. In many of the social mediums, there is an option to respond to direct messages from customers/clients immediately, even if it is to say ‘Thank you for contacting us. We’ve received your message and will get back to you as soon as we can’. People like to know that their thoughts weren’t lost in cyberspace!

One of the first steps for any business seeking to GROW is building awareness. Your company can’t grow if people don’t know you exist! Always, through remembering that your boss is your customer and always treating them like KINGS AND QUEENS – and that means listening to their thoughts, frustrations, questions and concerns – your business will continue to thrive. Enjoy the ride!