What Are the Risks of Growth Through Acquisition?
July 6, 2017
We’ve talked about the benefits of pursuing a strategy of answering service growth through acquisition, but to be fair we need to look at the downside as well. While the benefits of answering service growth via acquisition abound, the risks warrant careful consideration:
Overwhelm Existing Staff: When buying another answering service and integrating it into an existing one, which is the most effective way to control costs and boost efficiency, there is an instantaneous jump in call traffic. When proper preparations have not been made, this sudden influx of work can overwhelm even the most experienced agents.
The scheduling might be off, or the information about the new clients could be wrong. The result is staff who want to do a good job and give it their best, only to fall short. This produces frustrated agents who grow discouraged and may even quit in frustration.
Increase Customer Service Issues: Not only can agents take a pounding from an acquisition, but so can support staff, who might experience a disproportionate increase in calls about service mistakes, billing errors, and miscommunication about the transition.
What if every bill is wrong because the seller didn’t have good records? What if the written client instructions haven’t been updated in several years, and the information you think is accurate is actually out of date? What if the phone company doesn’t switch the lines and numbers over properly? Instead they disconnect the service and then take too long to reinstate it.
In each of these scenarios, the newly acquired clients will be irate, and they’ll call you to complain. Your support staff will take the full force of their frustration.
Break Existing Procedures: While a common benefit of making an acquisition is an increase in your economy of scale, you might have some systems or processes in place that don’t scale well. Or perhaps you think they’ll scale, but when you try to expand them to embrace the new clients, these procedures break. And these scalability problems impact both clients and staff. Until you can fix the issue, everyone suffers.
Hurt Existing Clients: While these issues relate to your newly acquired clients, these problems spill over to your entire client base. A poorly made acquisition, puts your existing clients at risk.
Incur the Wrath of Former Employees: If you don’t hire all the employees of the acquired answering service, they become unemployed. In anger, they could seek to cause you harm by making negative comments to damage your answering service’s carefully crafted reputation. In extreme circumstances they could band together and form a new answering service to compete with yours. After all, they know the business, and they know your customers. Plus, if you haven’t taken control of the acquired service’s technology, these enterprising people may have readily available equipment to use for their new business, as well as a location to operate from.
Suffer Heavy Client Losses: When the acquisition transition goes smoothly, the new clients are happy. They may even celebrate, because your service outshines what they used to receive. However, if the transition goes poorly—and there are many possible reasons that could cause this—clients will grow unhappy. When their frustration level exceeds the emotional cost of switching services, they will leave. While this inevitably happens in isolated instances, when it occurs on a wide scale, massive client defections threaten the financial goals of the acquisition.
Lose Money: The ultimate goal of an acquisition is to make money, but an acquisition that goes badly can have the opposite effect. If too many clients leave, you won’t have enough revenue to pay for your acquisition. The result is negative cashflow and a loss for the year or maybe for several years.
Though these acquisition risks are formidable, they are also manageable. And each successful acquisition helps make subsequent acquisitions go better. Yet if the risks seem too great, then pursue growth through sales and marketing as a better growth strategy, which carry none of these dangers.
The choice is yours.
Janet Livingston is the president of Call Center Sales Pro, a premier sales and marketing service provider and consultancy for the call center and telephone answering service industry. Contact Janet at email@example.com or 800-901-7706 to arrange a private consultation about buying or selling an answering service.
Peter DeHaan is a freelance writer from Southwest Michigan.
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