In a previous post, “The M&A World- Now and the Future”, I wrote about the changing economy and its impact on the recent merger and acquisition activity. If my supposition is correct, then what will be the future of small businesses in America and how will that directly affect the many baby boomer entrepreneurs?
Although it is next to impossible to predict the future course of events (who would ever have foreseen the shift in the auto industry that we have witnessed?), I have suggested that many of these businesses will be shuttered because they will no longer present competitive opportunities in the market and there aren’t a sufficient number of buyers to absorb the overflow of these less profitable companies.
Is this inevitable? No one knows for sure, but unless strategies are put in place to change this dynamic, we could be heading for a shift much like the world of banking and auto dealerships have undergone.
Some possibilites include: combinations of less profitable businesses, cooperatives, strategic alliances, multi-marketing agreements, joint ventures and contractual arrangements.
If some of these smaller businesses combine to make larger companies, then they might be able to compete up-market and create cost efficiencies that were otherwise unavailable.
Another possibility is the formation of cooperatives like what we have seen in some other industries. These member organizations allow their members to reap the benefit of cost savings, and provide a source of additional resources, assistance and information.
A strategic alliance (such as one among competitors or vertically and/or horizontally aligned companies) is another avenue that may yield favorable results for small businesses. These alliances can be as creative and plentiful as the companies that create them.
Other less comprehensive answers could include marketing agreements, contractual understandings or isolated joint ventures in order to reach and service a large customer on an ad hoc basis.
Although each of these potential solutions are complicated and bring their own set of organizational (integration of personnel and systems, alignment of management/owners, etc.) and financial issues, none of these are insurmountable, and all should be explored.
Small businesses have always been a driver of the US economy and a major source of employment. Change is inevitable and time is critical. The only question is: Will these small businesses be a part of it?