Organic growth challenges
Keeping with my topic of yesterday and what will develop into a theme this week, is a topic that I have struggled with for the last year or so. External growth. My background is not running a small company, but actually running divisions/regions of much larger, publicly traded growth companies. In my previous industry (solid waste collection, landfills and environmental services); organic growth and operational excellence was important, but external growth through acquisition was much more important to increasing shareholder value.
If you can, imagine if Fedex bought UPS; the operational and administrative syngergies would be immense. Well buying and “tucking-in” garbage companies is along the same line. In the same market, usually all the garbage companies would need to travel the same streets, employ the same number of sales and admin staff, etc. so imagine the benefit of just having twice as many stops on the same route. Or better yet, if you were lucky enough to own a vertically integrated disposal or handling facility, then adding more volume to it was nearly 100% incremental profit.
Fortunately and at the same time unfortunately, when you are building a fast growth company that is in a very tight and emerging niche, like Yardstick operates in, there are far fewer overlapping companies and much less opportunity to grow your company through external growth measures. This creates challenges as we have to focus our efforts on organic growth, which although rapid in our case, has limitations. This is especially challenging when all of your growth comes from your customers adoption of emerging technology as opposed to coming from competitor organizations. It’s often the case that we are working with potential clients for months and even years before they adopt a web-based examination or training protocol, and this is exacerbated by the fact that we are dealing with regulators and certification / licensure organizations.
I am not complaining, trust me. We love the space that we are in, and especially proud of our ability to become a pre-eminent Canadian provider of online certification testing services for our clients. Also, our other niches of e-commerce enabled training partnerships has proven fantastic as well.
The challenge becomes learning to control your focus on what you do well, and then redeploy your cash flows into other non-related ventures, or look for opportunities that are vertically integrated with our existing offerings, selling different things to our current customer verticals, or entering into new spaces with different versions of our application.
We tackle this issue on a daily basis, and it will command more and more of my time. Is the distraction and increased risk worth it? Only time will tell.