Agglomeration is a new way for small businesses to scale up quickly using the capital markets.
Callum Laing of Unity-Group discusses nine of the benefits.
9 Benefits of Agglomeration
One of the primary reasons small business join agglomeration is to provide liquidity in the business. The problem with small businesses is that they're incredibly illiquid. For an investor there's a huge risk in putting money into your company. If you join an agglomeration you're now part of a publicly listed business and your shares can be traded on a daily business. For the founder, that means if you want to sell 5% and pay off the house you can do that.
The Scale Paradox is a challenge that most small business face. As a small under resourced business you can't go for the big contracts. Because you can't go for the big contracts you remain a small under resourced business.
Often a big company will win the contracts and outsource the job to you while they cream all the profits. When you join an agglomeration and then go through the procurement process with big companies they look at the balance sheet of the combined entity. Rather than pitching as a $10 million business you're now pitching as a $200 million global PLC which allows you to access a much bigger range of projects and budgets.
3. Board of Peers.
Another benefit is that you join an executive board of other entrepreneurs; people who have built multi-million dollar debt free business in different countries and sectors that are there with you helping you to succeed.
4. Talent Attraction.
Agglomeration gives you the ability to attract quality senior staff. To get to the level where you are going to grow and challenge the big boys you need to have senior staff. For many talented individuals, it's perceived as a risk to join a small business. When you become part of an agglomeration you can still offer all of the benefits of a small business but with the security that comes with a PLC. That provides a huge leverage when candidates are considering joining your company or another.
One of the strongest benefits is the ability to acquire other companies in your sector. Often the fastest way for a company to grow and add value to its clients is to add acquisitions but most of the time they lack the resources to do that.
Working with Unity Group and the new currency of this publicly traded stock allows you to go out and buy competitors, companies in new territories, suppliers, partners, or anything that could make your company a stronger proposition for your clients. Growth through acquisition is something big companies do all the time but for many small companies it's out of reach. Joining an agglomeration will allow you to do this.
One of the challenges many entrepreneurs face is the feeling that they're not growing fast enough or that they're plateauing. Plateauing for an entrepreneur is like running backwards. Joining an agglomeration, having that visibility of what it's like to work in a PLC and be part of a global entity and understand the way the money markets work and impact business, is really an evolution that most entrepreneurs should go through as part of an education.
7. Succession Planning.
Agglomeration is not designed as an exit strategy for your business but a growth strategy. However, it's unrealistic to think that entrepreneurs will stay in their business forever. Most will want to move on after a few years. One of the hardest things as an entrepreneur is succession planning.
The solution is to find another entrepreneur running a business like yours, put them in charge of both businesses and then you can step into a chair person role and they can send you the reports. Because of the nature of the agglomeration, 2 - 3 years down the line you'd expect to have 200 - 300 companies in your group. That provides rich pickings for companies that would be interested in taking over your asset.
8. Public Listed Company.
You get to learn how PLC work and how markets treat finance and businesses in that environment. You're already uniquely qualified to become a non-executive director in other companies. Having that PLC experience really takes you to the next level and opens up a world of opportunity for you to go and sit on public boards where you can make a real contribution and learn about other business in other industries.
9. Extract Value.
Many entrepreneurs go into business with a desire to become an ultra-high net worth individual. The challenge is that we create a huge value in our business but we're unable to extract that value. By joining a PLC and having free trading stock it suddenly takes us into the realms of the high net worth individuals. Once you reach that level and have free trading stock you'll find private banks wanting to get in touch with you to offer you all sorts of advantages that are not open as a private businessman.
So as you can see there are a number of benefits for joining an agglomeration.
For more information on whether an agglomeration is right for you business, contact us.