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BUMPS ALONG THE WAY. The process of growing through acquisition was exciting and intense but filled with potholes. We made a lot of mistakes and learned a lot of lessons. Remember, our strategy called for optimal penetration into the top 30 markets? However, what if an aggressive competitor is making major headway in a smaller but still significant market -- and initial contact with the competitor reveals a willingness to talk about an acquisition? (Answer: sometimes, we jumped too quickly in situations such as these, draining resources from our major-markets strategy.)
What happens when you sell a territory to a franchisee and then a competitor builds a number of stores and subsequently wants to sell? The franchisee may not be prepared to participate in the purchase but also has contractual rights in the geography. (A sticky wicket, indeed, but our bottom line was always to honor the partnership. Our first obligation was to our franchisee.)
What if a competitor undervalued his or her company and we could acquire the firm with a big discount -- but the shops were not in a top 30 market? (Solution: if there is an existing franchisee willing and qualified to operate the stores, buy the company. If not, pass.)
A FINAL WORD. Although McDonald's founder Ray Kroc believed a company is either green and growing or ripe and rotting, our message is that entrepreneurs must have a strategic reason to expand and pay careful attention to financial management. So many companies meet or exceed revenue objectives -- and then find themselves in trouble. We faced all of the questions listed above (and many more too numerous to be addressed in this article!) The lessons learned center on believing in the mission and the plan. Think long term, because seldom is real value created quickly.
My Babson College colleague, serial entrepreneur and friend, Ed Marram, talks about the stages of entrepreneurship: wonder, blunder, thunder, plunder, and asunder (or the renaissance of wonder!) Blunder and thunder are growth stages and terribly dangerous. Acquisitions that are on plan and strategically sane can help turn blunder into thunder.
Stephen Spinelli, Jr., 49, began his entrepreneurial career two years after graduating from McDaniel College (now Western Maryland College) in 1977 with a B.A. in economics. He co-founded Jiffy Lube International, Inc. in 1979. Three years later, Spinelli left the founding management team to become a franchisee. He remained a director of the company. Ultimately, he became Jiffy Lube's largest franchisee, with stores in Massachusetts, Connecticut, and New York. Thirteen years after founding Jiffy Lube, Spinelli sold his founding shares in the franchiser and his franchised stores to pursue a career in academia.
Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation.
Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation.
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