No one said growing a new business would be easy. For Davison, however, there were two overriding challenges to overcome – challenges the pair failed to appreciate initially.
Rookie mistake #1: not understanding the optics of a merged business
As an established business owner with a good track record, securing business loans and finance might be relatively easy. But merging with another business owner complicates things, says Davison.
“To start with, we couldn’t get access to the capital we needed to grow,” he explains. “We had impressive individual trading histories but failed to realise that after we merged we’d have an unproven new business that nobody would want to lend to. Fortunately, NAB were able to lend to us. ”
Rookie mistake #2: underestimating the impact of acquisitions on people
“We could scale up through acquisition a lot faster than through organic growth and the cost of capital, once we could access it, was low,” Davison says. “So we acquired an accounting firm and two bookkeeping businesses all at once.”
Over a period of just nine months, Carbon Group had doubled its staff and exponentially grown its client list. At least on paper.
“Understandably, our new staff wanted to know how things would operate following the acquisitions,” Davison says. “But given we’d taken on four new businesses we just couldn’t spend enough time with everyone. Once we got over that, the issue of cultural fit emerged. Our culture is, for want of a better word, a ‘young’ one. There’s a focus on innovation, fun and passion. Some of the new staff embraced that while others didn’t and moved on.”
It wasn’t just staff moving on post-acquisition.
“If you suddenly have, say, 100 new clients it’s hard to make contact with them all quickly,” Davison says. “Even if you do manage to do that, they don’t have a relationship with you the way they did with the previous owner. Many of those new clients are going to shop around and a proportion will go elsewhere.”