Merge Your Way to Profits?

Recently, I sat down with a friend who has a professional services firm who told me she is thinking about merging with a competitor. She asked me for my thoughts. My first question (I will always answer any question with another one) was, "Why"? 

She said at the very least, they could save approximately $200,000 a year by combining, and money would go straight to the bottom line. So assuming they would be 50/50 partners, that is an extra $100,000 each. And that doesn't factor the potential to raise prices or become stronger than other competitors and get new business. 

My next question was: “Do you like and trust your potential partner?” She said they had worked together before and she "absolutely liked and trusted them.” 

In this case, she already makes pretty good money, so she doesn't have to do this. But I am hearing from many people who are really struggling post recession (meaning the recession certainly isn't over for them). Some haven't had a profitable year since 2007. 

In many cases, the overhead required to run the business effectively is still necessary, but not feasible from a financial standpoint. Think about it - cut rent in half, reduce redundant staff, save the jobs of the others, etc. Another benefit for some is just the idea of having another peer/owner to speak with about the challenges and opportunities of running a business.

Of course there are so many things to think about when taking on a partner(s). But this could be a good time to call up one or more competitors and meet for a cup of coffee.