These days happen to unravel one of the most crucial chapters in Orfium’s story until today. The decision to take a large step towards new territories and to widen the team by welcoming fresh, yet skillful and trustworthy people. To power up more wide-reaching operations, while trying to maintain the culture and character, built as a startup.
Entertainment is a vast and dynamic field that brings the world together and Japan is avowedly one of its greatest leaders. Following the acquisition of Tokyo-based Breakers INC, I am very excited to have found a new homeland for Orfium and fully ready to dive into the numerous possibilities and challenges that come along.
The brand new Orfium era, surely brought much enthusiasm and got everybody inspired all over again. Increased curiosity, boosted motivation and revived aspirations are some of the beneficial after-effects of a bold and ambitious move. But that is not all. A company’s acquisition along with the recruitment of its people, has also opened up the thought-provoking discussion of M&As and Hiring, set side by side.
Startups are not as easy as they once were. Nowadays, they need to function on a much larger scale to stand any chance at surviving in the market. The technical elements are still manageable, but most startups cannot deal with large-scale recruitment and talent grooming. That is why M&A and not just hiring is the better option. (FYI hiring is inevitable and a core way to grow)
Hiring recruits is a gamble, and you need a training structure and enough facilities to train them enough to see a proper return. But those things involve additional costs that an emerging startup is not likely to have.
There are plenty of other benefits of a successful M&A for businesses that are trying to scale up. The dominant business will get both the trained staff and a significant portion of the client base of the other business if they play it right. Naturally, there is a certain risk factor to it, and a badly done M&A can also bring more harm than good, which I’ll be discussing below.
Fast Growth And Recruitment Problems
The existence of a startup is a battle for survival. It is surrounded by countless factors that pose a severe threat to it. These challenges are becoming increasingly more troublesome as the days go by due to the massive popularity of startups these days.
1. Tough Competition
Startups need one of two things for absolute success. They either need to create a niche where they are relatively unchallenged, at least during the growth period. Or they need to introduce a product or service to an existing niche and revolutionize it. However, both these things are extremely hard to do.
Most good startups play with a similar scheme. So, there is usually a massive amount of competition for every niche. It is one of the first problems startups face. That kind of condition is very unfavorable for Small-scale startups. So, they are forced to try and expand their business as fast as possible.
2. Financial Management
One of the most crucial parts of any business is financial management. Startups start small, and usually, the people behind them can handle the big financial decisions on their own. Unfortunately, as the scale of the business goes beyond a certain point, they become increasingly inadequate for managing it.
They can’t manage all the stakes, shares, and investors they rely on for funding. Sometimes trying to procure too much or too little funding becomes their downfall, as they do not have enough backup in case something goes wrong.
3. Human Resource
When talents come into the job market, they usually get snatched up by the big fish in the corporate pond right away. Small or medium startups struggle to make do with the leftover employee pool. Scraping by like that can put a tremendous amount of strain on a smaller business.
Most large-scale corporations have a structure that gradually trains and utilizes the new hires. Startups usually do not have that kind of environment because it’s not stable enough. That is why managing and finding employees can be a big hassle for any startup trying to expand its reach.
But startups cannot ignore this issue either. They need more people to increase their scale. That leads to a situation where they have to spend far more assets to recruit and retain competent people than many larger businesses.
Is M&A Better Than Training New Employees From Scratch?
The issue with the astronomical cost of hiring a lot of employees in short order can be daunting, even for long-standing businesses. The drawbacks of doing so are even more apparent in smaller businesses. But M&A could be the answer to such problems.
Traditionally, M&A only happened where a large corporation swallowed smaller ones. But the past few decades have changed all that. Countless small and medium businesses are easy targets for prospective M&A.
But I can understand why some startups do not pay much attention to M&A. It is a relatively new convention, and the cost might seem a little too much. So people are still not sure if it’s worth doing M&A over training new people from scratch.
There are a few ways you can look at it.
1. Trained Employees Cost Less than Training Employees
Training a group of employees from scratch takes time and resources. Those are commodities startups cannot spare. Most startups also lack the structure necessary to incorporate new people into their fold.
So, when assessing the cost of hiring new employees, you can not only count the salary and benefits. The actual performance of the employee also needs to compensate you adequately. There’s always a chance that things won’t work out, and the employee leaves for one reason or another.
Then your investment would be wasted, and you would need to search for a new one. But amidst all that, you are losing valuable time that you could have used to overtake your competitors.
2. Trained Employees Are More Reliable
When you do an M&A, you would be looking for businesses that are similar to your own. The employees would be familiar with the line of work, and you could easily retain them by giving suitable incentives.
They also have a history of doing the job before coming into your fold, so you get experienced people rather than greenhorns. Hence, they can start to contribute to your business immediately after joining.
However, such a way of acquiring new employees is not without its downside. Companies don’t always have competent employees. You would need keen eyes to separate the talents from the tumors. So you would need to spend some time categorizing them accordingly. But I believe that time is offset by the minimal training time it would take to get them on the field.
Other Benefits Of M&A For Startups
There are countless other benefits of M&A than just getting trained personnel. It can also serve as a way to suppress your competitors.
1. More Clients
One of the greatest benefits of M&A is that it gives you a ready-made client base. The company you acquire would have similar clients. They would probably stay and see what you have to offer. That gives you a chance to expand your market.
You would also need to use this chance to let the talents from the recruit list build themselves up. Giving them a familiar field to develop will incentivize them to work harder. They will be loyal and would help you retain loyal customers from the previous business.
2. Eliminate Competition
By acquiring a business of a similar niche as your own, you would be cutting down a potential competitor. But doing so comes at a risk. You won’t get to swallow a decent company if all their shareholders are against it. So it could take a lot of convincing and lobbying to get a company for a reasonable price.
You could also give a devastating blow to your competitors by buying out local supply chains. However, this only works for regional businesses.
3. Supply Chain Optimization
One of the most popular M&A options for a startup is to try and acquire the supply chain of your raw material. That would require a lot of ambition and planning. But you could effectively cut down your production cost by a significant margin by doing it right.
Why M&A and not just hiring can help you develop your startup boils down to three main points. You can eliminate future threats, get more trained employees and an existing client base as a foothold in a new niche.