Industry Aggregation with Gordon Bizar

How to Depression Proof Your Business?

Why Traditional Recession Tactics Are Doomed To Fail This Time? Tomorrow’s sources of advantage aren’t like yesterday’s. … Ultimately, they are about a true advantage — one that accrues not just to the corporation, at the expense of people, society, or the environment; but one that accrues to all. Maybe we are living in interesting times to see which business model is the winner in this recession.

Changing conditions call for changing ways of doing business. The world has now entered a period of economic turbulence caused in part by global hyper-competition, skyrocketing energy costs, financial uncertainty, and waves of new technologies. This will most likely be a prolonged period during which the status quo will be upset by rapid changes in how business is conducted within your industry. The old business models and rules are being swept aside by new ones.

The Industry Aggregation model can best be explained by comparing it with the Japanese “keiretsu” model which was highly instrumental in that country’s post WW2 “Economic Miracle”. In the keiretsu model a number of publicly-owned industrials band together for mutual benefit along with a bank. The collaboration includes cross-ownership of stock, access to bank loans, joint ventures, and preferential treatment with the group.

The Industry Aggregation model is fine-tuned for small to medium sized privately held companies with revenues in the one to fifty million dollar range to deliver the same set of benefits. Replacing the bank is a public company which serves as both the group’s anchor and banker. The benefits of Industry Aggregation are:

* Member companies swap privately held stock for trading shares which sell at significantly higher multiples. This creates the liquidity for shareholders which is absent in private companies.
* Various forms of cross-marketing and joint ventures by group members help everyone to increase revenues.
* Operating costs are decreased through both group purchasing power and preferential intra-group pricing.
* Access to scare resources such as capital, human resources, and IT is improved substantially.

As is probably obvious, the goal of Industry Aggregation is to empower entrepreneurs and help them grow their companies further.

Industry Aggregation is not suitable for startups. However, some exceptional early-stage companies with bona fide revenues maybe considered.

To learn more about the benefits of Industry Aggregation for your own business, I recommend the original source: Gordon Bizar.

Video Summary:
4:00 Why is so difficult to bring entrepreneurs to work together.
5:00 How to filter the right entrepreneurs for aggregation and avoid the wrong behavior.
6:30 First Aggregation Model applied in Chile with fast growth.
10:00 The big asset is to leverage relationships
11:30 3-step strategy to grow even more: reduce cost, increase services, hire more talent
12:30 Good problem to have is to reduce the fast growth due to more infrastructure needs

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