If a firm finds itself being commoditized, acquisitions won’t fix the problem. In fact, nothing will, at least not within the existing profit formula.
This is one of the most common misunderstandings I see among private business owners and, frankly, in the marketplace as a whole. Many owners believe that acquiring a competitor’s client base, vendors, or customers will automatically create scale and increase the value of their business.
Sometimes it does, slightly. If the acquisition leads to meaningful operational efficiencies, there may be a marginal improvement in margins. But acquisitions alone are rarely a true driver of enterprise value growth when the underlying business is being commoditized.
When margins are under pressure, the answer isn’t “more of the same.”
Commoditization Is Everywhere
Firms facing commoditization need to migrate to where future profits will be captured, the point in the value chain that will command the best margins going forward.
And let’s be honest: for most businesses, that place is not where they operate today.
Technology, automation, and shifting customer expectations are commoditizing nearly every industry. Retail is the most obvious example, but this dynamic is now crossing into almost every sector. Information-based work and knowledge professions are feeling it acutely.
My own industry, financial planning and advice, is no exception. The forces of commoditization are moving fast, and they’re coming for a profession near you if they haven’t already.
If margins are shrinking in your business, it’s not because you’re doing something wrong operationally. It’s because the economic ground beneath you is changing.
The Real Source of Growth
So what does work when margins are under assault?
The most reliable source of unexpected growth in revenue and profitability comes from disruptive products and business models.
Disruptive companies typically start with offerings that are simpler, more affordable, and more accessible than those of established players. They gain a foothold at the low end of the market, then move up, tier by tier, into higher-performance, higher-margin products and services.
The key isn’t complexity. It’s simplification.
Rethinking the Value You Deliver
Now apply this lens to your own business.
What products or services could you reinvent to deliver higher margins by simplifying, streamlining, or automating parts of the process? Where are you spending time and money on low-value work that clients don’t truly care about?
In my firm, we made an aggressive shift in how we create financial plans.
Data input is now almost entirely automated through API connections and assisted workflows. What once required multiple in-person meetings and hours of manual entry is now handled in one or two virtual meetings with a paraplanner or associate, at a much lower cost.
Clients also have direct access to their plans and can input information themselves if they choose.
The result? We deliver a low-cost, high-value financial plan that is simple, scalable, and disruptive to traditional planning firms that still believe everything must revolve around face-to-face data gathering.
Relationships Still Matter, But Differently
This isn’t about removing relationships from the equation. Relationships are core to understanding clients and delivering meaningful advice.
What has changed is where we spend our time.
By eliminating low-margin, tedious work, we can focus on deeper, higher-quality interactions—the kind that actually create value for clients and differentiation for the firm.
The Question for You
Enough about us.
The real question is: what does this look like in your business?
Chances are, there’s an opportunity hiding in plain sight. In a short conversation, we can often uncover something worth exploring, whether it’s a product, a process, or a shift in where you sit in the value chain.
If you’re seeing margin pressure or feeling the effects of commoditization, let’s talk.
Give me a call.