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Many startup entrepreneurs dream about an exit strategy – launching their business, being acquired and striking it rich. Perhaps you have the same dream.
As an exit strategy, yes, it’s a common occurrence especially in technology. But it isn’t always easy. It helps to understand human nature – the motives of acquirers.
You have to make it a buying environment. Competitors are especially interested in acquiring a fast track to increase market share.
Some entrepreneurs buy micro companies to accelerate their business prospects.
(In my early days as a consultant to get a jumpstart in a new market in which I was unfamiliar, I bought a firm to insure that prospective clients would readily hire me. I told them: “I’m the new president of an excellent five-year-old company with an outstanding record of success.”)
Savvy acquirers are motivated to buy if they get the right answers for their key concerns about building a company vis-à-vis acquiring one.
They wonder if they’ll save time and money for potential earnings by buying a business instead of building their own startup.
Emotions can play a part in their decision-making – a fear of being left behind in a competitive marketplace – or a desire to seize an opportunity for growth.
What buyers want
They want to buy a company with tangible and intangible assets:
- A great business plan
- Strong financials
- Effective operations/business processes
- Excellent branding
- Cutting-edge technology
- A healthy community reputation
- Superb talent and human resources approach
(For specifics on the seven assets, see: When Should You Develop an Exit Strategy? Now…Here’s How.)
Before you get overwhelmed by the seven assets, not to oversimplify, but start concentrating on these three basic elements:
Talent
Savvy businesspeople know that talent is paramount. Not only companies fear losing their own great talent, but in making acquisitions, they want to acquire great talent.
A lot of sellers have great concepts, but not all have the best team of people. Make sure you have the right HR strategies for top business performance.
Intellectual property
If your concept is proven, your company will be more attractive. Patent protection is vital. Employ the basics in protecting intellectual property.
Even if your concept isn’t advanced but has wonderful potential, you might attract buyers who believe by acquiring your firm that they’ll save time and money in going to market.
Market share
For immediacy, many acquisitions occur when a buyer is able to save time and money in expanding into a new sector or region.
Often, buyers make an acquisition because they fear you and your company.
Meantime, lower your expectations of a buyout. Stay focused on your mission to grow a great company. That’s when wonderful surprises occur.
From the Coach’s Corner, related articles to help your business to be attractive to buyers:
5 Reasons for a Strategic Plan and its 6 Key Elements — Are you ready to compete? Is your company like many that need to rethink their strategic plans? Here are some tips in strategic-planning basics.
For the Best Cash Flow, Manage Your Inventory Costs with 8 Tips — With proper inventory management, you can lower your expenses and increase your cash flow. For many businesses, that means taking a look at your inventory costs. When your products aren’t selling, obviously, it hurts. Products just lurking and collecting dust in your warehouse are costing you money.
Management Best-Practices Include Solid Operations Checklists — Are you concerned about profits? Would you like for your business to be in a class of its own? Not to oversimplify, obstacles to profits result from two basic barriers: External and/or internal challenges.
For Stronger Profits, Avoid 11 Typical Pricing Mistakes — In general, how can you manage the sweet spot – between your price-optimization and costs? Dennis Brown of the consulting firm, Atenga (www.atenga.com), says many companies make 11 pricing mistakes: 1. Companies base their prices on their costs, not their customers’ perceptions of value.
It is always wise to look ahead, but difficult to look further than you can see.
-Sir Winston Churchill
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