Small fish are eaten by larger fish. It’s a common story in the tech space. If your startup is valued at $2 million to $50 million, your list of potential buyers will most likely include larger versions of your company.
So just because your startup appears to be a “small fish” does not really mean you should think small. To attain the valuation your startup truly deserve, you must first fully comprehend the kinds of customers who are interested in your service and the primary value drivers that will entice them to purchase.
Big fish aren’t the only ones who might be interested in your product. Sea lions and grizzly bears eat small fish as well; they just hunt in different ways.
Accounting buyers, like private equity firms or venture capitalists, will assess your startup primarily based on revenue generation.
They’ll look at your company’s growth history and business operations to assess the risk of investing in it.
Regardless of whether your ideal buyer is a large corporation in another market or a small corporation in your own, you should plan your exit route from the start.
Even if you’re late to the party, here are some steps you can take right now to position yourself for buyout:
Locate a high-value market
Entrepreneurs frequently believe that their businesses have intrinsic value that is determined by the market. In reality, a company is only worth what a buyer is willing to pay for it, so it’s in your best financial interest to identify big spenders in existing markets who stand to benefit the most from entering your market.
Recognize the key value drivers
Companies purchase startup companies for a variety of reasons, including employees, technology, customers, and innovation, to name a few.
Just as you understand why your clients purchase your product, you should understand why a particular company would consider purchasing your business and what you can do to optimize its perceived value.
Identify the flaws that are suffocating valuation
Once you’ve determined what your prospective buyer is looking for, you can work to eliminate the flaws that will have the greatest negative impact on valuation and invest in developing or continuing to expand those high-value aspects that are crucial to the highest-paying buyer.
Most existing entrepreneurs are totally comfortable throwing themselves in front of a big fish, expecting to be its next meal.
However, the big fish/little fish scenario isn’t the only viable exit strategy, and this limited view of the animal world may be restricting your startup’s valuation.
Expand your definition of your best buyer and know what makes you the ideal catch that would get the exit your startup truly deserves, so you know where to invest your money, time, and attention.
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