If you have paid attention to any sort of business news, you have undoubtedly heard about a company selling or being acquired for a significant amount of money. When it comes to successful exits, valuation determines the price. But what are the variables that determine how high that valuation can go?
There are a lot of factors that come into play. For instance, the leadership team, the technology, the patents, and most importantly, the company that owns the data are all major factors to consider.
This is the Exit.
The Why
Most entrepreneurs lack the experience to set themselves up to win by design vs by default with an exit strategy. This requires matching their passion to multiple segments of people in a space in which they are trying to reach and also realizing that it’s those same people who could or would want to acquire them.
The exit strategy is vital in securing a sense of confidence that the time and money your investors and shareholders/staff have spent in the build-up phase of the company is valuable and safe.
In order to have a good exit strategy, this usually relies on an understanding of five segments in any business.
The End User / Fan
If you have developed a brand, you will have fans who will go to bat for you. You need to nail the core behaviors that provide the motivation your community needs which ultimately fuel their desire to want to work with you.
The Influencer / Business owner
What type of behavior and engagement do you need to be able to achieve your mission? Can you prove it with data? Conjecture or theory doesn’t work; analytics is the thing now and you have to be able to support your argument or it will fall flat instantly.
Rewards vs Ads
Having the ability to apply gamification tactics allows people to unlock rewards (that could be highly targeted ads). Remember that because they earned a reward, it feels completely organic vs. pushed. So think of what behaviors you need to meet to achieve your mission where you can reward your clients and create a win-win relationship between brand and fan.
Sponsors
Many entrepreneurs fail to realize there are tons of large brands who desire to connect with communities that fit their demographic. When a sponsor is seen as a resource (provided by you) to your community, everyone wins in an authentic experience. This again requires matching some actions and behaviors that your community could take in which sponsors are also interested in.
Data
Remember when Facebook acquired Whatsapp for 19 Billion dollars? At face value, Whatsapp was a 5-year-old company that had technology that was wildly sought after and their user base was over 1 billion people at the time of purchase. That wasn’t the end game though. How that user data was used was the real play. Facebook now uses that data for add retargeting purposes to make the user experience better and more relevant. This is huge money and when you can show that your company has thousands, or in WhatsApp’s case 1 billion daily active users (DAUs), you can then expect an 8-15 times multiplier on the value of your business. That’s huge!
Who Could Acquire You?
We are aware the big trend now is to do everything without thinking about money. At the same time, if architected properly, you can stay true to core values and also be compensated in a big way. This allows conscience entrepreneurs to do even more good in the world.
What types of behaviors or engagement would a potential buyer or acquisition be interested in? Can you authentically merge certain key elements into the user experience? If you can answer those questions with a well-defined answer, you are on the right track to building a large company the could potentially be sold or acquired leading to a successful exit.
The fact you are taking the time to think about the entire ecosystem and merging these elements instantly sets you ahead of the majority of influencers and entrepreneurs out there. In fact, to a well-trained eye, it is what elevates you from rookie to a pro. And the pros get and keep their tribes happy and loyal.
This Article was written by Dean Grey, Founder, and CEO of Skylab USA. Skylab is a tech startup in Carlsbad CA that has created a White-labeled Social Media Engagement Platform specializing in the Science of Engagement. Skylab is actively involved in applying that psychology in today’s business ecosystem with their state of the art platform. To learn more about them, please visit https://www.skylab.world