If you have paid attention to business news, you have undoubtedly heard about a company selling or being acquired for some 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, the leadership team, the technology, patents, and most importantly, who owns the data?
This is the Exit.
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 the multiple segments of people in the space they are trying to enter and also realizing that it is those people and companies that exist in that space 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 fanbois and eventually Co-creators who will go to bat for you. You need to nail the core behavior that provides the motivation for your community to need, as well as want to work with you.
The Influencer / Business owner
What type of behavior and engagement do you need to be able to meet your mission? Can you prove it with data? Conjecture or theory doesn’t work; analytics are the thing now, and you have to support your argument or it will fall flat instantly.
Rewards vs Ads
Having the ability apply the gamification tactics allowing 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 your mission where you can reward your clients/fans to take and create a win-win relationship between brand and fan
Many entrepreneurs fail to realize there are tons of large brands who desire to connect with communities that fit their avatars. 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 or behaviors your community could take in which sponsors are also interested.
Remember when Facebook acquired Whatsapp for 19 Billion dollars? At face value, Whatsapp was a 5-year-old company that had technology that wildly sought after and user acquisition of over 1 billion people at the time of Purchase. That wasn’t the end game though. How that user data would be used was the real play. Facebook now uses that data for add retargeting purposes and to make the user experience better and adds more relevant. This is huge money and when you can show that your company has thousands or in Whatsapps case 1 billion daily active users (DAUs) then you can expect an 8-15 times multiplier on the value of your business. That’s huge!
We are aware the big trend now is to do everything without thinking about the money. At the same time, if architected properly, you can stay true to the core values and also be compensated in a big way. This allows those conscience entrepreneurs to do even more good in the world.
What types of behavior or engagement would a potential buyer or acquisition be interested in? Can you authentically merge these 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 far above the majority of influencers and entrepreneurs. 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