Startup Acquisition: What will it do for your business?
What increases your company value? Let me bring you in on a secret, startup acquisitions. Startup founders are telling us that getting acquired should be one of your long-term goals. Let’s find out why.
As a startup, you have to set a goal of getting acquired. Matt Decoursey, CEO of Full Scale, said that “If you are able to have a successful acquisition at your startup and sell it for a multiple of what your revenue is, that’s usually a huge win for the founder, for the investors, and everybody else that’s involved in owning the company.” Startup acquisition is not the end of it all.
With negotiations taking place, you have the option to have it bought out or you can stay and run the company under their umbrella. You have created value that didn’t go unnoticed. It shouldn’t be just one company but it can also be a group of investors. “Acquisitions are amazing and if you can set your business up to be acquired then you’re doing business the right way,” says Hernan Sias from Business Bro.
Increase Your Company Value, how?
Startup acquisitions basically mean that someone is paying you to acquire you as a business. You can pay it in a number of ways. It can be through cash or through stocks. Acquisitions also take different forms. Here are some examples of the types of business acquisitions:
- Horizontal Acquisitions happen between companies who are direct competitors. This is also called consolidation. Acquiring businesses, especially when they are your direct competition, will give you access to that company’s customer base, technology, and people. This increases your company’s value and results in a greater market share.
- A vertical acquisition is where one company buys a firm or a supply source used for the products they sell. This means that one big business acquires another business that is a supplier. Efficiency and control over its own supply and costs are the main goals for this type of acquisition.
- Conglomerate acquisitions happen when parent companies buy out multiple smaller companies so they can diversify risk.
- A congeneric acquisition is when two companies who perform related functions to one customer base come together. One solid example of this is when banks acquire an insurance or loan provider.
When we talk about increasing your company value, you must get an investor interested in your business. This, in turn, puts you in a position of power. Essentially, you are marketing your company to potential investors. A successful startup acquisition is a proof that you know how to do business the right way. This builds up your reputation as an entrepreneur and increases your chances of getting the right funding for your next business venture.
Why businesses acquire new businesses
The reasons why a startup acquisition happens will vary. Acquisitions are not all about takeovers. One that’s acquiring another business may want to offer a specific type of product or service. One business may have the solution for your client. You acquire a company with the goal of providing better service to your clients and possibly provide better service to their clients. Other reasons include:
- Investors see good value that runs parallel with their current business model
- Less time spent and fewer costs compared to building something new
- Competitive advantage, new client base, and possibly more profit
Business acquisitions are also strategic because it saves you loads of time developing and testing a product or service. Basically, the end goal for startup acquisitions is to gain something valuable that will help complement growth for both businesses.
Strategize and create big goals for your business
When starting a business, you have to take a look at your business model. One of the big business goals you should consider is acquisition. Mark Sias gives us a perspective on acquisitions. He said, ”acquisitions are amazing and if you can set your business up to be acquired then you’re doing business the right way.”
You gain an advantage when you attract big players to invest in your business. This is one solid proof that you know your craft. Build your reputation by creating a venue for business acquisitions all the while increasing your company value.
Though there are a lot of reasons that startup acquisitions happen, some of the top reasons include:
- Investors see good value and run parallel with their current business model
- You spend less time and fewer costs compared to building a new product
- You gain a competitive advantage, a new client base, and possibly more profit
Building your business requires focus and a trustworthy team. We’re so happy that at Full Scale, we are able to bring together awesome people who are committed to success. If you want to partner with us to help create software or digital content, we got you covered. We have a strong recruitment process to ensure that our services help elevate you towards success.
If you want to learn more about entrepreneurship and everything about startup life, check out Startup Hustle TV. Join the cast as we discuss how owning or starting a business can be both stressful and rewarding.