As you define your growth strategy, an important area to consider is which other market spaces you may want to expand into and what other companies already own, occupy or are operating in these market spaces. Some of these companies may be competitors or offer substitutes for your product, but many are heading in different directions than you are and could serve as valuable partners and allies. It can be useful to think of the market as a universe or galaxy with a number of objects of varying sizes, speeds and directions: you may be headed on a collision course, but most often there are sufficient differences that you can connect, travel together for a while, or sit in each other’s wakes.
Building off the market map you outlined with your growth strategy, you can start to fill in companies that you know are operating in your segment, the adjoining market spaces, and beyond. As with any view out to the horizon, the view up close to your space is more granular, while the objects in the distance are fuzzier. That’s fine at this stage. However, your objective with this big picture view is to 1) continually increase the granularity at all stages; and 2) gradually increase your understanding of the outer perimeter of the picture to enhance your big picture. Just as the best drivers set their sites on the distance rather than the road right in front of them, the best CEOs focus on navigating to the distance – in time and market space – while relying on their teams to safely chart the course through what is immediately in front of them.
As you consider the market spaces and look at the companies you have identified, you want to form a hypothesis as to whether you intend to build to enter that space, partner with companies in the space, buy one or more companies in the spaces, or whether the companies in those spaces may be prospective acquirers of your business. The first three (build, partner, buy) are topics for another day but with respect to prospective acquirers, a useful way of classifying them is to build a simple table with the following columns:
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Name
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Core value proposition
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Our strengths vs them
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Our weaknesses vs them
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Hypothesized approach (Build/compete; Partner; Buy; Exit)
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If Exit:
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Strategic Fit (H / M / L)
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Acquisitiveness (H / M / L)
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Ability to Pay (H / M / L)
There are a couple of different ways to approach the companies on the list. This is not always the case but broadly speaking, the company with the larger sales force is more likely to be the acquirer of product, while the one with the smaller sales force is more likely to sell their product or service into the one with the larger sales force. Given that we are focusing for now on how you can lay the groundwork for potential acquisition, an acquisition is more likely to take place from a larger company with more market reach – which means you will be selling into them (the converse applies if you are looking to acquire companies).
For an outbound, promotional approach into a larger company where you don’t already have a relationship, the two most typical and effective entry points are by you, the CEO, directly to the CEO of the larger company, or by your head of partnerships / business development to their counterpart. As with most sales or ice-breaking efforts, your direct outreach as the CEO is going to be the most effective starting point – your Sales team sells the product, while you as CEO sell the company. Best case, the prospective acquirer’s CEO responds and you start to form a relationship. Alternatively, the prospective acquirer’s CEO refers you to someone else in their organization and you turn it over to your head of business development or partnerships to move the relationship forward until such time as you and the other CEO get re-engaged. And worst case, you do not receive a response, which still leaves you options such as following up, getting a warm intro from a mutual connection, having your head of BD follow up with their counterpart, or getting their attention over time by consistently winning and serving common customers with excellence.
However the relationship starts, your goals at this early stage (recall that we are getting started years ahead of a potential acquisition) are to make contact, get to know one another, and ideally start to work together in some capacity. The best partnerships are the ones where you can “sell to, buy from, and sell with”. You are almost certainly not going to get to that point right away but “sell with” is often a mutually beneficial starting point. This generally involves both parties finding existing clients in common who would be willing to pay on top of their existing agreements for some new, synergistic combination of what both parties offer, or finding new prospects that will do so. As with all relationships, it can be slow in the early going and there are usually trust and reliance issues to work through but if the value is there and both parties are committed to making it work, you will develop a strong interconnection that will generate positive returns for both parties, and make you more attractive as an acquisition candidate down the road.
Next section: A – Choose Advisor(s)
My name is Alexander Rink. Drawing upon over 20 years of experience growing early-stage companies, my team and I help CEOs and Boards of Directors of companies from $1M to $25M in revenues identify and resolve strategic and organizational challenges to accelerate their company’s growth in a capital efficient manner.
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