One lesson they won't teach you in business school is that growing your user base is both difficult and expensive. In fact, it costs about $10 to get an eyeball to your website.
Buytopia is one of the largest e-commerce companies in Canada. But when we started two years ago with Ryan Marien, we only had $45,000 of startup capital. With 300 competitors in the space, we needed explosive and inexpensive growth to survive.
So how did we pull it off? Acquisitions. Over the past year, we've bought six smaller daily deal companies including PriceDodger.com, Bargoonz.com, GoBabu.com, IndulgeLiving.com, GaggleUp.com and Dealivery.ca and consolidated them under the Buytopia umbrella.
These are seven steps we took to make it happen:
1. Meet your competitors. This may seem counter-intuitive, but from the beginning we've spent time getting to know our adversaries on a personal basis. We attended trade shows and sometimes made cold calls just to build early relationships. Nobody understands your business the way your competitors do – after all, they're fighting the same battles. Use this common ground to forge a relationship. These deals wouldn't have been possible had we not nurtured these relationships early on.
2. Help your enemies. When a competitor features a problematic merchant on its website, for example, we'll often go out of our way to notify them. We have no desire for a competitor's reputation to be damaged and are more interested in protecting the industry for the consumer. As a result, our competitors are often grateful and from there, we can start to build a trusting relationship.
And though we'd never give away our secret sauce, the trust we earn goes a long way, especially when competitors start considering offers from multiple bidders.
3. Time the market. We're firm believers that a deal is just as much about the fit as it is timing. When we identify a competitor is slowing down, we'd contact them immediately. We track our competitors progress through market share, website traffic and sales data.
Khurram Shroff from GoBabu.com said, "I couldn't believe how quickly Buytopia reached out – we had already been talking about a potential merger, partnership or acquisition; management and investors were on board, all we needed was a fair offer.
4. Seal the first. The first transaction takes the most time. The legal contract starts from scratch and there's no precedent for how things will go once you merge the two companies. It took us almost five months to acquire PriceDodger.com. The legal document went back and forth dozens of times and it took a lot of diligence to work through all the possible scenarios. But after you cement the first deal, it's easy to rinse and repeat.
More importantly, there needs to be a ton of organizational energy to ensure the deal is properly executed when it closes. In our case, migrating users and sharing technology was never simple. But it was important that we executed well the first time so there could be a strong reference for future transactions.
5. Watch the mother ship. It's easy to get caught up in deal making and take your eye off your core business, especially in a startup where resources are constantly stretched. What worked well for us was to divide the work; Anatoliy was able to manage the acquisitions, for example, and Ryan and Michele were able to focus on the core business.
6. Eye on the prize. The market has been very harsh on daily deal companies in the last 18 months, but we were confident with an increased subscriber base, we could offer better value to Canadians. When we looked to acquire competitors, we were most interested in engaging subscribers. It was critical that we didn't pay a premium on resources that wouldn't add value.
7. Patience. The deal ratio is 5:1. You need to be working five leads to close one deal. Every company has a massive personal investment of time, and some of the companies we acquired had millions of dollars invested in them. So be patient. Even when a deal seems lost, the market often blows a warm breeze your way.
Michele Romanow and Anatoliy Melnichuk are the co-Founders of Buytopia.ca, a leading e-commerce player. Buytopia.ca has saved their 2 million subscribers over $100-million in 2.5 years through offers on restaurants, spas, travel and things to do in the city.