We all know that becoming the world's best at something can help you win business. But becoming famous for one thing can also help you sell your company.
You have a number of options. You could sell to your management team or a financial buyer, but you'll probably get the highest valuation if you find a strategic buyer.
Strategic buyers are looking to pick up something they don't have and couldn't easily create on their own. When evaluating acquisition targets, they ask a few basic questions:
• How much would it cost to build from scratch what that company has created?
• How long would it take?
• How much could we buy that company for?
If you offer a hodgepodge of stuff the strategic buyer also sells, it will argue it's easier to just build what you created and drop the price below yours or hire a couple of salespeople to go after your customers. But if you offer something truly special that is difficult to replicate, the acquirer will want to buy your business.
Last month Google paid $50-million to acquire Aardvark, a unique technology company that lets users tap into the knowledge and experience of its extended network of contacts to get quick answers to specific questions. Let's say you have a peanut allergy and you're travelling to Denver. You could post a question to Aardvark that will ask your extended network for a recommendation on a safe place to eat dinner.
Aardvark didn't try to compete with Facebook for all forms of social media, it specialized in getting obscure questions answered by trusted contacts. Google is keen to take on Facebook for the social media space, so it made sense to look at Aardvark as an acquisition. Could Google have built the same technology? You bet. Could it have acquired Aardvark for less money and time than it would have taken Google to build it from the ground up? Yes again.
Aardvark therefore gets acquired.
Becoming a specialist in one thing will not only help you in your marketing, it will also help you get acquired for a premium when you're ready to exit.
Special to the Globe and Mail
John Warrillow is the author of Built To Sell: Turn Your Business Into One You Can Sell . Throughout his career as an entrepreneur, Mr. Warrillow has started and exited four companies. Most recently he transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which he sold to The Corporate Executive Board in 2008. He is the author of Drilling for Gold and in 2008 was recognized by BtoB Magazine's "Who's Who" list as one of America's most influential business-to-business marketers.