Why Acquisition Should Not Be Your Whole Goal

Why Acquisition Should Not Be Your Whole Goal

Why Acquisition Should Not Be Your Whole Goal

In a business landscape where having your own startup carries undeniable cachet, entrepreneurs are guided by many motivations. Some want to be their own bosses, otherswant to turn their personal passion into a career, and still others are inspired to answer a need in the marketplace. Yet it’s undeniable that many also have their eyes on a different prize – acquisition.

This isn’t a surprise. The business pages are splashed with stories of billion-dollar acquisitions. From Snapchat rejecting a $3 billion offer from Facebook to Yahoo’s $1.1 billion purchase of Tumblr, it’s easy to understand why so many confident new business owners see a goldmine in their startups.

Let me be clear. There’s nothing wrong with making piles of money from being acquired. But those staggering sums that make media headlines are the exception, not the rule,  and if you build a company for the sole purpose of being acquired, you’ll be making a grave mistake. Here’s a look at how to avoid doing so.

View Your Business Through the Right Lens

There are reasons why businesses succeed and reasons why businesses get acquired; they aren’t always the same ones. In fact, sometimes they run  in direct opposition toeach other. Take Instagram, for example. A billion people were using the service but they weren’t generating any real revenue. While that would never be a good business strategy, it worked for getting acquired.

Unfortunately, too many entrepreneurs look at that kind of acquisition and decide that revenue won’t need to be a priority for them. This is exactly why so many startups fail: Because their focus is misplaced. Revenue is the life-blood of a successful company. If you disregard that element and fail to be acquired, you’ll be left with a starving company that can’t function. In your company’s existence, an acquisition might happen later than you predicted, or never at all.

Launching a startup requires an immense amount of energy and resources. You don’t want to walk away from the experience without a dime to show for it. Focus on generating revenue to keep your business alive and thriving. Remember the saying “pay yourself first?” Instead of dreaming about your future windfall, make a point to drive actual revenue here and now. Your business will be stronger, you’ll be compensated for all your hard work, and your startup will be that much more attractive.

Build Your Company On a Solid Foundation

Ambitious entrepreneurs with dollar signs in their eyes tend to live in the future – who might acquire them, how much they’ll be paid, the projects they’ll start after that payday. That kind of fantasy is natural to indulge in once in a while, but ultimately you’ll need to focus on the present.

The fundamentals of launching a strong business haven’t changed much, and that means developing a solid business plan. Sure, you want your company to be a success, but you’ve got to draft the roadmap toget there. After all, the business world is full of competitors. How will you attract eyeballs, get attention, engage customers? How will you stand out? What’s your potential market growth and what kind of metrics, leads, prospects, or sales ,will you use to measure your success? What goals do you want to hit a year from now?

The idea is to build your startup as if it’s a big public company that won’t be acquired. Determine the actions you need to take to get there. Yes, you’ll still be a startup, with a startup culture and startup challenges, but you’ll grow your business by following the path to big company status. Don’t get me wrong; you won’t always have all the answers on targeting customers or making all your plans fall into place. No one ever does. But you should always be proceeding toward some sort of a revenue mark.

Consider how you’d pitch and sell your company to a venture capitalist. Obviously you’d present a very positive picture that demonstrates the ways and reasons your business will make money. No VC will invest in a startup that’s being built solely for an acquisition Instead, he or she will expect to see a promising product backed by a solid business plan and a reasonable revenue pathways. Your job is to build the company you’re pitching to investors.

Keep Your Eyes On the Long-term Vision

 Here’s an uncomfortable question many entrepreneurs are afraid to ask themselves: Five years from now, what does your business look like if you haven’t been acquired?

Answer honestly. That answer will tell you whether or not you’re building the right business. If you see a future where your business had the funds to be self-sustaining five years down the road, you’re probably on the right track. But if you see your business closing its doors after a certain point, or felt a sense of dread at being trapped in the same startup for an indefinite number of years, you may need to rethink your plans.

To share my own experience here, I’ll admit that I started my company MyCase, a legal practice management software business, with the idea of a possible acquisition at some point. However, I also positioned the company to generate enough revenue that we could keep running it on our own if that’s what we ultimately decided to do. Our decisions and growth were never guided by thoughts of an acquisition, but rather the plan to build long-term success. Trust me – if you do that, everything else will fall into place.

To summarize my advice bluntly, getting acquired should be a want, not a need. If your startup and your professional future hinge on an acquisition, you’ve set yourself up for failure. Instead, build a strong company on a foundation of intelligent planning and design a strategy that can take you into a profitable future. Maybe you’ll hit the acquisition jackpot, maybe you won’t. Either way, you and your career will land in an enviable place.

Matt Spiegel

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