Your pre-money and exit valuations are almost entirely dependent on the category in which your business operates. Before you go into business and even after starting your company, there are a few key target areas which can make the company more desireable as an acquisition target. Moving a business to higher value categories should be the ever-present desire of management, especially for managers and owners looking to grow by raising capital. Here are a few pointers on how to prepare and position your business for strategic acquisition:
How to move to a higher value category
There is never a clear path forward. Nearly every business must choose between differing demands which will pull the business into different directions. Determining which area will have the greatest impact on adding value is one of the most important strategic missions of management. Should the business be better prepared to reach massive scale? Should management seek to put up significant barriers to entry? Should there be a push toward a larger target market? What about decreasing sales cycles? Determining your area of focus can be difficult.
In many instances, the current positioning of the business is the best determinant of which direction the business should go. There is no overarching “one size fits all” fix to the direction in which to head. Like most business decisions, moving to a higher-value category for the company will require quantifiable NPV valuations of each direction in which you may be deciding to head.
In determining how to take your business to the next level to obtain venture capital or private equity funding, speaking with one of our expert finance and business consultants may be helpful.