“Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world”. -Joel A. Barker
At the core of its heart, every activity is associated with some specific target. To have clarity on the target beforehand helps in determining the right progress trajectory of the activity. Without clarity on vision, the activities keep on running an endless race. Same is applicable for startups as well.
If you are starting a startup, the target should be clear from the very first day, so that all the strategies could be developed and tracked as per the desirable success target and rate. Entrepreneurs have two major objectives for their business models, either to become the biggest player of market and acquire the small startups or the expert of some domain and getting acquired by big players.
So, if the target of your startup is to become an expert of some vertical and getting acquired later on, the focus of entire business model should be to develop the market base of targeted player so that it could become noticeable for acquisition.
FS Analysis on Startup Buying and Selling – Startup buying and selling has become a common phenomenon in contemporary market place. It helps in getting the established consumer base, expanding the business verticals, enhancing the business presence and getting the developed setup for business. Here are the major factors that entrepreneurs should keep in mind while getting into the market with focus of selling the startup in future to some big player.
Assumptions for Entire Case Study– 1. The targeted player to sell your startup is working in domain of e-commerce of electronic products and has developed a loyal consumer base by its excellent supply chain and related services.
2. The targeted player is well funded and have sufficient fund to expand or change its business model as per the market need or to stop the penetration of other players into its loyal consumer base.
3. The targeted player is aggressive enough to accept the changes in its business model.
Business Models with Low Probability of Acquisition- If you are targeting to sell your startup to the above mentioned player, following business models have less probability of acquisition.
[A] Same Model with Same Product–Let’s assume you are planning to start a business model of e-commerce of electronics items. Assumed that all the features and services of big player are already incorporated by you in your business model, you are planning to capture the untapped customer base or focusing on penetrating the customer base of big player. Now try to get the genuine reason for following questions-
- Why would consumer buy from you, when they have the choice of well-established and trusted player?
- Why would the big player not be able to incorporate the additional features of your business model into its own and through you out of the market?
- Why would the big player allow you to penetrate into its established market volume? Unless this happens – Read Mayo War!
- Why would the big player not be able to capture the untapped customer base before your business model starts getting prevalent?
- Why would the big player not be able to apply “Cash Burnt Market Capturing Tricks” to stop your infiltration?
The answer to all of these questions leads towards one answer only that the big players are never interested in acquiring the same business model instead their target is to expand their own business.
[B] Same Model with Different Product- Let’sassume you are planning to start an e-commerce business model with different product of the assumed big player. Assuming you are trying to replicate the same model of established player of electronics items, your target is to capture the market volume as much as possible and sell it to the big player of electronics e-commerce. Now, try to find the answer to the following questions-
- What would stop big player to introduce one more vertical into its business model on its own?
- Why would consumers not trust on the established player?
- What is extra in that new product of yours which will divert customer traffic toward your product?
The whole point is that the acquisition probability of same business model with different product is less because the big players have all the resources required to grow themselves in another verticals as well.
[C] Different model with same product- Let’s assume you are planning to start the review platform for electronics products i.e. your business model is different than the targeted player of same product. Assuming that your business model is nowhere linked with that of targeted player, the probability of acquisition is less. Reason being you are not affecting the direct market volume of big player in any way.
Business Models with High Probability of Acquisition – Following business model have high probability of acquisition by the targeted player of e-commerce of electronics items-
[A] Enhancement in Business Verticals – If you introduce a business model that gives an enhancement in the business verticals of targeted player has higher chances of acceptance, provided you are able to establish a loyal consumer base and big player is not able to develop that vertical soon.
Suppose you provide on demand installation, repair and maintenance of electronics products and have developed a good reputation in the market, the probability of acquisition is high because it provides an enhancement into the business verticals of targeted player and works as an added benefit to the CRM of existing player. Snapdeal acquired Freecharge, Exclusively and Esportsbuy to add new verticals in its business. (Read it here – Snapdeal Acquisition Trend)
So, FS advises founders to analyze the business models of all the competitors and start developing a setup that is directly linked with prospective improvement in the business verticals of established players and start developing a loyal market base for your startup. Chances of your startup buying and selling will increase in this scenario.
[B] Enhancement in Customer Acquisition, Pre Sale- If you are planning for a business model that would help the targeted player to enhance consumer acquisition through mobile/website or any other marketing technique, the probability of acquisition is high, provided your platform is robust enough with awesome user interface.
Suppose you provide a technology platform or a mobile app which reveals number of an electronics item which is being sold in the area related to a target customer. If customer is getting continuous information about that product being sold in big numbers, he is definitely bound to visit stores to check that product or buy it online. Flipkart acquired companies like Mime360, Chakpak, Adiquity and Appiterate due to same reasons – (Read it here – Flipkart Acquisition Trend)
So, FS advises startups to develop a tech based customer acquisition platform with good user interface to enhance its chances of getting acquired in recent future.
[C] Enhancement in Better Customer Service, During Sale- If you are able to enhance the business model of a big player by providing the related services to its consumers, the probability of acquisition is more.
For our case study – With customer expectation of delivery as soon as possible and the most challenging area of startup business is ‘Last mile delivery’. By any chance you are able to figure out the puzzle of having a better war to manage inventory or making the product reach to its buyer within least possible time, you are on the big radar of all online market sellers.
Warehousing, inventory management solution, delivery force, courier service are few to name which make the cut into this kind of service.
So, FS advises founders to understand the business models and products of targeted player and provide the related services that are remaining untouched by the big players.
[D] Enhancement in Consumer Relationship, Post Sale- If you are planning for a business model that would help the targeted player to enhance its consumer base service management, the probability of acquisition is high, provided your services are robust enough to make big players trust on you.
Suppose you provide a Consumer Relationship Management platform for electronics products, where experts and users can solve the product related queries of other users would attract the big players, so that they can drive traffic to their product base via that platform.
So, FS advises startups to look into the consumer relationship management tactics of big players and develop a better solution of it.
Here is the overall advice to entrepreneur for being specific on the long term goal of startup buying and selling-
- Analyze the problem for which you are providing the solution.
- Estimate the market competition for your startup – Direct as well as Indirect.
- Get consumer feedback on startup prototype and check the potential of your startup concept.
- Based on the market need and acquisition trends of targeted player, alter your business model aligned with your long term target of acquisition.
Wish you luck for your startup. Stay tuned for more updates.