There are two ways to start a business. The most common way is to begin without knowing where the path will lead. You complete your idea phase, test ideas and gather feedback. You launch a product or service and you go from there. You put your all into establishing a customer base and you see where it goes, with a vague plan on what you want from the next year or three or ten. It’s certainly possible to achieve an exit in this way, and many entrepreneurs do this successfully.
The other way, however, is to start with the planned exit. Using this method, you first find your acquirer, then find out their problems. You solve their problems and they buy your business from you, for millions. In this way, your exit is pre-packaged. It sounds simple on paper but raises many questions. How do I know who my acquirer is? How do I know their problems? How do I know they will buy?
Here are the steps to starting a business with a guaranteed exit.
Identify the acquirers
Think about who you know and who those people know that you could be introduced to. Even your most vague of connections might hold the keys to your next business move. Within this web of professionals are people in roles of various types, running and working for businesses of all sizes. There is probably someone in there who makes or has made acquisitions. Make sure the company could feasibly make an acquisition of the magnitude you have in mind.
Write down your list of people to talk to and work out how you can get in front of them. Can you ask them directly, can you go through a mutual connection? Can you do them a favor? Leave their book a review on Amazon, recommend their work on Twitter, or help them out in some way. Get on their radar then ask the question and try to get them on a call or meeting. Make sure you’re moving in the right circles and meeting the right people. Put yourself in front of people who make acquisitions.
Find out their problems
The goal of these meeting with potential acquirers is to find out their problems. All of them. The way to get there is by asking questions and painting metaphorical pictures of a world with all their challenges answered. What problem do you wish you could solve? What do you waste money on? What do you waste time on? What frustrates you? What opportunities have you said no to? Keep asking until you have a list of their bugbears and biggest sources of frustration.
Once you have a list, get a sense of priority. Ask their top two or three issues from those they have mentioned. Hypothetically ask, if someone were to solve one of those problems for them, would they consider acquiring that company? Get them interested and intrigued in what you might be able to offer and do this with everyone on your list.
Propose the solution
Conclude your meetings phase and get to work with problem solving. With the issues in front of you, work out what you could create. Consider which tools, software and products would eliminate hassle for the people you have spoken to and build out your idea for the best one. Rank your potential acquirers in order of who you have the best relationship with, who you have the best communication with, and their perceived integrity. Integrity will be important for the next steps.
The goal here is to have a second conversation with your acquirer where you explain that you will build a company that will be a solution to a specific problem they identified. Say that when you have built and grown this company, you are confident it will be attractive to them and their competitors. Then outline your proposal: that the person in front of you acquire this company at a certain point, perhaps when you have hit a certain revenue or onboarded a certain number of customers.
Get buy in
The magic in this way of working is that you will have created something that this potential acquirer definitely wants. You know this because they told you so. Not only will they likely become your first customer, but they also won’t want anyone else to have the tool. This puts you in a strong position to ask for a signal of commitment, perhaps in the form of a letter of intent.
Establish the best and worse-case scenario for every eventuality of your product’s success and, together, make a plan for each step. There are plenty of ways that this can work in practice. Perhaps they give you seed funding to get the idea off the ground, perhaps you raise funds from elsewhere by providing that letter of intent. Perhaps they commit to buying at a certain milestone, perhaps they simply have first refusal on an acquisition. In simple terms, you build it and they buy it. Make the buying part as certain as possible before you begin.
Build and sell the solution
Once you’ve secured your buy-in, it’s time to build the solution you imagined. Hire developers, find a brilliant project manager. Start your business as you mean to go on, with intentional action and consistent, high-quality work. Create your timescales, map out the journey. Build, test, iterate and build again. Take the product to market and acquire customer after customer. Hit all the milestones you planned to hit.
Keep your potential acquirer informed as you go. Let them know you’re making that progress. Treat them as your favorite client and strike the right balance between important updates and too much information. When you’re reaching your goals and continuing to progress, reopen the acquisition conversation and make the offer. Plan your pitch, outline your success and state your terms. Have your backup plan on standby, to give you extra confidence.
Know what you’re doing
As said by chess grandmaster José Raúl Capablanca, “you must study the endgame before everything else.” Study your endgame and work back from there. Build this company within an industry you love to make sure you persevere through the inevitable ups and downs of the entrepreneurial journey. Have a rough idea of how long you’ll be working on this solution for before acquisition comes.
As well as focusing on the endgame, position yourself to enjoy the journey. Bring an A-team along with you. Geek out on statistics, get nerdy with customer acquisition figures. Make every communication with your potential acquirer a positive one, so they look forward to hearing from you. Successfully building a company with a guaranteed exit might make you wonder why you didn’t do it sooner.