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When David Perry started his video game company, he filled a dartboard in his office with the names of companies he thought would want to buy Gaikai one day.
Why would a startup business with no revenue or employees be thinking about potential acquirers so early? For Perry, it comes down to something he refers to as “down the track thinking.”
What’s the most reliable way to create financial independence?
Let’s set aside lottery winnings and inheritances because you have very little control over either. Let’s also eliminate endeavors like staring in Hollywood movies or playing professional sports because the odds of becoming wealthy in either pursuit are slim.
How many employees do you have?
Unfortunately, the answer to that question will be how many people judge your achievements as an entrepreneur.
Tell them you have a couple of full-time people, and they may look down on you as a “wannabe” entrepreneur.
Watch a climbing stage of the Tour de France bike race and you’ll see the world’s best cyclists performing a cat-and-mouse game as they ascend a mountain pass on an 8-10% grade. One climber will pull away from the relative safety of the pack, exposing them to the wind, only to be caught by the peloton a few seconds later.
What’s the story you tell the market about your company?
Your story is the way you position your business to anyone who asks. It’s the description you use on your website, the elevator pitch your salespeople use to win a meeting, and the explanation you give when someone asks about what you do.
The word “optionality” comes up a lot these days, and you may wonder what exactly it means. In the context of business building, optionality is creating a company where you have lots of different avenues for reaching your goal(s).
Having optionality is the opposite of putting all of your eggs in one basket and is a common vein that runs through all of the value drivers we measure over at The Value Builder System™.
If you sell a service, my guess is you’ve fantasized about owning a product company.
Service companies often trade at low multiples because their biggest asset is usually the people, who are free to leave at any time. This means service businesses typically trade at low single-digit multiples and are often limited by the number of hours in the day.
Have you ever considered sharing equity with key employees? Making employees owners can help you create alignment and act as a hook to keep people around, but it may not be necessary or even desirable, as Nick Leighton found out the hard way.
Are you ever approached by people wanting your advice on how to start a business? They see you running a successful company and think, “Wow, I’d like to do that.”
Their only stumbling block is that they don’t have an “idea” for a business. They refer to an idea like it’s this mythical creature that comes along every thousand years. They mix up the role of inventor with that of entrepreneur. They spend months thinking about starting a business but never get around to pulling the trigger. They blame their inaction on their lack of an idea.
Yet the idea is the easy part.
Before Jeff Bezos & Co. blew up traditional distribution channels, there was some value in being the local “guy” or “gal.” Being the local product retailer was a good business, and being a regional distributor of a popular line could make you a mint.
Those days are almost over.
Survey a group of founders about the personality traits that made them successful, and they will be quick to use words like determination, sacrifice, and hard work. Others will show more humility and chalk their success up to personality traits like curiosity. Still, others will credit dumb luck.
However, I believe there is another personality trait that many of the most successful founders have in common…
Turning a service business into a product or software company can be tempting. While a typical consulting company may trade at a modest multiple of EBITDA, a fast-growing software company with sticky subscribers could sell at a double-digit multiple of revenue.
The difference is hard to ignore.
When David Perry started his video game company, he filled a dartboard in his office with the names of companies he thought would want to buy Gaikai one day.
Why would a startup business with no revenue or employees be thinking about potential acquirers so early? For Perry, it comes down to something he refers to as “down the track thinking.”
What’s the most reliable way to create financial independence?
Let’s set aside lottery winnings and inheritances because you have very little control over either. Let’s also eliminate endeavors like staring in Hollywood movies or playing professional sports because the odds of becoming wealthy in either pursuit are slim.
How many employees do you have?
Unfortunately, the answer to that question will be how many people judge your achievements as an entrepreneur.
Tell them you have a couple of full-time people, and they may look down on you as a “wannabe” entrepreneur.
Watch a climbing stage of the Tour de France bike race and you’ll see the world’s best cyclists performing a cat-and-mouse game as they ascend a mountain pass on an 8-10% grade. One climber will pull away from the relative safety of the pack, exposing them to the wind, only to be caught by the peloton a few seconds later.
What’s the story you tell the market about your company?
Your story is the way you position your business to anyone who asks. It’s the description you use on your website, the elevator pitch your salespeople use to win a meeting, and the explanation you give when someone asks about what you do.
The word “optionality” comes up a lot these days, and you may wonder what exactly it means. In the context of business building, optionality is creating a company where you have lots of different avenues for reaching your goal(s).
Having optionality is the opposite of putting all of your eggs in one basket and is a common vein that runs through all of the value drivers we measure over at The Value Builder System™.
If you sell a service, my guess is you’ve fantasized about owning a product company.
Service companies often trade at low multiples because their biggest asset is usually the people, who are free to leave at any time. This means service businesses typically trade at low single-digit multiples and are often limited by the number of hours in the day.
Have you ever considered sharing equity with key employees? Making employees owners can help you create alignment and act as a hook to keep people around, but it may not be necessary or even desirable, as Nick Leighton found out the hard way.
Are you ever approached by people wanting your advice on how to start a business? They see you running a successful company and think, “Wow, I’d like to do that.”
Their only stumbling block is that they don’t have an “idea” for a business. They refer to an idea like it’s this mythical creature that comes along every thousand years. They mix up the role of inventor with that of entrepreneur. They spend months thinking about starting a business but never get around to pulling the trigger. They blame their inaction on their lack of an idea.
Yet the idea is the easy part.
Before Jeff Bezos & Co. blew up traditional distribution channels, there was some value in being the local “guy” or “gal.” Being the local product retailer was a good business, and being a regional distributor of a popular line could make you a mint.
Those days are almost over.
Survey a group of founders about the personality traits that made them successful, and they will be quick to use words like determination, sacrifice, and hard work. Others will show more humility and chalk their success up to personality traits like curiosity. Still, others will credit dumb luck.
However, I believe there is another personality trait that many of the most successful founders have in common…
Turning a service business into a product or software company can be tempting. While a typical consulting company may trade at a modest multiple of EBITDA, a fast-growing software company with sticky subscribers could sell at a double-digit multiple of revenue.
The difference is hard to ignore.
