Knowing where you play can be key to a future successful company sale
Every industry has an ecosystem, do you know what yours is and where your company is positioned within it?
James Moore originated this strategic planning concept of a business ecosystem in the early 1990’s and initially it was intended for the high tech industry. But today, every business in every industry has an ecosystem. A business ecosystem is comprised of the network of suppliers, distributors, customers, competitors, etc that are involved in the delivery of a product or service. The idea is each entity within the ecosystem affects and is affected by the others and this ecosystem becomes a constantly evolving network.
The reason it’s important to identify where in your industry ecosystem you play is in each ecosystem there are those entities which are considered high value, essential players and others that are of lower value, less essential and could be more easily replaced. Building your company to be a high value, essential entity with your industry ecosystem could mean the difference of millions of dollars to you as the owner/CEO at time of company sale to a third party.
As a very broad example, there is an ecosystem within the technology industry where there are entities within it that focus on hardware and others on software. Early on in this ecosystem, the hardware players were considered high value entities but over time, it’s the software companies that have taken over as the higher value entities and in many cases relegating the hardware providers to more of commodity status. All the players in an ecosystem play a role otherwise they’d be knocked out. But the key is knowing whether the role of your company is playing a high value or lower value role.
When the day comes that you look to attract a third party to acquire your company, you will want to be able to articulate where within your industry ecosystem your company participates and that you’ve built a business that is in what is considered to be a higher value area of the ecosystem. Doing so could be a major difference in determining whether you are euphoric with the payout you receive for your company. We help clients determine this for their business and help them drive up valuation, talk with us (949.874.0787) to help get you started in answering this question for your company.
