Inoculation Strategy #2: Pick Your Lane
The global economy has been expanding for several years, fueled by low-interest rates and optimistic consumers, which can be a dangerous time for founders. When the economy is hot, it’s tempting to expand outside of your original product and service category as customers seem to be willing to buy just about anything from you.
The problem with diversifying too broadly is that you can become less attractive to an acquirer over time. Acquirers buy what they could not quickly build on their own. When you diversify too broadly, a buyer may pass reasoning, that it would be relatively easy to compete with your similar products or services. They know you’ll want to get paid for all of your business, yet they may only want a small part of it.
Remember that acquirers only buy what they could not quickly build themselves, so they place a premium on buying a business with a definite competitive advantage — for example, a proven brand that consumers prefer or a protected technology innovation.
No matter what the economy has in store for the years ahead, do one thing better than anyone else, and you’ll always have a ready pool of potential acquirers for your business.