333 Million Reasons to Have an Exit Strategy Plan

Shutterfly Inc. (NASDAQ:SFLY) recently agreed to pay $333 million in cash and stock to acquire Tiny Prints Inc., the online seller of personalized cards, invitations, stationery and photo books.

Interestingly, I’m a Tiny Prints customer. I used the company to print my family’s Holiday Cards a few months ago.

Before I go on with the business lessons, some personal stuff — on top is my son Max. On the bottom, my daughter Isabella. And those smiley-face cupcakes that they are holding are incredibly good!!!

Holiday-Card

So why did I use Tiny Prints? Well the year before, I received a lot of holiday cards. And a bunch of them had the Tiny Prints website typed on the back of the card. So, I went to the Tiny Prints website. And when there, I realized just how easy they made it to create and print holiday (and other) cards. So, I became a customer.

As an entrepreneur, I want you to understand just why Shutterfly paid $333 MILLION to buy Tiny Prints. I mean, that’s a lot of money obviously, and Tiny Prints’ founders will be walking away with more money than they know what to do with.

So, the first question Shutterfly would have asked itself when considering the acquisition is the “build or buy” question. The question essentially is this: I have $333 million to spend. Would I be better off using that money to build what Tiny Prints has already built, or is the better decision to buy Tiny Prints instead?

In this case, Shutterfly chose to buy. What’s interesting is that Shutterfly is in a similar business to Tiny Prints (it also prints cards among other things).

So why would Shutterfly choose to buy? Maybe for one or more of a host of reasons including:

  • Shutterfly has operational systems that could make Tiny Prints even more profitable (or vice versa)
  • Tiny Prints has a big customer base that might also buy Shutterfly products (or vice versa)
  • The combined company gives it greater market share and ability to compete and/or realize economies of scale
  • Tiny Prints has a 220 person team already trained and in place which allows Shutterfly to grow without having to hire 220 new people
  • Tiny Prints has developed intellectual property and products that Shutterfly could leverage
  • Etc.

 
The key is that there are many reasons why big companies buy smaller ones. And why they pay HUGE premiums to buy them.

And, and this is the key: YOU need to be thinking about these reasons NOW, and build your company to continually gain more and more reasons. For example, your strategic plan MUST include building operational systems that an acquirer would value. It MUST include building unique products and/or intellectual property that an acquirer would value. And so on.

The process of preparing your company for sale is called “exit strategy planning.” It is a process that can exponentially increase the value of your business within a 12-24 month period and make your company an ideal acquisition candidate.

We recently formalized our exit strategy planning consulting service. If you would like to build and sell your company for millions of dollars, and would like to discuss having Growthink develop your exit strategy plan, fill out the contact form here (and please put “exit strategy planning” in the inquiry field).

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