Once an acquirer takes over an existing business, the aim can be to maintain it or sell it on to a third party but oftentimes the aspirations are to scale it up. Of course, growing a business is easier said than done. Here, we have listed a few ideas and strategies to help buyers scale their newly acquired internet companies.
The first big lever worth addressing is the company’s customer funnel. Conversion Rate Optimization (CRO) is key here, meaning the practice of increasing the percentage of users who perform a desired action on a website. Improving the conversion rate can include testing different calls to action or displaying testimonials and is commonly done with the help of analytics tools and rigorous A/B testing. Of course, a business’ funnel can further be improved with additional means, such as creating a loyalty or referral program to encourage existing customers to spend more money or become advocates.
The next lever to pull is marketing, which relates to the last points made in the previous paragraph. Most acquired businesses will likely already have established some marketing across a couple of channels, but there is always room for improvement. Firstly, the new owner should assess the current state of the company’s marketing initiatives and evaluate the overall mix. Scrutinizing the attribution model is key here to ensure the budgets are allocated effectively. From there on out, one can look into building out specific channels. For example, search and social media marketing commonly allow for easy scalability and oftentimes have room for improvement. Similarly, partnerships with matching brands or influencers can be fruitful, especially if the target customer is of a very specific demographic. Adjacently, setting up a sales team might be helpful if one does not already exist. Especially for more complex or B2B products, these employees can be a very valuable investment to drive more growth and subsequent revenue.
Having penetrated one market, the next step is obvious: expand into new markets. Entering new markets can be challenging, especially when it comes to regulation, logistics if you have physical products, market sentiment, marketing and education about the product. But before dealing with these many complexities, owners should carefully decide which markets to enter next. Useful tools can be the Google Keyword Planner and Similarweb for competition analysis, but before that one must understand customers local to that market, e.g. by speaking to them on/offline or analysing behaviours and preferences indirectly.
Beyond that, the new management can introduce new products, services, features and functionality. Broadening the catalogue and capabilities can help the company reach new segments, engage in cross- or up-selling, as well as create economies of scope. New services can yield similar results but are also useful for retaining customers through increased customer satisfaction thus increasing the returning customer rate. Adding new features commonly allows a business to charge more for their product and attract new users. Adding new functionality by improving existing products can have all the aforementioned effects in addition to decreased customer pain, which can prolong the lifetime value of a customer.
Businesses can also often grow - at least in terms of earnings - when increasing prices. This can be tricky as customers may revolt, so applying strategies like raising fees instead of base prices, targeting new customers with a higher willingness to pay (more) at a new price point and bundling products together can be very helpful. Getting the timing right is also key.
On the flipside, reducing costs can be a major lever in growing a business. For internet companies, renegotiating SaaS contracts or switching providers can be a great source of savings. More extreme measures can include outsourcing parts of the company to a remote workforce in low labour cost countries overseas.
A more severe step is to change the company’s business model. In very simple terms, a business model is how the business of a firm works. Changing strategies may yield opportunities for new revenue streams or higher margins, but might also pose dangers as customers might find the change off putting. For example, a business could choose to introduce a paywall and ask users to pay for content instead of financing the business through advertising. Alternatively, an eCommerce business may introduce an additional subscription service for frequently purchased products to lock-in customers.
Further resources:CRO with Hotjar, Intro guide to attribution models, Cross- and Up-Selling, How to raise prices, Tips for saving costs, Keyword Planner