Gregory Shepard argues founders should identify their Ideal Acquirer Profile from the start. Knowing your future buyer lets you optimize customer acquisition cost and lifetime value, avoid overpricing the business, and align growth strategy with what the acquirer actually wants. Most founders figure this out too late and lose exit value.
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I had a few people ask me about the ideal acquirer profile. And so the concept of an ideal acquirer profile, which you do in the North Star at the very, very beginning, is understanding who is going to buy your company. Now, the reason why you need to do this ahead of time— I have lots of conversations with people and they're like, it's too early to do that. And investors, it's too early to do that. Entrepreneurs, it's too early to do that. When somebody buys another company, when a big company buys another company, they have already absorbed their customer acquisition cost, the CAC, to acquire, I don't know, 100,000 customers, 50,000 customers, however many customers. So what they do in order to grow that business is they buy other products to sell to that same customer base, and they do that to grow the lifetime value. They've already absorbed the customer acquisition cost, and CAC to LTV ratio is a big significant data point in order to understand where you should be investing money. So if you invest money into growing lifetime value, optimizing the customer acquisition cost that you've already paid for, it makes the CAC to LTV ratio much, much higher. So that's one reason why you want to make sure that you have Your data point of who is going to acquire your company ahead of time. Another point is, if you find out— and a lot of entrepreneurs don't find this out until it's too late— that what you have is you have a company that's used to paying, let's say, $50 million for another company, and their track record in Crunchbase shows that they're used to paying $50 million for another company, and then all of a sudden you come out and you think you're going to sell a company to them for $100 million. In that scenario, you've outpriced yourself for that acquisition, and they don't have the behavior or the appetite to do that in the future. The third reason is that if a company is trying to buy you to grow their CAC to LTV ratio, and you are thinking whether they're going to buy you on either growth margin or retention, and whatever one of those is the priority, then you have to accept the fact that investing money into growth may not be the best way to go. Because investing money into growth without understanding your ideal customer profile that matches your ideal acquirer's customer profile is going to be a dead-end street for you. Most entrepreneurs don't figure all this stuff out until they get to the home stretch, and by then it's too late. I hope this is helpful.
