Starting a business venture requires tremendous planning. One of the foremost concerns of entrepreneurs embarking on a new business should be whether the business venture has strategic importance or not. The importance of strategic planning is reflected in the valuation a company may get due to the same. Needless to say, a new venture based on strategic value in an industry will be more attractive as compared to one with no or low strategic value.

An example of strategic planning that paid off is Baazi dot com, which was modeled on eBay. The strategy behind such a move was perhaps to increase the valuation of the company from the point of view of acquisition. When eBay wanted to enter the Indian market, acquiring Baazi made sense because it saved them the time and effort required for creating a market reach and customer base. In the process the latter made a huge sum. So the valuation of Baazi was based more on what it could offer another company looking to acquire rather than on its profits.

Businesses that command a premium price generally have a certain value-added potential. This could be in terms of distribution, customer base, geographic location, proprietary technology or intellectual or patented property of importance. For example, the time at which Vodafone acquired Hutch new licenses were not being given in the telecom sector by the government. Vodafone by taking over Hutch not only took care of that aspect, it also minimized market risks which it otherwise would have had to face as a new entrant in the industry.

Similarly, Subhiksha, one of India’s fastest growing retail outlets commands a healthy valuation today because of its market reach and customer base. Though the cost of operations might be very high in the beginning, the strategic policy to reach out to as many people as possible helps the business.