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How to find Valuable Gap in the Market

How Steve Murch Found a Valuable Gap in the Market

Sometimes the best way to build your business into a valuable company is to think with the end in mind. 

That’s what successful Microsoft software engineer turned entrepreneur, Steve Murch did when he launched his business VacationRentals.com. 

Over the last thirty years, we’ve seen the travel industry undergo two distinct, but business-altering transformations. Before the mid-1990s, avid travellers booked exotic hotels through trusted travel agents. The transactions were built on how well the agent could market themselves versus the number of travel options available.

All of this changed with the rise of online travel moguls Expedia and Hotels.com. Instead of going to an agent, travellers could search for their perfect hotel from the comfort of their own homes. 

Yet the true evolution took place in 1997 when Murch noticed a significant gap in the travel market. Expedia made it easy to book hotels anywhere in the world, but there were no options for villas, beach homes, or private rentals (This is much before the exploding popularity of Airbnb).

The launch of VacationRentals.com brought to life his vision where owners could list their properties, and travellers could search for homes to rent. 

The Challenge

While his idea was grand, Murch was faced with the ultimate business dilemma - the chicken or the egg. Travellers would only use his site if there were enough vacation homes, whereas owners would only list their properties with him if there were enough travellers using the site. 

Murch had two paths to consider:

OPTION 1 Go down the route many entrepreneurs do and undergo a series of costly fundraising rounds. 

OPTION 2 Think strategically about what his end goal was, and pursue a path to help him achieve it.


The End Game Strategy

Knowing where you sit in the market usually means you have a good grasp of the competition, as well as an understanding of who your potential acquirers are. This is what led Murch to go to Expedia with a brazen idea.

In return for access to the travel giant’s database of users, Murch would give them 20% of his company. 

What Expedia didn’t know, was that Murch had a secondary motive for the partnership.

He foresaw that Expedia would be a likely strategic acquirer for VacationRentals.com, and made the smart move to give up a little in the short term, to win big in the long term. 

Murch sold VacationRentals.com to Expedia three years later for a cool $87M. 

Had he opted for option one, and chosen to enter into venture capital rounds, he would’ve won in the short term but would’ve missed out on the larger, more substantial payday. He proves that it pays to build your business with the end game in mind.

Action Plan

You can learn from Murch’s success by sitting down and thinking about where you see your business going. How do you know your business is going to be valuable? 

Put yourself in the shoes of your acquirer. They will often purchase companies to:

  • Win business over from their competitors
  • Diversify their product or service offerings
  • Gain a foothold into a new market
  • Capture more market share and fix prices in their favour

So, even if you’re years away from selling, it’s important to make a list of potential strategic acquirers which may be interested in buying your business. Then, you can begin to build your business and make decisions based on what would make it attractive to these types of buyers.

Be sure to catch up on our previous article in this series

Would you rather be famous or rich?
Entrepreneurs: Do You Want To Build a Business That Makes You Famous or Rich?

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