A term thrown around in the business world that you might have come across is a ‘unicorn’. It refers to businesses that have achieved a ‘rare’ type of status, and this article will look at what a unicorn is in business by diving into the following areas:

  • What is a unicorn in business?
  • How are unicorn businesses valued?
  • What steps can I take to increase business value?

What is a unicorn in business?

In 2013 Aileen Lee coined the term ‘unicorn’ in an article on startups. That article describes an exclusive ‘club’ of young companies that are privately owned and valued at more than $1 billion. 

Some well-known examples are companies in the US such as Airbnb, or Elon Musk’s SpaceX, and European businesses such as Klarna, or the UK’s Brewdog.

Businesses can lose the title of ‘unicorn’ if they go public and decide to release shares to the public who can buy into the business. Unicorn startups must be privately owned; however, there is no set time limit or company age on what can be classed as a ‘startup’. If the valuation drops below $1 billion, they will also have lost their coveted unicorn status.

How are unicorn businesses valued?

To be called a unicorn, each business has to be valued. The value assigned is generally based on investors and venture capitalists and how they feel the company will grow and develop over its trading life. To gain this insight, they create detailed forecasts of sales for both the long and short term.

The need for forecasting often means that the value assigned has nothing to do with the business’s financial performance. Many of the companies may not turn over much profit when they start trading. But they still may have private investors, startup capital, and crowdfunding (if applicable) that will allow them to meet the $1 billion threshold.

It’s not always as simple as just assigning a value based on capital available and investors. Sometimes if the startup is the first of its kind in the industry, it can be complicated to compare it to other business models to create forecasts, as they have no direct competitors.

What steps can I take to increase business value?

There is no one way to build a company with billion-dollar potential. But by looking at other business unicorns, you can note some similarities that could be seen as early indicators of success, even before they have received the official valuation. These indicators are:

  • The business is a simple solution to an existing common problem.
  • They have a strong, recognisable proposition – that is, a clear reason why customers should buy from them.
  • They have a clear vision for their development and a planned path to achieve it, backed by data, passion, and skills (the right team) to execute their plans.
  • A strong position in the existing industry, making them different from competitors.
  • A unique offering in terms of products or services that have never been seen before (they are first to market).

These attributes make unicorn businesses easy to market and easy to brand to become recognisable to the public. Mixed with a product or service offering that resonates with customer demand or consumer needs, this is a recipe for success.

Some unicorns may have products or services that aren’t necessarily accessible to the majority of consumers, perhaps due to price or technology that hasn’t taken off yet. These businesses will have other attributes that make their valuation so high, such as being first to market or showing that they are ahead of the curve technology-wise.

Growth strategies

Generally speaking, most unicorns have seen rapid growth. They may not always turn a profit early on, but growing quickly and maintaining that growth is what many unicorn businesses have done, resulting in long-term success.

While many businesses would like their product or brand to go viral, that spike in interest might not last very long. So to act like a unicorn, you have to ensure that your business creates effective marketing and financial strategies to sustain consumer attention over time – not just for a quick bump in profit from going viral. 

Here are some do’s and don’ts to work on to start acting like a unicorn business early on:

  • Don’t just work toward profit straight away. Only focusing on profit might result in chasing ‘quick wins’ instead of long-term success. 
  • To automate or create processes early to be efficient, so you can concentrate your time on building total revenue instead of fussing over margins.
  • Do focus on perfecting your product so that it becomes the ideal solution for your target audience. Consistently revisit the product to ensure it’s still meeting consumer needs. Not only will this increase your trust with your customers (you’re solving their problems with your product), but it will ensure you have a growing customer/user base to sustain sales long-term in the marketplace and give you an edge over your competitors.

Funding options

Once you’ve established your offering and have a viable audience who’ll buy it, you can think about funding your unicorn-to-be. There are many options, such as:

  • Bootstrap the business by investing your own funds and only spending when you have the money to do so.
  • Launch a crowdfunding campaign.
  • Seek venture capital by preparing a thorough business plan and investor pitch to gain interest.
  • Get a business loan to get your venture off the ground.

Make your accounting easier with a simple app 

By setting up a Countingup business current account, you can manage all your financial data in one place. The app comes with free built-in accounting software that automates the time-consuming aspects of bookkeeping and taxes. 

You can view real-time insights into your business’ finances, such as cash flow and profit and loss statements. The app provides running tax estimates so that you always know how much to set aside for your tax return. 

Download the Countingup app to apply for your business current account in minutes. All you need is proof of ID and a selfie. Download the app here.