DEFINITION of Hunting Elephants
Hunting elephants describes the practice of targeting large companies or customers. Hunting elephants is a buzz term, and is used to describe a strategy of going after very large customers to sell a good or service, as well as targeting large companies for acquisition.
BREAKING DOWN Hunting Elephants
Hunting elephants is a colloquial term for describing the practice of targeting large companies as potential clients or acquisition targets. Whether selling a toaster or acquiring a competitor, companies can follow one of a number of strategies when deciding where to focus limited resources. From a sales perspective, hunting elephants emphasizes finding enterprise-level customers that will make large purchases. If a company is able to close an “elephant” sale than it may see a significant positive impact on its revenues, especially if it is able to obtain a multi-year contract. Startups that are able to close a large client may use this information when convincing other large companies that it provides a good product, as companies are more likely to work with a new company if they know that other large companies are also doing the same thing.
Focusing on large, existing companies can be a resource-intensive endeavor because other competitors have likely made a similar purchase or acquisition in the past. The average revenue per account (ARPA) is going to be much greater for elephants, but the number of companies that qualify as elephants will be lower than the number of smaller companies. Acquiring clients with low ARPA may be easier than acquiring larger-value customers, but very low ARPA clients require a company to be able to reach a large audience.
Companies looking to acquire another company also look at the cost of the acquisition relative to growth potential. The cost of acquisition can be massive, and in some cases, the perceived value of the target company may be a large multiple of its earnings. This is often the case for technology companies, as they are often in the early stages of development but the market may see lots of potential.