Platform risk is a line item.
Most small software businesses depend on a platform: a search engine, an app store, a marketplace or another company’s service. That dependence has a cost. It belongs in the numbers, not in a footnote.
Contents3.1A cost that does not appear.1 / 4
§ 3.1
A cost that does not appear.Until it does.
Hosting, support and payment fees appear in the accounts every month. Platform risk does not. It appears all at once, when a rule changes, an algorithm shifts or a price rises.
Because it appears all at once, it is easy to ignore in a good year. It is also easy to overreact to in a bad one. The useful response is to measure it.
§ 3.2
Three ways to measure it.Share, replacement cost and history.
- Measure 1
Share
What share of revenue, new customers or traffic depends on one platform?
- Measure 2
Replacement cost
If that platform stopped working for you, what would it cost in time and money to replace it?
- Measure 3
History
How often has the platform changed its rules or prices, and what happened to businesses like yours?
§ 3.3
How we treat it in a review.We model the loss.
When we review a business, we model what happens if it loses its largest customer, its largest channel or its most important platform. A business that survives that case is a stronger acquisition.
A dependence is not a reason to pass on its own. Many good businesses are built on a platform. We want to know the size of the risk, and whether the price and the plan reflect it.
§ 3.4
How to reduce it.Before a sale, or instead of one.
Add a second channel before you need it. Build direct customer relationships. Keep your product compatible with more than one platform where that is practical. Read each platform’s terms and follow them.
None of this removes the risk. It turns a cliff into a slope.
End of essay 3