PRICE OR RELATIONSHIP: SECURENOW’S DILEMMA

Secure Now, a leading insurance brokerage firm, needs to carefully balance pricing strategies
with building trusting client connections at this critical juncture. Although price sensitivity
among consumers and market competition are the root causes of the issue, the significance of
establishing long-lasting partnerships cannot be overstated.
On the one hand, the market demands competitive pricing to attract and retain clients. In the
insurance market, there are a lot of options, and buyers usually compare costs. Secure Now needs
to deliver reasonably priced solutions to be relevant and competitive. However, focusing solely
on price may put profit margins and the ability to provide comprehensive coverage at risk, which
may lead to a decline in the standard of services. Conversely, maintaining a solid clientele is
essential to long-term success. Dependability and trust are essential in the insurance sector, and
Secure Now recognizes the importance of establishing enduring connections with clients.
Building connections with clients requires understanding their needs, providing specialized
services, and ensuring a seamless claims process. This tactic might lead to good word-of-mouth
referrals, repeat business, and customer loyalty.
Secure Now must carefully weigh these two criteria. A limited concentration on low prices may
erode profit margins and jeopardize the quality of services. However, prioritizing connections
over competitive pricing may result in them losing business to less expensive alternatives.
Mehta's situation draws attention to a well-known dilemma that entrepreneurs of startups
encounter: fit vs. valuation. Mehta thinks Secure Now is worth ₹500 million, thus the ₹57
million offer from his classmate is significantly less. With this difference in opinion, who is
correct? Evaluating both perspectives is necessary to navigate this critical moment:
Mehta's Valuation:
Growth Potential: Mehta undoubtedly sees enormous riches and exponential growth in Secure
Now's cutting-edge technology and commercial potential.
Stage of Growth: Early-stage companies often struggle with valuation since they have limited
financial information and an unknown track record. Mehta might be taking prospects and
scalability into account, but normal valuation methods give priority to real financial data.
Founder Bias: Founders sometimes place an excessive amount of value on their companies
because of their natural emotional attachment to them. Optimism, while not inherently false,
needs to be restrained by candid assessments of the market.
Classmate's Valuation:
Market Benchmarking: Given the state of the industry and realistic development goals, the
classmate's offer might be based on comparable cybersecurity businesses.
Risk Mitigation: Early-stage investments are by their very nature risky. The peer may exercise
caution and evaluate potential technological issues, market compete
Investor Perspective: The classmate emphasizes the importance that money gains play as an
investment. Given Secure Now's current state of affairs and financial standing, their offer most
likely reflects their risk-reward assessment.
Mehta needs to choose her priorities. Choosing a classmate prioritizes getting money from a
trustworthy source that might be aware of the idea but has limited space for growth. While
looking for alternative investors may need more time to raise money and perhaps less compatible
partners, it also prioritizes a better valuation.
Ultimately, Mehta must weigh the trade-offs:
Fit vs. Value: Is it possible for him to accept a lower valuation in return for investor support, or
does the current offer fall short of the growth potential?
Optimization vs. Urgency: Is he in need of money immediately, or can he wait for something
better?
Collaboration vs. Control: Does he prioritize having complete control over all other
considerations, or is he open to collaborating with an investor who can offer a valuable
experience?

Let us investigate different frameworks to have a better understanding on the case. Beginning
with the SWOT Analysis:
STRENGTHS
Expertise and Reputation: SecureNow has a strong history of expertise and a good reputation in
the insurance brokerage industry.
Technological Infrastructure: The company can boost operational performance by leveraging its
state-of-the-art technical infrastructure.
Customer Base: A sizable existing clientele provides a strong foundation for building long-
lasting relationships.
WEAKNESS
Cost Structure: Potential flaws in the cost structure could make it more difficult to offer
competitive prices.
Service Gaps: Inadequacies in the company's present service offerings may make it more
difficult for it to meet the needs of a variety of customers.
Operational Inefficiencies: Any operational inefficiencies could affect the overall affordability
and caliber of the services provided.
OPPORTUNITIES
Market Trends: Identify and capitalize on recently emerging trends in the insurance industry,
such as shifting legislative frameworks or evolving customer needs.
Technological Advancements: Using technology can provide you with a competitive edge,
increase customer happiness, and simplify procedures.
Partnerships: Form strategic relationships with insurers or other service providers to broaden the
range of services offered.
THREATS
Competitive Pressures: The intense rivalry in the insurance industry puts Secure Now's market
share and profitability in peril.
Regulatory Changes: Modifications to the law may affect the cost and availability of insurance
products.
Economic Conditions: Downturns in the economy may lead to a decrease in the demand for
insurance services
Porter's and SWOT analyses enable Secure Now to develop a comprehensive action plan. For
example, by using technology infrastructure (Strength), operational inefficiencies (Weakness)
can be rectified and competitiveness boosted. One may reduce the risks related to legislative
changes and competitive limitations by looking into new market trends and forming strategic
alliances (Opportunities). By combining cost leadership strategies with relationship-building
initiatives, the company can adopt a well-rounded approach to overcome the challenges
presented by the competitive insurance market.
Subject to various assumptions, the most often applied techniques in valuation are the
Discounted Cash Flow Method and Multiples. First, applying the Discounted Cash Flow Method
with various case exhibits:
Cost of Capital (CAPM Method using Exhibit 8 and 20.39%
9)
Total Enterprise Value (DCF Method Using Exhibit 6) Rs. 1014.2 million
Minority Discount (Assumption) 26%
Illiquidity Discount (Assumption) 30%
Total Enterprise Value Rs. 525.9 million

Now, using the Multiples Approach:

Since we are evaluating minority stake private companies here, we have made adjustments for
both minority and illiquidity discounts using the DCF Approach, and simply for illiquidity
discounts using the Multiples Approach. We may infer that he can put off the company's
development goals and search for other investors to finance his growth in the future based on the
above appraisals made using the company's financials and careful consideration of the
advantages and disadvantages of each choice.