News Article

6/13/2017

Positioning Your Company to be Acquired

You’ve decided you want out.  The rat race is killing you, but you don’t want all the hard work you’ve done building a successful IT company to go to waste.  You need to be able to sell the company and actually retire on what you sell it for.  In short, you need to sell your company in the best possible way to get the most out of it you can.  There is a way you can sell your company to give you the greatest possible selling price, but it takes time.
 
The very first thing you need to do is realize that you must position your company correctly in order to maximize its value.  That means you may not be able to retire quite as quickly as you would like.  It could take a year or two to properly get your company where it needs to be in order to attract the largest offers.  The good news is that it’s possible you may have already done several of these things so it could go faster than you think.
 
  1. Make sure all your recurring revenue is properly documented and setup as a contract.  Signed, contractual recurring revenue is worth more money than standard issue month to month recurring revenue with no contract.  Hopefully you already have this, BUT if you don’t you might need to spend the next year or two converting your client base to a contractual model.  This will help get you more money when you ready to sell the business.
  2. Make your Contracts Green! Build automatic price increases into your Contracts. Increases of 3% - 5% yearly are easy to get buy-in on if you simply make it part of your new agreements at renewal time. Some clients may question this policy but what else do they sign up for that does not increase? 
  3. Be really strong at at least one thing. Whether you are strong at a vertical market, an expert at some third party business application or have fantastic Standard Operating Procedures that are well documented and diligently followed it will help increase the overall value of your company.
  4. Make sure your name is visible in your market when you are getting ready to sell.  If no one ever hears your name on TV or the radio or online then you seem like you don’t exist.  However, if your name is visible in the marketplace and you are known then there is a likelihood that your name recognition could give you more value if you sell.  Sometimes people buy a company NOT because it’s a well-run company that is profitable BUT because they have a recognized name in the market and people covet that, especially if they are from out of town. Goodwill = Value.
  5. Come up with a compensation plan or some kind of reward to incentivize your staff to stay for at least a period of time after any acquisition.  Your new buyer will value a company that has a good staff that will stay on after a merger more highly than if the staff bolts the very first week.

While your market share, profitability and sales make up the biggest portion of what your company will be valued at, there are definitely other factors to consider and if you do your homework, you can make those intangibles as good as they can be thus driving up the price people are willing to pay for your company.  So when you start nearing your exit, start planning right to position your company to be acquired.  Your wallet will thank you.

Contact MSP-Ignite today to find out more about how you can start to fuel growth by tapping the resources of other IT leaders. Visit us at www.msp-ignite.com or call us at 888.972.0236 or email us at msp@MSP-Ignite.com to get started today.

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