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Tips for Selling Your IT Business for the Best Price

Few industries are more stable than the Information Technology industry.  Our global society is more reliant on technology than ever before, and most small to medium-sized businesses rely heavily on the many services provided by IT firms to stay up and running.  According to IBIS World, more than 450,000 IT businesses, from sole proprietorships to large firms, earned $30.2 billion in profit in 2018.  These numbers reflect that it is a great time to sell an IT business.  If you are considering a sale now or in the future, consider the following tips to sell your IT business for the best price.

Seek Professional Assistance

Most business owners are seen as experts in their industries.  As an information technology service provider, you are likely a leader in providing technical services to businesses.  You’ve no doubt worked with countless owners that have attempted to manage IT on their own, eventually realizing the value in your expertise.  It is no different when selling a business.  An experienced business broker can take the tasks of valuing your business and finding a perfect buyer off your hands, so you can continue to focus on what you do best—running a successful IT company.

Determining the best valuation for your Information Technology firm can be a daunting task for you to take on alone.  M&A professionals are able to draw from a wealth of knowledge and experience to value your unique business.  They know what IT buyers are looking for, and they can expertly market your business to fit those needs.  They will vet prospective buyers and manage all of the details of the sale, all while you continue to manage your business.  Working with a business broker ensures a streamlined, and often shorter, sales process.  You’ll have peace of mind, knowing that the sale of your business is in experienced hands.

Organize Your Financials

When preparing to sell your business, take time to organize and clean up your financial documents.  Your financial records may make sense to you, but they must make sense to prospective buyers as well.  If you aren’t already doing so, consider an easy to understand program, like QuickBooks, to clearly convey financial statements.  Personal expenses should not be run through the business as you prepare for sale, as they can cloud the financial picture for your prospective buyers.

You will typically need to show profit and loss statements from the last three years, in addition to tax returns and balance sheets.  Prospective buyers may want to know how your IT firm compares to the competition, so have key industry numbers and future projections on hand.  In addition, work with your business broker to be able to articulate the value that your business adds to the market.  These factors allow prospective buyers to see that your business is well managed, and this can greatly increase the potential value of your business.

Don’t Center the Business Around Yourself

After investing so much time, energy, and money into growing your IT business, it is understandable that you may want to remain involved in every aspect of the business, even as it grows.  You likely have your hand in solving complicated technical problems, interviewing new staff, building customer relationships, and negotiating contracts.  While this has no doubt led to your success in the industry, it may be seen as a red flag to potential buyers.  They want to be confident that the business will succeed once you are no longer running the show.

If you haven’t already done so, you may want to consider removing yourself from the vast majority of the company’s tasks.  Focus on hiring and training highly qualified staff that is cross-trained in multiple areas.  Begin the process of transferring customer relationships from you to account managers, and design a chain of command that allows managers to handle the bulk of the issues that arise day-to-day.  Potential buyers will recognize your well-trained staff as an asset and will value your business with that in mind.

man-and-woman-shaking-handsProvide Strong Customer Service

In the Information Technology industry, nothing is more important to the bottom line than customer service.  Because your customers are businesses themselves, getting timely assistance is critical not only to your success but to theirs as well.  Institute efficient standard operating procedures, and educate both your employees and your customers on the process to initiate and respond to service requests.  Even your IT support providers should be cross-trained in customer service, as they are often the face of the firm when they are dispatched to clients.

Business owners often depend on word of mouth referrals to find service providers, from insurance agents to accountants and information technology specialists.  Providing high-quality service to your customers can be one of the best ways to market your company to other businesses looking for a better IT experience.  Client retention is also directly linked to customer service.  As your customer base grows, so will the value of your business.

Ready to Start Preparing to Sell Your IT Business?

It is never too early to begin preparing your IT business for sale.  These tips not only increase the value of your business at the time of purchase, they may also increase your profit in the short run, while it is still under your ownership.  Don’t wait until you are ready for retirement to start thinking about the value of your business to prospective buyers.   Focus on providing outstanding customer service to your clients, and train highly qualified employees to do the majority of the business tasks.  Ensure that your financial documents are organized and easy to understand, and contact an M&A advisor to determine the best value for your business.  When the time comes to sell your IT business, you’ll be prepared.

 

 

 

The Do’s and Dont’s of Increasing Value When Selling Your Fence or Deck Company

With property values and residential construction on the rise, it’s a great time to own a fence or decking business.  Low unemployment and rising incomes have led to increased residential spending.  The demand for fence and deck companies is high as homeowners look to install new fences and decks or upgrade existing structures.

Over the past five years, fencing companies have seen uninterrupted growth, according to IBIS World.  Approximately 48,000 businesses employ 80,000 employees.  The annual revenue for fencing companies is $8.2 billion, most of which comes from residential projects, according to IBIS World.  Decking businesses have been slower to expand in recent years, but are still considered stable, with the industry bringing in $700 million in revenue annually.  Based on this information, the time may be right to sell a fence or decking business.  While it is best to let an M&A professional determine the true value of your business, the following formulas may give you a general idea of what your business may be worth:

  • 27x-3.94x SDE (Mean is 2.99)
  • 18x-5.20x EBITDA (Mean is 4.19)

Consider the following do’s and don’ts in building value in your fence or deck business.

Do Offer a Superior Product

Potential business buyers are always looking to see the value that you are adding to a particular industry.  The best way to add value to the fence and decking industry is to offer the superior products that customers are seeking and to stay on top of trends.  If you haven’t already done so, do some research on the Home Owners Associations in your area.  Know what types of fencing are approved for each neighborhood and make it available to your customers.  While many established neighborhood HOA’s may stick to a few pre-approved options, newer neighborhoods may be looking to use newer, on-trend materials.  Businesses are seeing the value of updated fencing as well.  Most still prefer basic, cost-effective chain link, but others are looking for a more stylized product to protect their business.

Not long ago, decks were seen as a functional space for a table and chairs, but today’s homeowners are looking to make the deck an extension of their living space.  Wood is still the preferred choice of material, accounting for 84% of all decks, according to IBIS World, but composite decking is on the rise.  Bench seating and other customized features are also important to homeowners.  You add value to your business and to the customer experience when you can provide design services and custom decking to customers in your area. 

Don’t Stick to Old Marketing Strategies

Having an effective, affordable marketing strategy in place is very appealing to potential buyers.  There was a time when most businesses’ advertising plans consisted only of the yellow pages, but now, plans need to be much more diverse to target and attract the right customers.  Direct mail has been around awhile, but you are now able to be much more selective in who you target.  Focusing on new homes with no fence or deck, or neighborhoods where homes are 10-20 years old, where existing structures need a makeover, may be more profitable than a citywide mailer. 

In today’s online world, social media is often the most cost-effective way to reach a large number of future customers.  You may already have a basic Facebook page with your business information.  That’s a great start, but don’t miss out on the other features social media has to offer.  Customers are visual, so be sure to show them your work by posting completed projects online in real time.  Consider Pinterest to have images of your best work reaching potential customers.  In addition, use your social media platform to showcase reviews from satisfied customers.  Not only will your online presence attract new customers, but it will also serve as an additional insight into your business for prospective buyers. 

Do Prioritize Training and Hiring

Often, when business owners have a plan to sell their business in the near future, they take the focus off of hiring and training employees.  While it’s true that some future buyers prefer to staff their new business themselves, most place value in having experienced employees already in place.  As they learn the new business, they’ll have peace of mind knowing that each position is filled with a highly qualified employee, trained to do his or her best work. 

As you prepare to sell your business, be sure to have no employee position vacancies.  Knowledgeable managers are an asset to any business, especially if they are cross-trained in a variety of areas.  You may also want to consider beginning the process of replacing family members that will not stay on after the sale with employees that plan to stay with the business for the long term.  Buyers may see red flags if they anticipate a mass exodus after the transition of ownership.

Don’t Neglect Equipment

Prospective buyers are often focused on potential profit, not future expenses.  Be prepared to show an organized workshop and tidy office space.  Ensure that all business vehicles are in good condition before you list your business for sale.  Inspect trailers and hitches to confirm they are in working order.  If equipment needs repair, consider doing this as soon as possible.  The investment to take care of these needs now will likely increase the value of your business for future buyers. 

You may also want to invest in new equipment if it’s available.  Modern workshops appeal to buyers that may not want to invest in updates once the business is purchased.  Installers with new tools may also be more efficient in their work, leading to increased productivity and therefore, more sales.  The same concept can be applied to the office as well.  Have a streamlined customer management system in place to show prospective buyers.  Establishing that effective processes are already in place will help them feel confident in a smooth transition. 

It is never too early to think about the value of your business.  Whether you plan to sell this year or many years in the future, put these practices in place to ensure your business is highly valued by prospective buyers.  Reach as many potential customers as possible through effective marketing, and offer products superior to your competitors.  Don’t lose sight of hiring and equipment maintenance, even if you are actively planning your exit.  Offering a strong business with great potential profit will put you in the best position to find the right buyer for your fence or decking company.

 

 

Finding the Perfect Buyers for Your Business

You’ve invested time, money, and countless other resources into your business, and it is understandable that you wouldn’t want to hand the business off to just anyone.  You need to be sure that your buyer is the right fit, not only someone who is willing to pay the best price, but someone that has a vision for the future of the business.  Finding the perfect buyer for your business might seem like a difficult task, but there are some things you can do now to ensure the process runs smoothly and the outcome is one that both you and your buyer will be happy with.  Consider these steps to finding the perfect buyer for your business. 

Prepare Your Business for Sale

To find the best buyer for your business, you need to put your business in the best position to sell.  Most potential buyers are looking to purchase successful, well-managed businesses.  Before you list your business for sale, be sure to tie up any loose ends the business may have.  Negotiate contracts, repair work vehicles or equipment, and fill all vacant positions with well-qualified employees.  First impressions are also important, so take the time to organize your workshop or replace worn furniture in the waiting room.  These small details do not go unnoticed by interested buyers, and they have the added benefit of increasing the value of the business as well.

In addition to preparing the tangible aspects of your business for sale, you’ll also need to prepare your financials.  To start, buyers will usually want to see profit and loss statements from the last three to five years, tax returns, and balance sheets.  Have key industry numbers and future projections on hand, and be prepared to explain the value your business adds to the market.  Clear and organized financials give buyers the overall impression that the business is well managed, an asset to those looking to make a smooth transition.

Work With a Business Broker/ Intermediary

Running a successful business takes expertise, therefore, you are most likely an expert in your industry.  You understand the value of working with industry experts, and selling your business should be no different.  The process to sell a business can be time-consuming.  An experienced business broker/intermediary will take the tasks of valuing your business and finding a buyer off your hands, so you can continue to focus on what you do best—running a successful business.

Finding the right valuation for your business can be a challenging task.  Though every business is different, business broker/intermediaries draw from a wealth of knowledge and experience to determine the best value for your business.  They know what buyers in each industry are looking for, and how to market your business to meet those needs.  They are also able to leverage their network of contacts to find and vet potential buyers, all without you needing to take time away from running your business.  While each sale is unique, working with a business broker will streamline and often shorten the process of selling your business.  Whether you plan to sell a small manufacturer or a large, multi-location business operation, an intermediary will work to ensure you have the best buyer for your business. 

Set the Right Price

After years of hard work growing a business, it’s reasonable that a business owner would want the highest valuation possible.  As previously mentioned, it can often be a difficult balancing act to find the perfect sales price.  While you don’t want potential buyers to get sticker shock and lose interest immediately, you also don’t want to miss out on profit if you price your business too low. 

Several factors go into determining the sales value of your business.  Sales, earnings, and market outlook all play an important role, but so do intangible assets like the business reputation and brand loyalty.  Buyers place value on potential for future growth, so a strong and diverse customer base is likely to greatly increase the value of the business.  Other transferable assets are also considered.  Do you own a patent or trademark?  Is real estate a part of the deal?  Be sure to clearly state everything you intend to transfer to the new owner.  This will ensure you get the best possible purchase price for your business.

Qualify the Buyers

Even when you are actively looking to sell, the thought of turning over your business to someone else may be difficult to think about.  There are many reasons people look to purchase a business, but they are generally divided into two groups.  The first group, strategic buyers, typically own one or more businesses already.  They may even be a competitor.  They are looking to see how your business will work with their existing portfolio.  Strategic buyers tend to have the resources and experience to purchase a business.  Financial buyers, on the other hand, have money to invest, and their main goal is to turn a large profit.  Financial buyers may not always have industry expertise, but they are motivated buyers that often will pay the most for the business. 

Your business broker will pre-screen potential buyers.  They will want to know that a buyer is financially qualified to purchase your business, from where they are getting financing to whether they’ve had bankruptcies in the past.  They will be looking at other factors as well, including work experience, industry knowledge, and any additional transferable skills they may have.  Intermediaries often run background checks, as well.  Once your buyer has been screened by the business broker, you can rest assured that he or she has been fully vetted and found qualified to purchase your business.

Be Patient

woman-carrying-keys-clipboard-sold-signThe best time to sell your business is when the business is going well.  One of the reasons this is true is because you have more time to find the right buyer.  Business owners often wait to sell their businesses until they have no other options, whether because of financial problems, health, or other factors.  This puts the owner in the position to take the first, not the best, offer on their business.  Placing your business for sale while things are going great not only ensures the best valuation of your business, it also gives you the time and freedom to wait for the perfect buyer.

The average length of time to sell a business is around six to nine months.  Factors like industry trends and the economy can have a great effect on how long a business is on the market.  Intermediaries typically shorten the process by finding qualified buyers and using their expertise to negotiate and close deals effectively and efficiently.  While you may be tempted to take any offer that comes to you, it is best to be patient and wait for the perfect buyer for your business.

The process to find the right buyer for your business can seem daunting, but there are things you can do to make the process easier.  Begin by preparing your business to sell.  Whether you need to focus on hiring highly qualified employees or getting your financials in order, ensure all loose ends are tied before you list your business for sale.  Next, hire an intermediary who will determine the best valuation of your business and match you with the perfect buyer.  Finally, be patient.  Trust your business broker to find the right buyer for your business, and work to make the transition as smooth as possible. 

 

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Sigma Mergers & Acquisitions LLC: 18170 Dallas Parkway, Suite 203, Dallas, Texas 75287
Dallas Business Broker, Mergers & Acquisitions Dallas / Fort Worth / Texas

214-396-8100 Office
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