For the past 20 years you have built your information technology business. Your company has become part of your identity. Even when you are not at work, you are working, thinking, planning. You never stop. If you sell you are leaving behind much more than a job. In this article we will discuss some reasons that might indicate that it is time to sell your information technology company.
1. Late in your working life you are faced with a major system re-write, sales force expansion or capital requirement in order for your company to maintain its competitive position.
2. A large competitor is taking market share away from you at an accelerating pace.
3. Your legacy system or competitive advantage has been “leap frogged” by a smaller, nimble, entrepreneurial firm.
4. A major company just acquired a direct competitor and will be aggressively growing the business.
5. Your fire to compete at your top level is not burning as brightly as it once did.
6. Your kids are not interested or are not capable of running the business.
7. You have had a health scare and have decided to smell the flowers.
8. You have lost a major client of a key employee.
9. The market is hot and you decide to take some chips off the table for asset diversification.
10. You exit in an orderly fashion and from a position of strength as you intended.
Lets look at these in a little more detail.
Major capital investment, system upgrade or sales force expansion required – You are supposed to be diversifying your assets, not concentrating them even further. Think about a simple payback analysis. Does that extend beyond your retirement date? You want to be able to defend that investment with the energy and intensity you devoted when you were originally growing your business. Maybe it is time to bring in an equity partner with smart money, an industry buyer with the management depth, infrastructure, or distribution network to protect that investment. You might consider selling now with a three-year employment contract. Let the new owner fund the required capital investment and defend that investment with his larger capital base.
A Large Competitor is Taking Market Share Away from You – Believe me, the news is not going to get better. As an investor you would probably sell the stock in a company you owned if Microsoft or GE decided to assume a presence in that market. Business owners often struggle with objectivity when a similar event takes place in their own company’s industry.
Your Legacy Systems have been “Leap Frogged” by a Nimble Entrepreneurial Firm – This happens all the time and can cause an erosion of your customer base. Your inertia will sustain you for a while, but eventually you will begin to experience customer defections. You can either rewrite, acquire or sell. If you decide to sell, do so before losing too many clients.
A giant company in your industry just acquired one of your major competitors. Watch out, they did not make this acquisition to maintain status quo. They want to grow their market share. They will be coming after your clients. The good news is that as a defensive measure, one or more of their competitors will be compelled to make a similar acquisition. It is best to be aggressively ahead of the curve and get acquired while the market is hot and prices are being bid upwards.
Your interest and competitive fire is eroding. Let’s face it, if you are not growing, you most likely are contracting. Your competition was tough when you were on your game. Your family’s net worth is under attack if you are no longer fully committed.
Your original plan was to turn your business over to your children. They may not be interested or capable of competing at this level. Perhaps the greatest legacy you can leave to your kids is to convert your company into a diversified portfolio of financial assets that are far less risky than turning complex company in a highly competitive industry over to inexperienced managers.
You have a health scare and all of a sudden you start thinking of all the sacrifices you made and all the things you want to do before it is too late. Your list of goals is immediately changed from financial in nature to family, friends, travel, experiences, philanthropy, etc. You might want to listen to your heart this time.
You have lost a major client or a key employee. That can be a real blow to a business. The owner, by nature, is optimistic and believes that the lost business will soon be replaced and does not ratchet down the expense level to match this new sales level. If he does cut, inevitably, it is not fast enough and not deep enough. Maybe it is time to seek a buyer that could replace that business before your company’s value is severely impaired as your profits erode.
The market is hot and you decide to take some chips off the table for diversification. You may be thinking of retiring in four years, but a consolidation is occurring in your industry and valuations are up 20%. Sell at the top and sign a four-year employment or consulting contract. The odds are that if you exit on your original schedule, valuations will have settled back down to the norm.
You ring the bell and exit on your own terms, from a position of strength, exactly like you planned. You are well aware of the competitive forces in the market and the relative strength or weakness in valuation multiples. You have prepared your business to be attractive to a strategic buyer. Everything is going your way. You hire a good M&A advisory firm to present you confidentially to the most likely buyers. Several recognize your value and show interest. You are able to get a little competitive bidding going. Your transaction value rises and your terms improve. You pull the trigger and complete the sale. Mission Accomplished.
By: Dave Kauppi
Posts Tagged ‘Information Technology Business’
Ten Reasons to Sell Your Information Technology Company
January 28th, 2010The New Form Of Business Information Technology
January 14th, 2010Business information technology has come a long way in just a few years. The day of researching various companies through hard cover books is all but gone now, replaced with a much faster and more accurate system of online research tools. As well, the same amount of research work that took a dozen people or more to conduct just a few years ago is now handled by one or two people.
This is good news, especially for smaller companies who in the past were not able to afford the services of huge research team or firm. These days, many smaller companies, and some larger ones, prefer to do their own internal research which allows them to focus on only the most important factors that concern their immediate needs. But even though business information technology has become faster and somewhat easier to conduct, it still requires a certain amount of pre-planning as well as the use of some rather unique skill sets.
One of the most important skill sets is also one of the most overlooked. This is the skill set that involves knowing exactly what to research on a company. As you probably already know, most publicly held companies and many privately held companies have literally tons of data sheets online about their companies. From financials to product lines, just about anything can be located with a bit of time and energy. In a sense, this is good. In another sense, this is simply overload. The trick to effective business information technology is to narrow the search down to those issues that are most helpful in making a sales plan or presentation plan.
One way to do this effectively is to start with a set of instructions that help you identify exactly what it is you need to research and then go beyond that with helping you locate and focus your research on those issues. This allows you to avoid the overload syndrome and concentrate on that which is most important to you and your sales team.
You can, of course, hire a consulting team to teach you these skills and the best methods for conducting this type of specialized research, or you can work someone who has already mastered this type of unique business information technology process and, probably, save time and money in the process.
But how do you find someone who has already mastered these skills?
One great place to begin is with Jack Howe’s new e-edition of his “30 Minutes to Prepare for the C-Suite Meeting.” This eBook is packed with useful techniques to help boost your sales efforts. The core of this program is learning how to anticipate what a customer wants from your sales force and knowing, beforehand, how your sales force is going to handle those concerns, objections, and questions. In a sense, the research methods outlined in this eBook help you better prepare for the all important sales meeting in such a way that your team has the edge over your less prepared competition.
Learn more about this powerful system at http://www.30minsto.com.
By: Iprwire Staff Writer
Information Technology Business Plans And Virtual IT
January 13th, 2010Many computer consultants struggle to come up with solid Information Technology business plans. The main reason for this is that many fail to understand the concept of "Virtual IT" and how using it as a business model can help them build profitable and stable companies.
If you are like most consultants trying to devise Information Technology business plans, you probably are aware of the idea behind Virtual IT. However, you most likely are not using it to its full advantage as part of your philosophy of solving your clients’ biggest IT business problems.
The following 4 tips can help you embrace the concept of Virtual IT and build strong Information Technology business plans that will best serve your interests and your clients’ interests.
1. Understand What Virtual IT Means. Virtual IT is really all about becoming your clients’ outsourced IT department. Instead of just selling your customers and clients PC’s, servers, routers, Wi-Fi, cabling and other physical products, you spend your time selecting and designing their networks, looking at business problems, figuring out how to apply the technology to big business problems and bringing all the resources together into one nice, seamless package. With Virtual IT, your firm acts as a client’s part-time IT manager or Virtual CIO. Virtual IT is a convenient, flexible and comprehensive technical services program that gives small businesses access to what they need, when they need it without the financial and logistical burden of a full-time, salaried IT person.
2. Know How Virtual IT Benefits Your Business. Most successful small business computer consultants position their companies as IT departments because of the many benefits this concept provides. Positioning your firm as a true Virtual IT department for your clients helps you retain high-paying, steady clients and build long-lasting relationships. And when you base Information Technology business plans on this important concept, you can provide comprehensive solutions to big IT business problems… which makes your firm indispensable to your clients.
3. Figure Out How You Can Provide Virtual IT to Your Clients. As you build your Information Technology business plans around Virtual IT, you need to incorporate Virtual IT into the services you provide to clients. For you to deliver Virtual IT successfully and profitably through strong Information Technology business plans, you need to know what the opportunities are and what typical Virtual IT solutions look like. For example, what are the traditional types of services that you can sell to your existing and future clients? Which other opportunities exist for you?
4. Remember That Virtual IT Grows Real Relationships. Be sure that you are always continuing to add value to both your existing customers and clients, and new customers and clients. This is what Virtual IT is all about. You don’t just sell the initial network installation, and cross your fingers and hope that everything works. You also can’t wait for your customers to call you. Be proactive and provide Virtual IT on an on-going basis so you and your clients can avoid major emergencies. By providing ongoing Virtual IT services, your business will be more profitable, and both you and your clients will experience fewer headaches. Plus, your clients will be relieved that they have a trusted re for long-term small business IT support.
In this short article, we discussed 4 tips to help you use the concept of Virtual IT to build strong Information Technology business plans. Learn more about how you can get great, steady, high-paying clients through well-designed Information Technology business plans now at http://www.MyInformationTechnologyBusiness.com
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By: Joshua Feinberg
