Selling a Technology Business
Getting the best price when selling a technology business
In an ideal world you would start up your business and build it up to become a highly profitable, successful and well known company which someone will want to buy. However, selling a business for the maximum price is more than just about building a successful company.
Ultimately, the amount of money the business is making, or has the potential to make, is what drives prices. However, in the technology sector where the promise of future profits tends to have more weight than in other sectors, getting the non-financial side of the process right is crucial.
For the key elements that need addressing to get the best price for your technology business, simply subscribe to the Business Sale Report.
It is a good idea to have a strategy meeting once or twice a year to check that all the stakeholders have their aspirations and timescales in rough alignment.
Strategy meetings offer an opportunity to review your unique selling point (USP), best partner strategies and channel strategies.
Goetz Partners, the specialist technology corporate finance consultancy, sent a questionnaire to stakeholders in a business, asking, amongst other things, what the respondent regards as the firm's main USPs. Often the answers from within the company are very different.
Subscribers to the Business Sale Report can read more information on best practice for strategy meetings for people looking to sell a technology firm.
For technology businesses there are some crucial factors that have a significant impact on value:
Products and Services
Does your business have wide product appeal sold at a price that people are prepared to pay? If you are a niche player, you need to be able to show that there is a big enough market to expand into. This might mean that the product can be sold in multiple countries at low volumes but at high margin prices. An example might be training software for investment banks.
The most important factor-influencing price is most definitely connected to the type of product for service that is being offered…
Business Sale Report subscribers can access more on the importance of products and services when selling a technology company.
Get the best people. It might be worth spending £150k on one good salesperson already successfully selling a similar product or selling to your target market than get five less able salespeople at £30k apiece.
Business Sale Report subscribers can access more details on who and how people in the organisation can increase value.
Customers and Channels
The setting up of good channels is essential as it gives the business a platform from which it can sell its products and services. Look closely at how you can partner with customers, other companies who may have synergies with your business, resellers and distributors. Perhaps recruit someone who has set up such channels and then gone on to sell the business.
To make yourself attractive you need to have high brand profile. If your product is well known in the market, make sure your company literature, website etc highlights the product brand name and not just the company name.
In the technology world it can be hard to define exactly what you are doing. Watch out for new terms. A business was sold last year that sold software that prevented the loss of data from systems. The business said it provided Data Leakage Protection (DLP) and low and behold, soon after, a raft of businesses were sold for good multiples calling themselves DLP providers. If that is what you do, shout it!
You need to work out exactly who the likely buyers of your business are.
Find out more about buyers’ motives when looking to purchase a technology company by subscribing to the Business Sale Report.
It is imperative that in order to achieve the very best price when selling your technology business, you must follow 5 simple rules.
If, after all of this, no-one comes along and wants to buy you straight off, then you will need to actively market your business for sale.
Unless you have bought and sold businesses before it is essential that you appoint the best advisors that will spend time on marketing your business and negotiating any sale.
Timing, both in deciding when to sell and in the stages of the process, is key. The pace of change in the technology sector means that there is every likelihood that new hardware - perhaps a netbook or a smartphone - may come out that can use your technology. The iPhone has helped many business launch products and applications. Google's Android mobile platform is providing similar opportunities. New regulations can make industry-specific software desirable or even mandatory.
For more on how to target new markets when selling your technology business, and to examine industry pricing benchmarks, subscribe to the Business Sale Report.