Do These Things and You’ll Maximize Your Sale Price and Cruise Your Way Through the Process
I’ve spoken to hundreds of MSP and IT business owners over the years and one of the common threads during my conversations is that many of them have the dream of selling their business for millions of dollars one day. Unfortunately for many of these business owners, their dream will never become a reality because their business will struggle and won’t achieve the value they hope or worse, their business will go bankrupt.
But there is definitely a way you can build your business properly so that it becomes attractive to potential buyers, not to mention that it’s extremely empowering knowing that you have a company that is desirable and ready to be sold on your timeline, not someone else’s.
From 2004 to 2013, I founded and managed an IT services company based in the Toronto area. During that span, I built a multi-million dollar recurring revenue business and I’d been approached by many organizations who were interested in acquiring my company. In 2013, I successfully sold my company to j2 Global, an $800 million US-based cloud services company. I stayed on with j2 for another 2 years and during that time, I was personally involved with eight MSP acquisitions. I’ve seen all shapes and sizes. We acquired well-run companies and companies that were upside down, and their valuations were reflected accordingly.
From my first-hand knowledge, I’d like to share with you 6 great tips to make sure your company is poised for a successful acquisition.
- Establish your goals
- It’s important to define what a winning scenario looks like for you! Points to consider include:
- The price tag you need to achieve to make it worth your while
Your preference between continuing to run your company as it is today or if you are comfortable if you get absorbed and your brand identity goes away - Your preference to stay on and continue to be employed or if you would like to cash out and disappear
Is it important to you that your employees will stay employed or are you comfortable if they all get let go after the acquisition? - Your preference to sell your entire company or just a piece
- The price tag you need to achieve to make it worth your while
- It’s important to define what a winning scenario looks like for you! Points to consider include:
- Educate yourself on the process, understand the difference between an asset purchase and a share purchase
- Talk to others who have been through the process. Points to investigate include:
- Any pitfalls to watch out for
- Understanding the difference between a share sale and an asset sale, and which one is better for you
- The estimated length of the process, and the associated milestones
- The typical information that is requested during a due diligence exercise
- Talk to others who have been through the process. Points to investigate include:
- Focus on your financials
- A healthy P and L and balance sheet makes a world of difference to your valuation. Ensure you:
- Set revenue goals before you sell.
- Get ORGANIZED.
- Get your debt under control.
- Get your accounts receivable under control.
- Keep the cash flowing.
- Become as profitable as you can to maximize your value.
- A healthy P and L and balance sheet makes a world of difference to your valuation. Ensure you:
If you thought these points were helpful, you’ll want to check back for Part 2 of this blog article to get the next 3 tips!