How to Increase Your Business Valuation
If you are a Microsoft partner looking to sell your business, you're in the right place at the right time. The most recent Equiteq survey found that Microsoft technology expertise continues to be the largest vendor capability associated with IT consulting M&A deals.
However, it's important to know that buyers today are more sophisticated, more selective and savvier than ever before. They can smell a bad deal from a long way off.
Buyers today have their antennae set on high alert for companies that fit specific profiles that are accretive to their overall valuation, and that are aligned with already-established expansion strategies and culture.
While there is no wiggle room for mistakes, many Microsoft partners already have a head start on positioning their companies to attract even the most selective buyers.
What Buyers Want
Want to see if your business will capture the attention of today's buying community? Here's a checklist of characteristics attractive to the types of companies that will pay well for what you've built. Assess your organization carefully to determine if you offer:
SMAC solutions. Social, Mobile, Analytics and Cloud offerings are non-negotiable -- make sure you offer solutions in these areas to attract buyers.
Depth of vertical market and domain expertise. Having a proven track record of expertise is invaluable. Strive to keep your business at the intersection of deep vertical market expertise and deep technical expertise that will service the needs of that market.
Clearly differentiated offering. Ideally, you'll want that offering positioned as No. 1 or No. 2 in the market you serve.
Double-digit annual growth. Buyers will want to see it in both your revenue and profit.
The ability to create and market IP offerings. These should flow naturally out of your specialized expertise. Future attractiveness to both technology buyers and consulting firm buyers may well depend on this.
A healthy balance sheet. You'll want to show strong retained earnings and minimal debt.
Marketable IP. Buyers will want to know that you have offerings that can drive additional service sales that are complementary to the core service being offered.
Recurring or subscription revenue. Make sure that your recurring or subscription revenue is at least 30 percent of total revenue. More is better.
A continuous stream of one new breakthrough expansion strategy per year. Maybe it's an expansion into a new geography. Or getting into a new service line. Or a new delivery system. However you do it, show some vitality.
Bold expansion strategies. Demonstrate your company's vision for the future. Is your organization caught in the grind of managing day-to-day operations, or have you positioned yourself to focus on growth?
What Buyers DON'T Want
On the flip side, the top four factors that deter buyers are:
Poor cultural fit. Why struggle to make the merger work if your employees and customers are coming in with very different expectations? It's much easier for buyers to find one where everyone's on the same page -- or at least the same book -- to begin with.
Diversity of service offerings. The more broad the spectrum of services, the less likely they are to be interested.
Market generalist focused only on technology. Today's problems are often very industry and business-specific, and so are the solutions, so deep, specialized knowledge may be more attractive. Often, buyers are looking for someone to complement capabilities they already have; broad and overlapping expertise lead them away from you.
Poor growth and profitability. Even if you have skills and expertise, buyers are looking for an extra sail, not an additional anchor. Demonstrating sound business knowledge can be as important as showcasing technical know-how.
As we said above, many Microsoft partners are already well-positioned to attract buyers. Not only do you offer solutions and expertise customers want, but you have access to the vast partner network and the resources Microsoft offers.
Continue to nurture both those partnerships and your business acumen, and one day you may well hear: "Hey there, we like the way you've built your business; we like how you've positioned yourself in the market, how you've smartly driven revenue and profit, and how you've invested for the future. We have an interested buyer. Can we talk?"
Posted by Mike Harvath on June 20, 2018 at 10:28 AM