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What’s your business worth?

March 31, 2017

What’s your business worth?

It’s an unfortunate reality that as many solution providers reach the age of retirement and begin the process of selling their business, they discover that it’s not worth as much as they thought it should be. It’s not surprising. After dedicating years of their lives to improving the business and building up a nice list of satisfied customers—and hearing what other businesses are worth—they develop unrealistic expectations of what their business is actually worth. Don’t let this happen to you. Here are a few steps you can take today that will positively impact the value of your business:

  • Calculate the real value of your business—Regardless of when you plan to sell your business, you should engage with someone who handles mergers and acquisitions to help you calculate the true market value of your business. Only then will you be able to identify the areas that require improvement. Some of the things they’ll likely suggest include the following:
  • Build recurring revenue—Consider a business model whereby everything you sell today—hardware and software—is offered as a service, or via a monthly payment/subscription. Short-term, this could impact your cash flow unless you leverage vendor and distributor programs to help you or your customers finance the solutions. You’ll also have to change how you sell to customers. Luckily, many are interested in the as-a-service model’s ability to shift expenses from CapEx to OpEx. The result is a book of business that someone will want to buy from you. Without these contracts, you only have a customer list with no guarantee of future business.
  • Have multiyear contracts—Many MSPs will tell you that they have month-to-month agreements with customers because it shows they have faith in the services they offer. It’s also an easier sale when the customer feels like they can drop the program whenever they want to. Having month-to-month agreements might be great for the customer, but it lowers the value of your business when it’s time to sell. Buyers want predictability and seeing a book of business that could leave the month after the business is sold is not very enticing. Longer-term contracts are more valuable.
  • Install systems and use tools—This will make your business run efficiently, even after you’ve sold it. The nice thing about installing systems and tools is that they can have an immediate impact on your business. Even if you’re not planning to sell for years, you can improve your business and probably eke out some additional profit.

Make sure you’re setting your business up for long-term success—even after you’ve sold it and moved on. 

We will be hosting the Specialty Invitational July 18-20th in Nashville, TN. The topics mentioned above will be presented on to help you in your day to day business.  Stay tuned to your inbox or contact Kim.Taberski@ingrammicro.com for more information on this event.