How To Maximize Your Value When Selling A Software Business
It is the dream of every hard-working business owner to one day transition or sell their company. But selling a business is no walk in the park, especially selling a technical business such as a software company.
The process of selling a software company is often more challenging and time-consuming than other businesses. And, this is especially true if you don’t have prior experience selling a business.
Software Business Selling Process
From valuation to marketing to contract negotiation, all of these factors can take a toll if you don’t have an effective strategy in place. This article highlights a few steps to help you navigate the sales process and maximize your profits at closing.
1. Enlist The Services Of A Certified Exit Planning Advisor
Trying to sell your business on your own without the necessary experience can cause more harm than good. A business broker will perform a financial analysis of your business to understand your business’s financial health and help design an exit plan suitable for your objectives. If your business is complex and multi-faceted, you’ll want an expert to help structure the deal so you gain more revenue at closing.
Trying to sell your company by yourself while simultaneously running the business can create conflicting demands on your time, which can have a negative impact on both the business and the sale. An exit advisor will help you to keep your “eye on the ball” so your revenues do not decline and cash flow is positive.
It takes years of professional experience and know-how to do things like valuation, contract negotiation and closing a sale successfully. An advisor can help guide you through all the nuances of the sales process, ensure you get the deal you want, and protect your interests. These can be difficult to achieve if you take the do-it-yourself route.
2. Get Your Financials In Order
For many software companies, recurring revenue is critical to success. While a growing revenue stream is great, it won’t necessarily earn you the results you want if you don’t get your books in order.
Savvy buyers are going to pour through your financials to understand your current strengths and growth prospects. They will want to know your ratio of debt to earnings, customer retention rates, and return on investment. These will help them gauge if your company is worth the asking price. It is important to clean up your books and create a proforma before listing your business.
3. Document Your Processes
It takes strong competency and know-how to successfully run a software company. Outsiders who are unfamiliar with your processes can find it difficult to operate the business without you. If your process is complex and not well understood, it will put many potential buyers off, thus shrinking your buyer’s pool.
Savvy investors want to be sure that they can successfully run the business. For this reason, it is important to ensure that the business can operate without your direct involvement. It is also crucial to have a team in place that knows the ins and outs of the business, that way when you retire or sell the company it can continue to operate as usual. In fact, as a software company, your valuation depends greatly on the quality of employees you have and your ability to continue to grow. So before putting your company up for sale, make sure that your key employees can take charge when you exit.
Another thing you can do to reel in buyers is to document your processes, i.e. creating a step-by-step guide or procedure manual. You should structure it in a way that will allow anyone with the right skills to execute. A well-documented process increases your ability to attract a broad range of buyers.
4. Improve Your Customer Service
As a software company, customer retention is critical to your long term success. If your customers’ calls and emails always go unanswered, it sends the wrong message to the prospective buyers; even your loyal customers will look elsewhere if you can’t provide the support they need.
So if your customer service is not up to par, improve it before engaging with potential buyers. Conduct a survey via the net promoter score to find out if customers would recommend your company to a friend or colleague. Update processes to increase customer satisfaction and invest in tools that can help you optimize your support processes. Use customer support software, and other tools, to manage your customer’s questions. You can also use them to monitor your response time, resolution rates and customer satisfaction.
If you’re getting a lot of inquiries, you can incorporate some of them to your FAQ page and direct customers who might have similar questions to this page. You can also create videos tutorials to familiarize new customers with how your products or services work. If the questions you’re receiving are technical in nature, try to respond to them as soon as you can. The best solution though is to make your products user-friendly.
Sell Your Software Business for Maximum Value
Selling a software company is a complex process to navigate alone. You’ve worked hard and invested a lot into your business; you can’t afford to get this wrong. That’s why you need to enlist an advisor or a professional brokerage firm like Raincatcher to help facilitate the sale. With thousands of clients served and decades of experience closing business deals, you can’t go wrong working with our team. Contact us with your inquiry today, and we’ll help make your exit a success.
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