How to Sell an Education Technology Business
The COVID-19 pandemic has created a dramatic shift in how students learn, and education technology is a key component in the new learning process. The pandemic is affecting every level of education.
The Chronicle of Higher Education reports that only 4% of nearly 3,000 colleges surveyed were holding classes completely in person. The remaining colleges were operating completely or partially online.
This shift to online learning has been difficult for students. Best Colleges notes that students are more stressed and anxious, and they are finding it difficult to stay motivated. Education technology helps schools provide quality instruction, and keeps students engaged. Large education companies like Blackboard and Coursera use technology to create a better learning experience.
If you’re thinking about selling an education technology business, you may find a number of potential buyers. However, you need to understand the risks and potential rewards of a sale, and a business broker can help you throughout the process.
Evaluate Your Business
Assess where your business stands right now, and consider both its strengths and weaknesses. This step is important, because you may find ways to improve the business before you look for buyers. Here are some factors to consider:
What makes your product different in the minds of customers? The answer might be a website that is easy to navigate and use, or a mobile app that students can use to learn from anywhere. If customers see your business as different, you can increase sales.
When customers have a need that your business can fill, do they think of your brand first? How long have you been in business, and how well do you market your product? Companies with a high level of brand awareness are more valuable.
How much competition do you face? If your product serves a market with just a few competitors, you can gain market share and charge a higher price. This is particularly true if you were the first product in the market.
Your value proposition includes the three factors above, and other factors, including your management team and your financial results. An experienced business broker can help you define your value proposition, and use that message to market the business.
The Importance of a Business Valuation
Placing a value on a technology business is challenging if the largest asset is the company’s intellectual property. The management team and the marketing department are important, but the most valuable asset may be the code that runs the system.
Business brokers understand how to value your company, and have the analytical tools used to calculate a firm’s value. They can generate a valuation that is useful in a sale negotiation with a potential buyer.
Finding and Vetting Buyers
You’re busy managing your business, and you may not have the time or skills needed to market the business and find interested buyers. If you come across a potential buyer, how do you know if they have the financial resources to make a serious offer?
Business brokers have a network of approved buyers who have the financial resources to purchase a business. Brokers confirm whether or not a potential bidder has the necessary financial resources, so you only spend time with legitimate buyers.
Your business broker will also protect confidentiality and insist that each potential bidder sign a non-disclosure agreement before any due diligence records are shared. You’ve developed a system to manage a successful business, and you don’t want the information used by a potential competitor.
Leave the marketing process to your business broker, and you’ll speed up the sale process.
Keeping Due Diligence on Track
One of the most important steps in closing your deal is the due diligence process. Statistics show that 50% of deals fail during due diligence.
The broker can help you pull together the records you need to start the due diligence process, including financial statements, contracts, organizational charts, and your marketing plans. Brokers keep the due diligence process on track, so the potential buyer moves toward a decision.
Negotiating The Terms Of A Sale
The terms of the sale may depend on a number of variables. Here are just a few that may apply to your business:
Does the business owner leave the business immediately when the business is sold? Some owners remain during a transition period to help the buyer maintain customer relationships, and to answer management questions.
Is your management team willing to stay and work for the new owner? Does the sale provide incentive compensation that rewards managers for staying?
Are you selling the entire business or just certain assets? This decision impacts the sale price you receive, and if any portion of the business will continue to operate under the owner’s control.
Experienced business brokers can apply their knowledge to address these questions, and to maximize the price you receive for your business. Work with the experts at Raincatcher today, so you can sell your business in less time, for an attractive price.