How to Sell a Technology Company

How to Sell a Technology Company 2019-12-30T11:26:56-05:00

Much like the manufacturing industry of a few decades ago, the technology sector is now playing a key role in powering the U.S. economy. The tech industry, which is worth roughly $1.8 trillion, is one of the fastest-growing fields both in the U.S. and globally.

Given this growth rate, it’s no surprise that the technology sector is generating a significant amount of deal activity. In the first half of 2018, the total number of tech industry mergers and acquisitions reached $207 billion globally – a number more than three times higher than that of a decade earlier.

With such favorable market conditions, it’s an attractive time to sell a technology firm. To complete a timely sale on favorable financial terms, however, it’s imperative to follow some smart practices before and after initiating the process.

With that in mind, let’s take a closer look at what you need to know before selling a technology business.

Take a Rigorous Inventory of the State of Your Business

Before you sell a technology company, it’s essential to evaluate the current state of your business. What are its strengths and weaknesses? What are its competitive differentiators? Do you have a unique value proposition? How do you stack up against the competition? Detailing these elements can help you build a compelling sales case for prospective buyers.

It’s also important to ensure that your financial documents are in order. This means having several years of business tax returns and other key financial records available for the buyer to examine. Financial information should also be clear, accurate, and comprehensive.

Develop an Accurate Business Valuation

Finding the right valuation is the key to getting full value for your business while also ensuring that it sells quickly. Under-price your firm, and you’ll leave money on the table; overprice it, and you might fail to generate any interest among buyers.

This is often easier said than done for many technology business owners. While they might know how to make a great software or hardware product, they typically have much less expertise in appraising the value of businesses.

Fortunately, there’s a solution to this common problem – hiring a qualified business broker. The right broker will know how to value a business by considering the full range of assets, including equipment and intellectual property; the financial performance of the business; and the desirability of the markets in which it operates, and balance this against the state of the M&A market for similar technology firms.

Sell When Your Technology Firm is in Peak Operational Condition

If you want to sell a technology business, it’s best to do so during times of high profits and growth. Buyers want to mitigate risk as much as possible; therefore, they want to know that they’re buying into a promising enterprise. Slowing sales or plunging profits only heightens the risk and makes your asset seem less attractive.

This means that it is often a smart idea to take steps to maximize customer acquisition and sales in the run-up to an exit. By devoting extra resources to marketing and advertising before putting your company on the market, you can increase sales and have a much more attractive asset.

Source Prospective Buyers and Negotiate

Marketing your technology business effectively and cultivating a group of interested buyers is critical to selling your company quickly and maximizing its value. However, few owners have the network of contacts or the marketing knowledge necessary to do this effectively. By going it alone, they run the risk of allowing their business to languish on the market for months or even years.

Unfortunately, few owners can market a business effectively or know how to find potential business buyers. However, by working with a qualified business broker, these challenges can be easily overcome. At VR New Haven, we’ve compiled a comprehensive buyer database, and we know how to match the right technology business with the right set of buyers. We also understand the conditions within each market and can help sellers choose the best time to list their company.

Negotiation is another significant element of any business sale. Buyers are going to try to push for the best possible price. If a seller doesn’t have experience at the negotiating table, they’re at a significant competitive disadvantage and may end up settling for less. That’s why it’s crucial to work with an experienced business broker such as VR New Haven – a partner who can ensure that you don’t leave money on the table.

Find the Right Business Broker to Help Sell Your Technology Company

Here’s the truth about selling a business – it’s often a protracted process, and there are a variety of pitfalls that can derail your deal. If you’d like to expedite the sale and settle on the most favorable terms possible, it makes sense to work with a qualified business broker.

A professional broker has the experience to help ensure that you do your due diligence. They can also help you prepare all of your documents and anticipate any problems that may arise during the sale process. Plus, a CT business broker firm can market your business effectively, connect you with prospective buyers, and help negotiate an attractive price for both parties.

However, choosing the right business broker is exceptionally important. At VR New Haven, we have extensive experience selling technology companies. We understand the industry, the market, and the unique characteristics of buyers for tech companies.

When you work with our knowledgeable team, you’ll follow our 9 step sales process that can help ensure that your exit is fast, smooth, and on your preferred financial terms. If you’re seeking to initiate the sale of your technology firm, we encourage you to contact VR New Haven today.