5 tips for selling your software company for maximum value
From the moment you start your software company, you should be developing an exit strategy. While you might have no plans to sell your business, things can go wrong, and you can find yourself in a position with no other option. In this case, having a plan to go to will make the entire process easier. If you do plan on selling, you should be constantly improving your exit strategy as your business evolves in order to ensure you sell your company for maximum value.
Selling a software company can be a difficult process due to the complexity of what’s involved. As the time to sell draws closer, there are a few core areas to consider so you have a successful acquisition.
Work with an experienced broker
As mentioned, selling a software company can be a difficult process. To get maximum value for your sale, you need to do everything you can at every stage. If you’ve never sold or exited a business before it will be near impossible to have the success you deserve.
A quality and experienced broker who have found that software companies are currently the most profitable type of business to sell, will usually offer free valuations. Brokers will also guide you through the entire process as you move forward, from finding potential buyers right up until the final negotiations.
Remove yourself from the business
Can your business function without you? It may be obvious but if you’re selling your company, it needs to be as simple as possible to take over. In the lead up to selling, you should aim to systematise your business.
The processes of your business should be documented in a step-by-step procedure. Detail how each sector of your company works, what tasks they carry out and how they should be completed. These documents should be easy to follow for people with the right experience.
Along with the functions of your company, you should remove yourself from the marketing and branding. If you’re the face of the business, how is it supposed to be marketed once you exit? Make sure you aren’t the centrepiece of your businesses branding. This makes it easier for buyers to take over the running of the company.
Do your bookwork
All potential buyers will be very interested in revenue and recurring profits. Your software company needs to portray recent revenue and profit gains. Buyers will value honesty and organisation, which means your books need to be in order and up to date. Not only do they want to see revenue, but they want to understand growth, costs, risk and opportunities.
As you prepare your company for sale, there’s two core components you should focus on; Maximising revenue and minimising costs. Most of the time, before a sale, it can be more effective to look at retaining current customers rather than trying to acquire more
Source code should be clean
Ultimately, your software should be built in the same language that your potential buyers are using. Again, this makes it easier for your business to be acquired. Your source code should be clean, with accurate and organised documentation and annotation. Make sure all the coding basics are set up.
When developing your code, it should follow a set of clear, concise and effective guidelines. Remember, you might have been working with the code for years, but a new buyer will want to be confident they understand how it works and how they can update it.
Customer support is key
For a Software as a Service business (SaaS), your customer service is crucial. If customers can’t get the answers they need, or are constantly asking technical questions, buyers will be wary. Therefore, it’s important that you optimise your customer support system. Ensure your system is well managed, up-to-date and you have quick response times, a high resolution rate and satisfied customers.
For a Software as a Service company, this is something that should be thought about from day one. You should also have resources and content for your customers which can answer simple questions without them having to reach out to your customer service team.
These are just 5 key areas you need to address in the lead up to the sale of your software company. Other factors like uptime of software, legal requirements and your team will all play important parts in the sale of your business. Finding a respected broker is your first step in successfully selling your company, from there they should be able to help you through the process, ensuring you get maximum value.