Try to sell your business information technology – to avoid some common mistakes

Sell Your Business Transaction Information Technology is the most important thing you can do. Errors in this process can greatly reduce your transaction product. Do not spend twenty years of hard work and ability to grow your business as a professional just to get out as an amateur. Here are ten common errors to avoid:

1. Sale due to an unsolicited delivery Cart – One of the most common reasons owners tell us that he sold his company was an offer that was a competitor or more often these days, an Indian company looking to buy a customer base in the United States. If you were not the consideration The sale of business, you may not have taken some important personal and measures taken to going out on their own terms. The company may have some easy to fix problems can affect its value. Unable to establish an identity and style of life to replace the void caused by the separation of your business. If you're ready, it is more likely to come out on their own terms.

2. poor books and records – Business owners have many hats. Sometimes they become so focused on the next version are lax financial record keeping. Buyer make a thorough review its financial records. If they are poorly made, the buyer loses confidence in what they buy and that the perception of higher risk. If there are any negative surprises later in the process, adjustments to the purchase price can be serious. The transaction value is often attacked far beyond the economic impact of surprise. Get a good accountant to do your books.

3. Going it alone – The business owner may be grounds for the leading expert in user interfaces, but it is likely that your company will sell once in a life event. Errors at this stage have a huge impact. It is particularly important to have a good M & A advisor if you sell a company of information technology because these companies do not coincide with the traditional measures of valuation of the company. If an owner does not receive the right to representation and have several qualified buyers who covet its technology, can make a lot of money on the table. The sale of a technology is complex. Is there a better agreement with the structure of some of the transaction value as a win based on the achievement of post-sales results?

Do you understand the difference between the product tax after a sale of assets and the sale of shares? Your accountant can every day, but certainly not a tax accountant. His family business, with sales of attorney business legal work? Would advise you properly on the representatives and warranties will be in the purchase agreement? Your team will experience the buyer. Your computer should match the experiment will cost much more than their fees.

4. Skeletons in the closet – if your company has all the diligence process probably due to reveal. One of the key issues in business information technology is the intellectual property clear title. Are you employed either by agreements written? If you have hired outside programmers, has been its specific agreement on the ownership of their production? Buyer is concern that once released that the company has a lot of money, disgruntled former employees or contractors can resurface, sought legal intervention.

Before your business collapses Password buyer and thousands of people in this process and before other interested buyers are put on hold – show that the initial problem. We sold a company that had a year of finance. In the first meeting with us, he told us that his company under funded pension liability. We are able to provide the legal table and actuarial and give the buyer and their advisers in sufficient time to obtain the weapons on the subject. If this had happened later in the process, the buyer could skip the transaction, or attacked the transaction value of quantity far beyond the potential liability.

5. Leave word – Privacy Policy in the process of selling the business is crucial. If your competitors is, can cause great harm to their customers and prospects. This can be a big drain on morale and productivity. What if the head of systems development becomes capricious and maintains other utilities and leaves, while you sell? The buyer wants its people and represent a significant value of its future operations. If the word is for sale, suppliers and bankers are becoming nervous. Nothing good happens when the job is that your company is for sale.

6. Contracts poor – we mean here the contracts on a daily basis that are in place with employees, customers, contractors and suppliers. Your employees are not to compete, for example? If your company has intellectual property rights that have defined property in their employees and contractor agreements. Otherwise, you might think to close escrow after significant deductions. Are their contracts transferable without the consent of the customers? If not, customers could cancel the transaction later. Your buyer will pay in this way either. If you're tempted to sign a major agreement to negotiate the rates for pump your company the sale price, think again. Lock in a contract below market prices may indeed lead to a discount of your purchase price.

7. Employee misconduct – You make sure you have arrangements in place for employees can not be held hostage to a pending transaction. Employees Keywords are the key value transaction. If you suspect there are questions, you may want to apply the stay in premiums. If you have a bad actor, being carried in a transaction could cause problems. You may want to contact the buyer and preventive minimize any damage to your employee can cause.

8. There is no understanding the value of your business – company valuations are complex. A good business broker M & A consultant with expertise in your industry is your best bet. evaluation offices companies are great for business valuation for gifts and goods tax situations, divorce, etc. They tend to be very conservative and results may vary materially from the results of its three strategic battle buyers to purchase your business. If a service company can sell between 75% and 100% of turnover in recent years years, for example, technology companies are all over the map. One of our clients had coveted a piece of software technology and was able to get past 8 X years, sales of its purchase price. Of course, it could and could not have predicted that from the beginning of the commitment, but what a nice surprise. When it comes to selling your business, the competitive market to provide a value.

9. Enter an auction – is a visual stupid, but Imagine a large auction room occupied by a Sotheby's auction house and a guy with a shovel to tender. "Is heard $ 5 million? Everyone $ 5.5 million? The guy is sitting in the oar. Very silly, no? And yet, we hear many stories about a competitor ahead with an unsolicited offer and after some light trading the owner sells. Another common story tells his own banker, lawyer or accountant who intends to sell. Their good intentions Professional, says: "I have another client in your business. I'll show you." The next thing you know the company is sold. Believe me, these people buy your business a substantial discount. This is not ridiculous at all!

10. Far from giving the value in negotiations and due diligence – When selling your company, your goal is to obtain the best terms and conditions. I know it's a shock, but the buyer is to pay as little as possible and try to get a favorable contract for him. These objectives are not compatible with yours. The buyer will have to fight on issues such as price, in cash at closing, earn outs, notes the representatives of suppliers and guarantees the receiver and deductions, post-closing adjustments, etc. If you enter a meeting through settlement negotiations, before you know it, your Big Mac is a hamburger junior cheeseburger.

Due diligence is twofold. The first is obviously to ensure that the buyer knows exactly what you pay for. The second is to attack settings transaction value. Of course, this happens after the letter of intent sent to other bidders away from 30-60 days of exclusivity. If you do not have a good team of advisers, this can be costly

As my father used to say, there is no substitute for experience. Another said, is that when a man with money and experience do not know a man with experience, experienced man with money and the man with money leaves with some experience. Keep this in mind when considering the sale of your business. It is likely that his first and only experience. Avoid these mistakes and make the experience beneficial.

About the Author

<a href=”mailto:davekauppi@midmarkcap.com”>Dave Kauppi</a> is the editor of The Exit Strategist Newsletter and Managing Partner of <a href=”http://www.midmarkcap.com/IndustryAreas.cfm” target=”_blank”>MidMarket Capital</a>, providing business broker services to entrepreneurs in information technology, software, and high tech. Visit and review our lists of buyers and sellers. The firm counsels clients in the areas of M&A, sales, valuations, “Smart Equity Capital Raises” and revenue enhancement.

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