Information Technology Business

Information Technology Business Plans And Virtual IT

Joshua Feinberg asked:

Many computer consultants struggle to come up with solid Information Technology business plans. The main reason for this is that many fail to understand the concept of "Virtual IT" and how using it as a business model can help them build profitable and stable companies.

If you are like most consultants trying to devise Information Technology business plans, you probably are aware of the idea behind Virtual IT. However, you most likely are not using it to its full advantage as part of your philosophy of solving your clients’ biggest IT business problems.

The following 4 tips can help you embrace the concept of Virtual IT and build strong Information Technology business plans that will best serve your interests and your clients’ interests.

1. Understand What Virtual IT Means. Virtual IT is really all about becoming your clients’ outsourced IT department. Instead of just selling your customers and clients PC’s, servers, routers, Wi-Fi, cabling and other physical products, you spend your time selecting and designing their networks, looking at business problems, figuring out how to apply the technology to big business problems and bringing all the resources together into one nice, seamless package. With Virtual IT, your firm acts as a client’s part-time IT manager or Virtual CIO. Virtual IT is a convenient, flexible and comprehensive technical services program that gives small businesses access to what they need, when they need it without the financial and logistical burden of a full-time, salaried IT person.

2. Know How Virtual IT Benefits Your Business. Most successful small business computer consultants position their companies as IT departments because of the many benefits this concept provides. Positioning your firm as a true Virtual IT department for your clients helps you retain high-paying, steady clients and build long-lasting relationships. And when you base Information Technology business plans on this important concept, you can provide comprehensive solutions to big IT business problems… which makes your firm indispensable to your clients.

3. Figure Out How You Can Provide Virtual IT to Your Clients. As you build your Information Technology business plans around Virtual IT, you need to incorporate Virtual IT into the services you provide to clients. For you to deliver Virtual IT successfully and profitably through strong Information Technology business plans, you need to know what the opportunities are and what typical Virtual IT solutions look like. For example, what are the traditional types of services that you can sell to your existing and future clients? Which other opportunities exist for you?

4. Remember That Virtual IT Grows Real Relationships. Be sure that you are always continuing to add value to both your existing customers and clients, and new customers and clients. This is what Virtual IT is all about. You don’t just sell the initial network installation, and cross your fingers and hope that everything works. You also can’t wait for your customers to call you. Be proactive and provide Virtual IT on an on-going basis so you and your clients can avoid major emergencies. By providing ongoing Virtual IT services, your business will be more profitable, and both you and your clients will experience fewer headaches. Plus, your clients will be relieved that they have a trusted re for long-term small business IT support.

In this short article, we discussed 4 tips to help you use the concept of Virtual IT to build strong Information Technology business plans. Learn more about how you can get great, steady, high-paying clients through well-designed Information Technology business plans now at http://www.MyInformationTechnologyBusiness.com

Looking to Sell Your Information Technology Company – Avoid Some Common Mistakes

Dave Kauppi asked:

Selling your information technology business is the most important transaction you will ever make. Mistakes in this process can greatly erode your transaction proceeds. Do not spend twenty years of your toil and skill building your business like a pro only to exit like an amateur. Below are ten common mistakes to avoid:

1. Selling because of an unsolicited offer to buy – One of the most common reasons owners tell us they sold their business was they got an offer from a competitor or more often these days, an Indian company looking to buy a customer base in the United States. If you previously were not considering this business sale, you probably have not taken some important personal and business steps to exit on your terms. The business may have some easily correctable issues that could detract from its value. You may not have prepared for an identity and lifestyle to replace the void caused by the separation from your company. If you are prepared, you are more likely to exit on your own terms.

2. Poor books and records – Business owners wear many hats. Sometimes they become so focused on the next version release that they are lax in financial record keeping. A buyer is going to do a comprehensive look into your financial records. If they are done poorly, the buyer loses confidence in what he is buying and his perception of risk increases. If he finds some negative surprises late in the process, the purchase price adjustments can be harsh. The transaction value is often attacked well beyond the economic impact of the surprise. Get a good accountant to do your books.

3. Going it alone – The business owner may be the foremost expert in GUI interfaces, but it is likely that his business sale will be a once in a lifetime occurrence. Mistakes at this juncture have a huge impact. It is especially critical to have a good M&A advisor if you are selling an information technology company because these companies do not fit traditional company valuation metrics. If an owner does not get the right representation and have several qualified buyers that covet his technology, he possibly can leave a lot of money on the table. Selling a technology company is complex. Is it a better deal to structure some of the transaction value as an earn out based on post acquisition sales performance?

Do you understand the difference in after tax proceeds between an asset sale and a stock sale? Your everyday bookkeeper may not, but a tax accountant surely does. Is your business attorney familiar with business sales legal work? Would he advise you properly on Reps and Warranties that will be in the purchase agreement? Your buyer’s team will have this experience. Your team should match that experience of it will cost you way more than their fees.

4. Skeletons in the closet – If your company has any, the due diligence process will surely reveal them. One of the key issues in information technology companies is the clear title to intellectual property. Are your employee agreements well written? If you hired outside programmers, was their agreement specific in ownership of their output? The concern of the buyer is that once it becomes public that the deep pockets company is owner, previous disgruntled employees or contractors may resurface looking to bring legal action.

Before your firm is turned inside out and the buyer spends thousands in this process and before the other interested buyers are put on hold – reveal that problem up-front. We sold a company that had an outstanding CFO. In the first meeting with us, he told us of his company’s under funded pension liability. We were able to bring the appropriate legal and actuarial resources to the table and give the buyer and his advisors plenty of notice to get their arms around the issue. If this had come up late in the process, the buyer might have blown up the deal or attacked transaction value for an amount far in excess of the potential liability.

5. Letting the word out – Confidentiality in the business sale process is crucial. If your competitors find out, they can cause a lot of damage to your customers and prospects. It can be a big drain on employee morale and productivity. What if your head of systems development gets skittish and entertains offers from other companies and leaves while you are selling? The buyer wants your top people and they represent a significant portion of your future transaction value. If word you are for sale gets out, your suppliers and bankers get nervous. Nothing good happens when the work gets out that your company is for sale.

6. Poor Contracts – Here we mean the day-to-day contracts that are in place with employees, customers, contractors, and suppliers. Do your employees have non-competes, for example? If your company has intellectual property, do you have very clear ownership rights defined in your employee and contractor agreements. If not, you could be looking at meaningful escrow holdbacks post closing. Are your customer agreements assignable without consent? If they are not, customers could cancel post transaction. Your buyer will make you pay for this one way or another. If you are tempted to sign that big deal at bargain rates to pump up your business selling price, think again. Locking in a contract at below market rates could actually cause a discount to your selling price.

7. Bad employee behavior – You need to make sure you have agreements in place so that employees cannot hold you hostage on a pending transaction. Key employees are key to transaction value. If you suspect there are issues, you may want to implement stay on bonuses. If you have a bad actor, firing him or her during a transaction could cause issues. You may want to be pre-emptive with your buyer and minimize any damage your employee might cause.

8. No understanding of your company’s value – Business valuations are complex. A good business broker or M & A advisor that has experience in your industry is your best bet. Business valuation firms are great for business valuations for gift and estate tax situations, divorce, etc. They tend to be very conservative and their results could vary significantly from your results from three strategic buyers in a battle to acquire your firm. Where a services business may sell for between 75% and 100% of last years sales, for example, technology companies are all over the map. One of our clients had a coveted piece of software technology and was able to get 8 X last years sales as his purchase price. We certainly could not have and would not have predicted that at the start of the engagement, but what a nice surprise. When it comes to selling your company, let the competitive market provide a value.

9. Getting into an auction of one – This is a silly visual, but imagine a big auction hall at Sotheby’s occupied by an auctioneer and one guy with an auction paddle. “Do I hear $5 million? Anybody $5.5 million?’ The guy is sitting on his paddle. Pretty silly, right? And yet we hear countless stories about a competitor coming in with an unsolicited offer and after a little light negotiating the owner sells. Another common story is the owner tells his banker, lawyer, or accountant that he is considering selling. His well-meaning professional says, “I have another client that is in your business. I will introduce you.” The next thing you know the business is sold. Believe me, these folks are buying you business at a big discount. That’s not silly at all!

10. Giving away value in negotiations and due diligence – When selling your business, your objective is to get the best terms and conditions. I know this is a shocker, but the buyer is trying to pay as little as possible and he is trying to get contractual terms favorable to him. These goals are not compatible with yours. The buyer is going to fight hard on issues like total price, cash at close, earn outs, seller notes, reps and warranties, escrow and holdbacks, post closing adjustments, etc. If you get into a meet in the middle compromise negotiation, before you know it, your Big Mac is a Junior Cheeseburger.

Due diligence has a dual purpose. The first is obviously to insure that the buyer knows exactly what he is paying for. The second is to attack transaction value with adjustments. Of course this happens after their LOI has sent the other bidders away for 30 to 60 days of exclusivity. If you don’t have a good team of advisors, this can get expensive

As my dad used to say, there is no replacement for experience. Another saying is that when a man with money and no experience meets a man with experience, the man with the experience walks away with the money and the man with the money walks away with some experience. Keep this in mind when contemplating the sale of your business. It will likely be your first and only experience. Avoid these mistakes and make that experience a profitable one.

The New Form Of Business Information Technology

Iprwire Staff Writer asked:

Business information technology has come a long way in just a few years. The day of researching various companies through hard cover books is all but gone now, replaced with a much faster and more accurate system of online research tools. As well, the same amount of research work that took a dozen people or more to conduct just a few years ago is now handled by one or two people.

This is good news, especially for smaller companies who in the past were not able to afford the services of huge research team or firm. These days, many smaller companies, and some larger ones, prefer to do their own internal research which allows them to focus on only the most important factors that concern their immediate needs. But even though business information technology has become faster and somewhat easier to conduct, it still requires a certain amount of pre-planning as well as the use of some rather unique skill sets.

One of the most important skill sets is also one of the most overlooked. This is the skill set that involves knowing exactly what to research on a company. As you probably already know, most publicly held companies and many privately held companies have literally tons of data sheets online about their companies. From financials to product lines, just about anything can be located with a bit of time and energy. In a sense, this is good. In another sense, this is simply overload. The trick to effective business information technology is to narrow the search down to those issues that are most helpful in making a sales plan or presentation plan.

One way to do this effectively is to start with a set of instructions that help you identify exactly what it is you need to research and then go beyond that with helping you locate and focus your research on those issues. This allows you to avoid the overload syndrome and concentrate on that which is most important to you and your sales team.

You can, of course, hire a consulting team to teach you these skills and the best methods for conducting this type of specialized research, or you can work someone who has already mastered this type of unique business information technology process and, probably, save time and money in the process.

But how do you find someone who has already mastered these skills?

One great place to begin is with Jack Howe’s new e-edition of his “30 Minutes to Prepare for the C-Suite Meeting.” This eBook is packed with useful techniques to help boost your sales efforts. The core of this program is learning how to anticipate what a customer wants from your sales force and knowing, beforehand, how your sales force is going to handle those concerns, objections, and questions. In a sense, the research methods outlined in this eBook help you better prepare for the all important sales meeting in such a way that your team has the edge over your less prepared competition.

Learn more about this powerful system at http://www.30minsto.com.

Grow or Sell Your Information Technology Company – A Crossroads Decision

Dave Kauppi asked:

Thinking of taking your information technology company to the next level with a major marketing campaign or by hiring additional sales resources? These are decisions that can impact your company’s future. It might be time to consider the alternative of selling your business.

We are often approached by software company or information technology business owners at a crossroads of taking the company to the next level. The decision in most cases is whether they should bring on the one or two hot shot sales people or channel development people necessary to bring the company sales to a level that will allow the company to reach critical mass. For a smaller company with sales below $5 million this can be a critical decision.

For frame of reference, prior to embarking on my merger and acquisition advisor career, I spent my prior 20 years in various sales capacities in primarily information technology and computer industry related companies from bag carrying salesman to district, regional, to national sales manager and finally Chief Marketing Officer. So when I look at a company, it is from the sales and marketing perspective first and foremost. I am sure that if I had a public accounting background, I would look at my clients through those lenses.

So with that backdrop, let’s look at what might be a typical situation. The soft ware company is doing $3.5 million in sales, has a good group of loyal customers, produces a nice income for its owner or owners, and has a lot more potential for sales growth in the opinion of the owner. Some light bulb has been lit that suggests that they need to step this up to the next level after relying on word of mouth and the passion and energy of the owner to get to this stage.

I have either spoken with more than 30, primarily technology based companies over the years that have faced this exact situation and can count on one hand the ones that had a successful outcome. The natural inclination is to bite the bullet and bring on that expensive resource and hope your staff can keep up with the big influx of orders. The reality is that in most cases the execution was a very expensive failure. Below are several factors that you should consider when you are at this crossroads:

1. The 80 20 rule of salesmen. You know this one. 80% of sales are produced by 20% of the salespeople. If you are only hiring one or two, the likelihood is that you will not get a top performer.

2. The president of the company and decision maker has no sales background so the odds of him making the right hiring decision are greatly diminished. He will not understand how to properly set milestones, judge progress, evaluate performance objectively, or coach the new hire.

3. To hire a good salesman that can handle a complex sale requires a base salary and a draw for at least 6 months that puts him in a better economic condition than he was in on his last job. So you are probably looking at $150,000 annual run rate for a decent candidate.

4. If you have not had a formalized sales effort before, you are probably lacking the sales infrastructure that your new hire is used to. Proper contact management systems, customer and prospect databases, developed collateral materials and sales presentations, sales cycle timeframes and critical milestones and developed competition feature benefit matrixes will need to be developed.

5. Current customers are most likely the early adapters, risk takers, pioneers, etc. and are not afraid of making the buying decision with a small more risky company. These early adaptors, however, are not viewed as good references for the more conservative majority that needs the security of a big company backing their product selection decision.

6. Your new hire is most likely someone that came from a bigger information technology company and may be comfortable performing in an established sales department. It is the rare salesman that can transform from that environment to developing the environment while trying to meet a sales quota. Throw on top of that the objection that he has never had to deal with before, the small company risk factor, and the odds of success diminish. Finally, this transformation from a core group of early adapters to now selling to the conservative majority elongates the sales cycle by 25% to as much as double his prior experience. If you don’t fire him first, he will probably quit when his draw runs out.

With all this going against the business owner, most of them go ahead and make the hire and then I hear something like this, “Yes, we brought on a sales guy two years ago who said he had all the industry contacts and in nine months after he hadn’t sold a thing and cost us a lot of money, we fired him. That really hurt the company and we have just now recovered. We won’t do that again.”

What are the alternatives? Certainly strategic alliances, channel partnerships, value added resellers are options, but again the success rate for these arrangements are suspect without the sales background in the executive suite. A lower risk approach is to outsource your VP of Sales or Chief Marketing Officer function. There are a number of highly experienced and talented free lancers that you can hire on a consulting basis that can help you establish a sales and marketing infrastructure and guide you through the staffing process. That may be the best way to go.

An option that one of our clients chose when faced with the six points to consider from above was to sell his company. This is a very difficult decision for an entrepreneur who by nature is very optimistic about the future and feels like he can clear any hurdle. This client had no sales background but was a very smart subject matter expert with an outstanding background as a former consultant with a Big 5 accounting firm. He did not make the hiring mistake, but instead went the outsourcing of VP of Sales function as step 1. When their firm wanted to make the transition from the early adapters to the conservative majority, the sales cycle slowed to a crawl. Meanwhile their technology advantage was being eroded by a well funded venture backed competitor that had struck an alliance with a big vendor.

They engaged our firm to find them a buyer, but then we encountered the valuation gap. Our business seller thought his company was worth a great deal and that he should be paid with cash at close for all the future potential his product could deliver. The buyer, on the other hand, wanted to pay based on a trailing twelve months historical perspective and if anything was paid for potential, that would be in the form of an earn out based on post acquisition sales performance.

With a well structured earn out agreement and the right buyer, our client will reach his transaction value goals. His earn out is based on future sales, but his effective sales force has been increased from one (himself) to 27 reps. His install base has been increased from 14 to 800. Every one of the buyer’s current customers is a candidate for this product. The small company risk has been removed going from a little known start-up with $500 K in revenues to a well known industry player, publicly traded stock with a market cap of $2.5 billion.

He avoided the big cash drain that a bad sales person hiring decision would have created and he sold his company before a competitor dominated the market and made his technology irrelevant and of minimal value.

My professional contacts sometimes tease me and suggest that I think every company should be sold. That may be a slight exaggeration, but in many instances, a company sale is the best route. When a information technology business owner is faced with that crossroads decision of bringing on a significant sales resource that will be faced with a complex sale and the executive suite does not have the sales background, a company sale may be the best outcome.