Win-win deals involve compromise and patience but don't do it alone. Revenue Rocket has facilitated hundreds of transactions in over 30 countries for IT Services companies over the last 20 years. From deal origination to close, we can help you through your next M&A transaction.We'd love to learn more about your growth strategy needs: https://revenuerocket.com/contact-us Listen to Shoot the Moon on Apple Podcasts or Spotify.

Shoot the Moon with Revenue Rocket

The Secret Sauce of Deal Making

Is it the right time to sell? Should you consider an earnout? Are you selling in or selling out? What are some options for your future role in your business? Listen to the answers of the questions business owners are asking when they come into a position to sell.Revenue Rocket has been helping IT Services business sell their business and acquire other businesses for over 20 years. If it could be time for you to sell your business, we’d love to talk. Reach out at revenuerocket.com/contact-us.

Why Sell?

We often use the term ideal prospect profile, which is something as a buyer or seller you need to understand. Before outreach to a potential seller, decide what attributes are the most important to you when looking at an ideal company to buy. If you are in a position to sell your business, think about the ideal buyer and what the ideal attributes are. Having your idea prospect profile ahead of time and then managing outreach is critically important.Here are some attributes to consider when building a target list:geographysizetalentstrategyculturerevenuemanagement teamvertical marketWe are representing some amazing IT Services companies for sale, if any of these companies fit your ideal prospect profile, reach out at info@revenuerocket.com.

Let's Build a Target List!

The strategic buyer and the financial buyer: how do they differ? In this episode, Mike & Ryan discuss each buyer in detail.A financial buyer is typically one who buys the business to get a reasonable return on their investment quickly. This buyer is driven by certain rates of financial return and may be looking at a portfolio of companies to buy.A strategic buyer is looking to grow through buying a business that is strategically aligned with theirs, that fits into their business objectives, product & services set, culture, financials, geography, and other criteria.At Revenue Rocket we look at 3 main criteria when working with strategic buyers and sellers:Cultural FitStrategic FitFinancial fitIf the combination has an aligned strategy and culture, they can usually find a path to financial fit. A strategic buyer is looking for capability enhancement to complete or broaden their offering.If you're 

Strategic Buyers vs Financial Buyers

Recurring revenue is income generated in a business that comes in regularly, usually monthly, quarterly or yearly allowing a business to provide a service level to a client. Recurring income allows revenue to come in with a high degree of certainty and stability.With a recurring revenue model, businesses can predict what percentage of revenue may be lost each month. Reoccurring revenue is something that can happen again but not necessarily repeatedly. Listen to our CEO Mike Harvath, and VP Ryan Barnett discuss the importance of recurring revenue, our insights, and how it impacts your IT Services business, especially during an M&A process.

Benefits, Upsides, and Risks of Recurring Revenue

Working capital is the liquidity that is needed to run the business to pay your obligations. Some people call it cash flow, but essentially the ability to pay your obligations in your business and how quickly you can turn orders to cash is how we define working capital. Accounts receivable management is important to maintain positive liquidity. Cash is king!Many small businesses don’t have good policies in place to maintain good cash flow management. It’s easy to let your payables bloat when it’s not being managed every day.In this episode we discuss:Coverage ratio and what it meansExcess working capital and what that meansWhat is good for a buyer?What is good for a seller?OvercapitalizationWhat is the required amount of working capital to have to operate?Harvesting working capitalAccounts receivable management

Working Capital before during and after a Transaction

We have 20 years of experience and over 200 transactions under our belt in IT services M&A. In this episode we want to share our experience with the length of an M&A process and the timeline to getting a deal done.We focus on answering questions about:What happens now that you've decided you want to either buy another firm or sell your firm? For example, you need to look at cultural and financial fit where 1 + 1 = 3.What makes your firm special?What is my "number"? What would I be willing to sell my business for or purchase another business for?What do the first 30 days of the process look like?Are your financials easy to understand?How many suitors need to be brought to the table?What does outreach look like?Should you use an advisor?How long do typical negotiations for an LOI take?What is a lockout?How long does it take to get from a letter of intent to close?Related episode: listen to our thoughts on What to Expect when Expecting a Transaction here.

M&A A to Z: Timelines and Expectations

While we specialize in M&A for IT Services firms, we also have been helping these companies grow organically for over 20 years. Our proven specialization, verticalization, and productization (SVP) method is the key to sustainable growth. Revenue Rocket works with global IT Services leaders to secure their market position, expand in new or adjacent markets, and grow profit long term. One area we are going to focus on today is geographic expansion.When looking at corporate expansion, businesses often overlook the strategic and opportunistic benefits that can come from looking at geographies beyond their current service area.  At Revenue Rocket we look at many attributes when uncovering a geographic expansion opportunity for a client.  Some obvious ones include; booming economies in niche markets such as an influx of tech investment in a certain city which in turn brings the talent.  A prime example of this was the influx of capital (human and cash) that Austin Texas experienced in 2016 & 2017.  Another prime example is the category anomalies seen in markets, such as tourism in Orlando, Digital Out of Home in Las Vegas, or the financial services and investment banking that stems from Manhattan, NYC. Whatever the motive it is important to work with your M&A advisors to quantify the opportunity and ideally time it perfectly with lifecycle trends to ensure proper valuations are in play.  Today we are seeing a significant exodus from high tax states such as California. People that used to perform their duties at a major corporate campus are now encouraged to work from home and as such, talent is turning to more tax-friendly states to homestead. Today the State of California has seen more than $58B in adjusted income leave for lower or no tax states such as neighboring Nevada, Idaho or BIG Texas.  The reason this matters for IT Services companies is that the decision-makers are moving, headquarters are shrinking and the demand for secure working from home technology has skyrocketed.  That said would we encourage our clients to seek an exit to a California-owned suitor? Expand there organically? Maybe! It really depends on the circumstances for the parties and the motivation behind the transaction. Additional consideration should be made for international expansion, such as looking North of the border into Canada, or across the pond at European opportunities.  While these can also carry large upside for category significance or emerging trends based on local and social-economic makeup it can also bear additional complexity as localization of platforms, people, and fundamental business practices can differ. It is important that you consider all variables and options when entering a process organically or on the sell side or buy side. At Revenue Rocket we will use our proven processes to identify unique opportunities that yield the best outcomes and in today's market that almost always takes into account the option for Geographic expansion.

Geographic Influence on the M&A Process & Organic Growth

Identifying the right people to participate in the process can be harder than it seems. The process needs to be part of a larger strategy the business was executing against and as such the target, process and anticipated outcomes should be widely known and understood by those at the executive level. That said, once the company is in an active process pulling in the right people at the right time can become problematic.  The due diligence process can be lengthy and should always be split into functional areas with the assigned owners. The likelihood of a company wanting to tackle all functional areas at once is slim and not advised. So who needs to be involved?CFO/Finance: The financial elements are often the most important and should be led by the executive with the most insight into the existing business and the corresponding leader on the sell side. These two not only have to reconcile and debate the accounting and forecasts but they may also end up working together post combination. Corp Dev: The head of corporate development at a corporation is largely involved in managing the inbound inquiries for ongoing processes looking for suitors, but the role is much more than that. We think of corp dev as the strategist, executionist and cheerleader for the “buy” option, out of the commonly considered; build, buy or partner scenarios corporations consider when filling a gap in their offering. Once in a process this individual is the continuity between the information, gaps and misunderstandings that arise in each of the functional areas during the process.  CEO: The CEO’s job during a process is to get the deal done. They often are working with the support system of the process and ensuring that timelines are being met and that the strategic value is agreed upon by all leaders. The importance of group alignment post combination is the difference between achieving a return on the investment or not. Corporate counsel: Whether internal or external, the attorneys are a key contributor to the process. Not just documenting the combination but in the disclosure, reps and warranties as well as corp entity restructuring as well as regulatory filings and governance. All components required to complete a transaction.Sales Leadership: Do not bring them in right away. Maintain a sense of confidentiality as we recommend sales people that are out talking to clients shouldn’t be brought into an acquisition early.Marketing Team: The marketing team is critical with announcing the deal, involvement in rebranding, press releases, post merger integration (PMI) etc. Plan early with your marketing team!Human Resources: Your HR leadership needs to be involved more in an asset transaction than a stock transaction as you shouldn’t need to repaper the employees in a stock transaction. Bring in leadership on a need to know basis.The fact is, the more people you tell, the more risk that you could violate your non disclosure. The rule should always be; “a need to know basis”. This is less about keeping confidential items confidential (which can carry more significance in public companies) and more about keeping people focused on the business. Acquisitions are distracting and if your leadership is all focused on someone else's business, they are not focused on yours. Leveraging an advisor such as Revenue Rocket will provide your executive team the guidance and support you need while helping keep your leadership focused on the business. Our team of experts has participated in hundreds of transactions and we can be heavy when it comes to driving the process to the best possible outcome.

Employee Involvement: Who and When during a Buy Process

You’ve built your business for a long time and now you’re ready to sell it for many different reasons. The process can be lonely, but it’s not a bad thing when you need to continue to run the business and create stakeholder value. So, who should be involved when you start this process? Listen to the episode to get our full run down on the process and employee expectations.During a process it’s easy for employees to feel the distractions and shifts in priorities. It is important for a few reasons to keep employees at bay during the sale of your business to ensure continuity of operations before and during the combination. In this episode we will talk through some of the most pervasive employee challenges we encounter during a transaction:Involving management too early can spur unwanted opinions stemming from lack of understanding of the accretive nature of the transaction. Knowing which employees to involve in due diligence is also important as it is likely the other party will want details directly from those executing. Avoid bringing in the market facing people till the end.  It is easy for this persona to like to use any advantage they have during a sales cycle and nothing ruins deals faster than loose lips. Set clear expectations as to why they are being asked to participate in the process and ensure the priorities of those involved remain on running the business vs just the process. When getting close to global announcement make sure you bring in leads from each department to be able to articulate the positive nature of the transaction on each group. If certain people are going to be asked to leave the company it is always best to leave those decisions up to the combined entity and for the decisions to be executed after the combination is complete.  Nothing will derail performance like staff looking for a new job. In closing it is important to have a methodical approach to involving employees in the process as well as ensuring that the completed transaction benefits everyone. Bringing in the wrong employees too early can cause stress or even the risk of the deal not getting done. It's imperative that everyone get behind the positive momentum that will be created once the business is sold.

Employee Involvement during the Sale of your Business

In this episode, we are discussing the fruitful but confusing market conditions in the IT Services sector in the second half of 2020, as the country and world navigate a new normal.While much of the world is struggling with the economic recovery, several sectors are growing as a result of consumer and workforce behavior changes.  At Revenue Rocket we have seen a sharp increase in consolidation amongst IT Service providers and not as distressed assets.  The IT Services sector is in an accelerated market meaning that the industry is growing at the same time that it is consolidating.  The growth is fueled by a number of factors but the largest being the higher propensity for "working from home" environments amongst enterprise employers.  This has a significant impact on ancillary services such as remote access to secure infrastructures held by employers, the added security required to protect those infrastructures and the increased use of technology platforms that enable continuity between remote workers, such as video, chat and file sharing services.  The consolidation is an indicator of where the capital markets and private markets see the IT Services sector going. The fact is - this trend is here to stay and the value of IT Services companies is only going to increase as more and more employers and consumers adapt to the new world.  It's a perfect storm for our clients. At Revenue Rocket we work closely with buyers and sellers to ensure that accretive transactions are executed on time and on budget with clear and defined objectives. Listen to Shoot the Moon on Apple Podcasts or Spotify! 

The IT Services Industry is in an Accelerated Market

Keeping with the theme of providing guidance throughout a process, we felt it would make the most sense to talk you through the emotions that will come with a transaction. During this podcast we will discuss what to expect; before, during and after a transaction.Getting to the emotional state whereby you are ready to sell your business is a rollercoaster of a journey, filled with ups and downs and at times filled with doubts and fear.  Having a trusted advisor guide you through the options surrounding a potential exit or merger of your business helps ensure clarity and proper understanding of the pros and cons of each option.  Let’s dive in...BEFORE:When we begin working with a client our first focus is to establish a clear understanding of the intended outcomes a seller (or buyer) is looking to achieve. Through a detailed process we are able to establish metrics and milestones that would be required to achieve such outcomes - we will walk through the valuations we are seeing in both existing and adjacent categories in both like and opposing markets/audiences. Second is to determine what financial results are going to need to be met to achieve the valuation the parties are seeking.  Often we will leverage our SVP model to help a client achieve required metrics both in growth and earnings. This will enable the seller to either buckle down and get to the number or reduce expectations and proceed to market with a lower valuation and alternative suitor profile. DURING:Usually once we get to the phase of marketing the company for sale (or start the hunt to find the ideal asset) we have a solid foundation for what the process will look like and who will be invited to participate.  This stage can come with some personal baggage when existing owners begin carving out who they are not willing to consider as a suitor.  These discounted suitors are usually competitors or operators that have a track record of executing less than admirable transactions. At RRCG we help clients avoid the financial creepers, tire kickers and those that are not likely to be able to close. That said sometimes an exit into that evil competitor can yield the most reward.  Competitive buyers are going to see higher value in a transaction and we should consider them in most cases as viable options.  Many of the ongoing concerns that we face when bridging the dialog between buyers and sellers are sorted out and agreed to in the definitive agreements which will provide security to the sellers and their employees post combination. AFTER:Typically we like to think that if we do our job before and during the process we avoid unplanned emotion following the close.  That said, things are not always perfect and the parties need to work collaboratively to resolve gaps in expectations as well as ensuring continuity in communication to the employees, customers, and the industry. When working with RRCG you can be assured that proper due diligence will be conducted, that all representations and warranties are clearly understood and that the joint business plan is firmly established and agreed to by all parties.  This will ensure that the focus of those exiting the business or benefiting from liquidity will be positive and full of personal satisfaction. Please keep us in mind when navigating the complex world of M&A.

What to expect when expecting... a transaction!

With more than 90% of American businesses operating their fiscal year in line with the calendar year, the fourth quarter almost always brings with it additional goals, complexity, expenses and often earnings but how should you react during an M&A process? While each situation is different, the process remains the same. Planning and managing against established targets will ensure that Q4 is not packed with surprises, distractions and disappointment but rather an opportunity to complete a transaction with the best possible outcomes. Today we are going to talk about a few things to consider while rounding out the year (Q4)A solid financial proforma that ties out to your operating budgetMake adjustments in real-time. As financial targets are missed or exceeded, ensure your expansion or retraction plans are always ready.Don't make the mistake of looking at Q4 in late Q3. Don't defer the tough decisions on the "if-come"! Cut your losses and ensure you are hitting the rest of those targets.Ensure the process stays on track but not at the expense of missing your year. Losing sight of managing the day to day operation will result in missed targets and a delayed processFinish strong. Ending the year at or above targets established during an M&A process makes for a very short last minute discussion on last-minute negotiations.In closing, the key to a good Q4 is having a great Q1, Q2, Q3! Revenue Rocket can help with your short and long term organic growth strategy we’ve been doing it for over 20 years! Let's talk.

The Importance of Q4

As a seller, you need to weigh today's valuation over what the future valuation could be based on contract value and economic forecasts.  While future valuations are likely going to be higher, having the right mix of valuation criteria can ensure that you are getting a fair exit based on a multi-faceted assessment of the business. For example, looking at revenue and bookings vs EBITDA alone can yield a better valuation for a seller if the conditions are conducive to increased future valuations.  As a buyer, it is important to properly value the accretive nature of the transaction, such as ensuring the added benefit to the combined company is realized as part of a combination proforma. We help buyers identify true attainable returns on a transaction and what additional investments will be needed to reach those forecasts. In this episode, we discuss the different lifecycles and use cases that our clients face during this phase of the process and how we look at win-win scenarios when documenting a transaction to ensure both sell-side and buy-side obtain the value expected post-close. 

Determining the Right Valuation

Forecasting is important to businesses so that they can make informed business decisions that guide them into the future.Forecasting is the guide to grow your business and build predictable outcomes to set long-term strategies. This can be especially important when entering into an M&A deal whether you are the buyer or a seller. Revenue Rocket recommends that all businesses should try to forecast both revenue and profit for up to 5 years, even though knowing the far-out years could be a stretch. For example, businesses could not have forecasted COVID-19 and the economic impact it has had on 2020. Forecasts should be built on plausible methodologies and data so each decision, process, and transaction is based on real, predictable outcomes. In this episode of Shoot the Moon, the Revenue Rocket team shares their experiences, recommendations, and processes for forecasting in your business.Through Revenue Rocket's proven processes, we've helped clients grow organically, buy, and sell their businesses. Reach out to learn more about how Revenue Rocket can help. Listen to the Shoot the Moon podcast on Apple Podcasts or Spotify.

Simple Forecasting Models for IT Services Companies

The Shoot the Moon podcast is for IT business owners and executives. Host Mike Harvath, founder and CEO of Revenue Rocket brings his experience with M&A and growth strategies to IT Services company leaders worldwide. In each episode, Mike either discusses business topics or interviews an IT executive.

hubhopper

Shoot the Moon with Revenue Rocket

hubhopper