Why sell your IT support and telecoms business?
(Updated February 2023)
It’s wrong to think that business owners only sell companies when they are in trouble. In fact, the best time to sell is when a business is doing well.
Business owners should be considering selling when the company is at the top of its game and has room for growth.
In the UK, IT support and telecoms markets are strong (worth $137billion collectively) and analysts believe they will continue growing. With realistic room for growth, it could be the best time to sell!
Figures from Statista show IT service companies in the UK turned over $83billion in 2022 with around 7 per cent market growth expected in 2023.
Meanwhile, Global Data reports that telecoms businesses in the UK amassed sales worth $54 billion and predicted growth of more than 2 percent in 2023.
With these predictions, it’s clear why selling IT support and telecoms business might make sense.
Why sell your IT support / telecoms business?
Before making your decision, it is important to understand what you want to achieve from the sale. And it’s not only in financial terms! You must ask what you would like to do post-sale. When you are no longer in charge of your company, what will you do?
In general, the reasons for selling a business are one of the following:
- The natural business cycle
Every business goes through a natural cycle that includes various stages of growth and decline. The initial stage of growth often involves the development of a product or service, building a customer base, and establishing a brand in the market. As the business grows, it may require additional resources, investment, and strategic planning to continue expanding. This is when owners may want to sell the business.
- Change in personal circumstances
This could refer to a very wide range of factors, including health issues, family obligations, or a desire for a lifestyle change. In any case, it’s a strong motivator for selling a business.
- Serial entrepreneurs looking to build and sell
Serial entrepreneurs are people who have a track record of starting, growing, and then selling businesses. For them, building and selling businesses is a big part of their career strategy. So, at a certain point with any of the businesses they acquire and grow, they’ll be looking to sell for profit.
- Retirement
The owner might be ready to retire and sell the business as a way to exit the industry and cash out on their investment.
The difference in the IT support and telecoms sector
From our experience of the IT support and telecoms sector, the most common reason is the natural business cycle.
Owners of technology-led businesses tend to be younger. The driver for sale is when the business reaches certain tipping points on the growth curve. Typically, this is when turnover reaches £750,000, £2million and £5million.
At around £750,000, the founding directors need to move from service provision to focus on team management and building sales. If sales do not continue to grow, the company lacks critical mass to cope with client and/or staff churn and the business stagnates. Joining a larger organisation gives the business that critical mass and takes the burden off the owner's shoulders.
At £2million, business owners have to put an operational manager in place to run the service provision team. To continue growing, they need a dedicated business development manager/account manager to keep the current client base happy. They also need to put in place good financial management and credit control systems and staff. This is the tipping point where the business is no longer ‘lifestyle’.
Joining a larger organisation or bringing in new experienced business owners takes the responsibility off the founder's shoulders. This enables the financial investment required to take on the more senior staff and increase the marketing budget.
Businesses on ‘the radar’
Once turnover reaches and exceeds £5 million, the company will appear on ‘the radar’ for mid-sized trade buyers and private equity firms. For companies that reach this point, this has often been the initial long-term plan. They have a management team in place and have good prospects for continued growth but with a number of avenues to choose from.
Another reason for sale
One other reason for sale that is not uncommon is disagreement between business partners on how or whether to grow the business. Despite good intentions and friendships at the beginning, business partners often develop different aspirations and/or financial needs from the business. This can lead to serious tensions between the partners. If one cannot buy out the other, then the best option is to sell before the business is affected.
Are you ready to sell your IT support and telecoms business?
We would be delighted to offer you a free appraisal of your business. We will give you guidance on its value and attractiveness to buyers, and whether now is the right time for you to sell. Our appraisal can take the form of either a face-to-face meeting or a telephone call.
Contact us on 020 8090 9380, email [email protected], or complete the form below. You can speak to us in confidence and without obligation.
