How to value your IT support and telecoms business?
Article updated 19th June 2023
Few people these days can manage without using some form of IT. Whether it’s for streaming their favourite shows or running a business, staying connected via IT or telecoms is essential.
According to the latest figures, IT support services firms are expected to increase turnover in 2023 compared to 2022’s turnover of $83billion. Collectively, telecoms and IT support services in the UK are worth $137billion collectively.
And it’s not surprising – because 92% of people in the UK use the internet. With businesses increasingly using software for their accounts, it’s clear that the market is valuable. In
But what about the value of your IT support and telecoms business? With such clear signs of a strong market, some business owners in the sector maybe presuming their company is extremely valuable. It is, but don’t allow yourself to dream of seven-figure numbers just yet. What you need is to understand how to value your IT support and telecoms business.
How to value your IT support and telecoms business
If you’re thinking about selling your IT support and telecoms business, understanding its value is essential. It is important to remember that the true value of a business is where the balance is struck between what a buyer will pay for it versus what a seller is prepared to sell it for.
The value of any one business will be different for each buyer and the type of buyer they are. With IT support and telecoms businesses, the majority of buyers will be trade/strategic buyers (maybe link to What are buyers looking for in your IT support or telecoms business? blog) and so the strategic value to them will lie in the opportunities to cross-sell services between the combined client base, the acquisition of new expertise and the synergy savings that can be achieved through combing the overheads.
Competition between buyers for your business is also a key driver of value and this is where using a broker to market the business for sale and manage the negotiations is an important factor in achieving the best value.
Deal structure will also play a role in the headline value obtained. Accepting a portion of the deal as a deferred payment, earn out arrangement, or retaining a share of the company, will in most cases increase the deal value. We will look at deal structures more closely in future editions.
Whatever their strategic interest is, prospective buyers will use various valuation methods to determine their offer. The commonly used valuation techniques for IT support and telecoms businesses are:
1. Multiple of Earnings (EBITDA), and
2. Multiple of Turnover or Annual Recurring Revenue (ARR)
Would you like us to assess the value of your IT support and telecoms business?
We would be delighted to offer you a free appraisal of your business to 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, as you prefer.
Please contact us on 020 8090 9380, email [email protected], or complete the form below to arrange an appropriate time to review your exit strategy and the value of your business in confidence and without obligation.
This article originally appeared as part of our series of e-Tutorials for the Sale of IT Support & Telecoms Companies.
