5 top tips on Sales and Marketing to maximise the value of your ICT business
Updated 15th January 2024
As we discussed in an earlier edition "Who would buy your IT support / telecoms business?", buyers of ICT companies with revenues in the £500k to £5m bracket are most likely to be strategic trade buyers and one of the key elements of their acquisition is your client base.
In putting together your sales and marketing plan, bear in mind the following 5 top tips. Depending on where your company lies in the business growth cycle (see Tipping points for the sale of an ICT business), some of these points will be more relevant than others.
1. Diversify client revenues
Reduce the dependency on your top one to three clients. As a guideline, no one client should represent more than 15% of your revenue.
Exploring new market segments and geographical areas to further diversify your client base could be a good idea. This not only reduces risk but also showcases your company's ability to adapt and grow in different environments.
And remember to regularly analyse your market to identify emerging trends and opportunities where your business can expand its reach and reduce reliance on a limited client pool.
2. Ensure that the revenues and sales process are not dependent on you
Ensure that someone-else within the business is able to perform the complete sales function from initial enquiry, through bidding and quoting, to winning the contract.
Businesses that depend on the owner to win new sales (or indeed the strong relationship between the owner and existing clients to maintain recurring business) will represent a major risk to buyers.
If you do not have a sales process, develop one. Have one full time member of staff attend initial sales meetings with clients and take on your current roles in the process.
You could also invest in training and development programs for your sales team. This can include workshops on sales strategies, customer relationship management, and negotiation skills.
Building a strong, independent sales team not only reduces dependency on the owner but also adds strength and depth to your business’s current operational capabilities.
3. Maximise the proportion of your revenue generated by service contracts
Maintenance contracts, service contracts or retainers represent regular guaranteed income with little further sales effort for the buyer. As such they represent significant inherent value.
Moreover, as you will be in touch with your clients on a regular basis, these contracts in turn are likely to generate further project work. As a guide, ICT Support businesses should aim for at least 50% of revenue to be generated from service contracts and minimise the proportion of hardware/software re-sales
Also, consider adopting new technologies, expanding service capabilities, or offering bespoke solutions tailored to client needs. By enhancing your service quality, you not only secure more service contracts but also create opportunities for upselling and cross-selling, further diversifying your revenue streams.
4. Maximise the duration of your maintenance contracts
This will allow buyers more time to get to know your clients before the next renewal. Contracts with a 30 day notice period or which are due to expire within a month of the sale, will be viewed as higher risk and thus valued less by the buyer. Aim for at least a 12 month contract with a 3 month notice period before renewal. For more on the value of service contracts, click here.
To create a more enticing offering, you could consider offering incentives for longer contract commitments, such as tiered pricing or value-added services. This approach not only encourages clients to commit to longer contracts but also enhances the perceived value of your services.
And remember to regularly communicate with your clients to understand their needs and tailor your contract terms to align with their long-term plans - they’ll thank you for it.
5. Align your pricing and service with industry standards
Don't be the cheapest, buyers will not be able to offer a better package to your clients and therefore will find it more difficult to transfer the contracts. Your clients' key concern is continuity of service. An ideal buyer will have a service offering and ways of operating which are similar to yours.
Conduct regular market research to ensure your pricing remains competitive and aligns with industry standards. This includes understanding the pricing strategies of your competitors and the perceived value of your services in the market.
Strive to maintain a balance between competitive pricing and the high-quality service that your clients expect, thereby positioning your business as a premium, yet value-conscious option in the market.
This article originally appeared as part of our series of e-Tutorials for the Sale of IT Support & Telecoms Companies.
We hope the article has been useful. If you have any questions about anything we've shared above, or you're looking for more advice on how you can make your operational teams "buyer ready", then we've got plenty of experience to share with you. Simply get in touch using the contact form below or give us a call on +44 (0) 20 8090 9380.