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August 19, 2008 05:11 PM

Categories: M&A and Financing

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dannysh

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Joined: 08/19/2008

I own a software business that has been around for several years. We have a large client base that is growing with a good chunk of recurring revenue coming from maintenance plans.

I am considering selling it to raise money for a new venture that I am getting into. Does anyone have any recommendations or contacts of business brokers that specialize in sales of software companies?

Our product is an enterprise web portal used for document management.

Any ideas would be much appreciated.

Discussion:    Add a Comment | Comments 1-12 of 12 | Latest Comment

August 20, 2008 2:37 PM

There are some details that will help determine what to recommend for you:

-- Can you give a rough idea of annual revenues? If these are less than $1M, the kind of person and process that you can use to sell your business will be different than if the business is bigger.

-- What type of software is this and what market is it being sold into? Are your revenues about the same from year-to-year, growing, or declining? This will help identify what kind of a buyer is likely to be interested.

-- Approximately what is the annual positive cash flow that the business generates? That will give an idea of how much you could sell the business for.

-- Where are you located? This may affect the kinds of buyers as well. Although most software businesses are easy to move, there are still some situations where physically being able to visit customers is beneficial.

August 20, 2008 7:35 PM

Thanks for the response.

2007 revenues were ~$350K with roughly $100K coming from maintenance and renewal fees. Net income ~$250K. Revenues have been increasing at about 20 - 25% per year. It is a very high-margin business with no hard assets to speak of. Everything is virtual and we have not seen any of our customers face to face.

The product is a web based document and report management portal and is horizontal in scope. We have over 300 installed sites around the world with some very well known names among them.

Our office is in California but this can be handled from anywhere. We have a long-term relationship with an offshore firm that has handled development for us for several years.

August 20, 2008 8:01 PM

California is not a bad place to based out of and the scale of your business means that you're most likely to find a buyer (a) directly yourself, (b) through someone who knows you and can be a trusted intermediary, or (c) through a business broker. I don't know any business brokers in California that would be dealing in the software industry. There may be someone else in these forums that can give you some leads in this regard.

I can tell you about (a) and (b) above because I've seen that work pretty successfully. The way to approach this is to find companies that have complementary products and services for whom this could be a strategic fit. You (or someone else you trust) can then approach those companies with an interest in getting to know the business owners. If you make the contact an visit with this company, the process is kind of like dating. You do not necessarily give your ultimate objectives in the first meeting. Instead, you can talk about "partnership" in various forms. If you use a trusted intermediary, the process is more like an arranged marriage.

You may also find that there is a "financial" rather than a "strategic" investor that is interested. A financial investor would want to buy the business as an investment for its cash flow, but doesn't necessarily own any existing businesses that would be synergistic with what you're doing. You may be able to find these kinds of buyers by placing a "business opportunity" ad in the right online or print publications. That is what a business broker might also do in this case.

Let me know if you need further info.

August 20, 2008 10:39 PM

Yes, I am already pursuing options a) and b) but I also wanted to make sure I covered all the bases by contacting a business broker as well.

Out of curiosity, what kinds of multiples are you seeing for this business size (whether sales or earnings)?

Are most of the transactions in this range done as cash or do they typically include seller financing?

February 28, 2011 4:10 PM updated: February 28, 2011 4:17 PM

hello. my business sounds very similar to your in terms of the setup and size of client base. did you sell your business?

i'm trying to find someone to buy mine but am struggling to find a buyer becasue we are in a very niche market and have only 3 competitors around the world who don't have much money.

i'm wary of going via a business broker becauase they none are specialised in my industry. If they were to put it in the standard advertising mediums i can't see it selling becasue of it being so specised.

Does anyone have any advice?

April 3, 2011 1:27 AM

Vivek - As a poster mentioned above, think of a business that ould be a good strategic fit to align with yours, if there are any perhaps they would be interested in purchasing.

I have no idea what your specialisation is so its hard to comment specifically here. But perhaps its other businesses who purchase your product/service down the supply chain who may be interested? Look at options like that.

If you can post some more info on your business we can try and give further ideas. Alternatively if you dont want to mention on here, email me and Im happy to give you some more ideas, if I have any.

http://www.nequityonline.com

February 24, 2012 4:58 PM updated: February 24, 2012 5:07 PM

We are also interested in selling our software business.
We started in 2007 and have developed a relatively active reseller network nationwide (54 dealers nationally).
Our software application's market is the hospitality industry and our reseller sales have been growing exponentially year over year, with this year's sales at about the 1M plus mark.
We have no debt.
How do we figure what the multiples would be for valuation and are there recommendations for a broker that will diligently market our business?

February 26, 2012 10:40 PM

Multiples average around 2x trailing 12 months.
And, that is entirely useless information -- much like knowing the average weight of humans, or the average salary in the US. :-)
Your best candidate for a buyer is likely a competitor.
Second best, a partner.
As Bert said earlier in this thread, most software biz brokers won't deal with a company of your size. You might try a general business broker, or start networking like crazy to sell it yourself.

June 11, 2012 10:07 AM

I would like to buy a software company with less $1M revenue. Looking for a new opportunity. Would you like to meet up?

June 14, 2012 7:34 AM

Good business

papetarie online caiete rechizite

November 14, 2012 4:14 PM

1. Do not sign an exclusive (except for named accounts they bring you for 1 year at most)
2. Read all of the contracts as I have seen small clauses that take a % of the company
3. Get % of sale in writing before you spend any time with a broker
4. Ask for a reference from a company they have sold in your space (Software)
5. Get a good NDA ( non-solicitation of employees, customers investors)
6. They should do most of the work not you
7. Have an attorney call the top 3-5 of your competitors confidentially without revealing your company name and location and see if they want your base, technology and or revenue
8. Look at selling in parts revenue, customers, technology, IT staff verses as a whole.
9. Don't trust anyone

December 17, 2012 3:02 PM

We have an interest in selling our "building takeoff, estimating and 3D touring capability" software system. This is a very sophisticated system (years in development and over 10 years in business), yet easy to use for contractors, building material dealers, etc. New product introduction for metal roof estimating integrating "aerial imaging" greatly enhances the future and worth of this company.
We are looking for a business broker specializing in software sales. If interested, or have a suggestion(s), please reply.

Discussion:    Add a Comment | Back to Top | Comments 1-12 of 12 | Latest Comment

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