We know what it means to startup, build, manage and consolidate a midsized IT company. We know that some of the IT jewels are produced by infinitely hard work by very clever people, but that mostly this type of entrepreneur is not able to get truly rewarded for this effort. We acknowledge that without the (technical) brains and perseverance many great products would not be on the market now. What also needs to be acknowledged is that commercializing the product is what actually provides the butter on the bread of all the people involved. And last but not least that an exit (in whatever form) is where the retirement money is to be made and/or the personal freedom is (re)gained to either focus on the part of the business you truly love or to set your sights on a different challenge.

Underneath we have outlined some scenario’s we have previously encountered. If you recognize your situation and want to change something about it, just contact us, won’t cost you anything and who knows it might help.

Start up

Many IT businesses just start with an idea, sometimes just as a continuous line from college/university into business life. Although there is nothing wrong with that those companies are primarily based on a big luck factor, and only a handful strike it rich in the end.

Start through

Businesses can come into turbulent times. Reasons can be that partners in a business want to go their separate ways because one or both feel the other one is holding them back. In many cases this happens when commercial and technical driven people start up a business as equal partners.

Another thing that frequently happens is that the business loses focus, sometimes because the owner becomes tired of the existing business and is playing around with new ideas without securing the existing business ongoing revenue.

The “we-never-have-cash” syndrome plaques many small- and midsized businesses. This can become a real turn-off from a once loved company. If also the people at home are fed up with the same story (no time, no money) over-and-over again it is really time to step into action in order to address and solve the problem. That after this decision still a lot of work has to be done should be clear to everyone.

Times are tough for many businesses at the moment. Many businesses actually don’t have an ongoing business problem but do feel the need for cash. Short term credits that previously took care of the inbalanced accounts receivable/payable, now are not sufficient anymore to cover that. If you also have a seasonal influence in your business then that even worsens the situation. Many entrepreneurs are once again forced to sign privately for credits, just to cover the normal business flow. Everyone knows this is a risk, but what can you do….

Small companies sometimes also fall into the trap of acquiring customers that are too large for them, just because they “must” keep the cash flow going. In many cases that means that a business is dead- in-the-water for a considerable amount of time, both customer and company are not happy with the results or the newly acquired company becomes a liability just because it “instantly” became the largest customer and costs patterns are based on the income from this customer.

You have been busy with a sales/merger of your business and in the end it didn’t work out. You probably lost a lot of time and energy and you are not in the best of moods because of it. Your people know about it, or have sensed something going on. A lot of projects were put on hold or just didn’t get the attention they deserved/needed.

Preparing for a merger, acquisition or exit

One way of growing the revenue and profit margin is by buying a company or merging with one. Those businesses can be complementary to yours, or even do exactly the same thing (of course you do it a bit better J). Now might be a good time to think/talk about merging or buying a company especially if you are still able to maintain a positive cash flow in the current economic climate. In the “new” company there should be some overhead that could immediately be cut or reassigned, resulting in either cost saving or revenue growth. The cost saving is often referred to as reaping the benefits of getting economy-of-scale.

Some other positive things are;

That you would probably lose the problem of customers playing both of you to get the lowest price possible.

That if there are competing products, the change to one of them (over time) might bring additional cash flow and free up resources for R&D instead of maintenance.

That there will be more resources a reshuffle of positions and job descriptions will become possible. This normally means that focus can be brought back to previously entangled job descriptions, leading to more transparency, accountability and in the end revenue.

That the increased size of the new company might just be what is needed to single out the position, content and responsibilities that fit your personal interests and profile.

A merger or acquisition can bring several good things to your existing business. But there are also things you should be very careful about. We name just some of them;

A thing to be concerned about is the cultural differences between the organizations that are going to be joined together. What seems to make a lot of sense on paper can actually turn out to be a total loss when the merger “doesn’t work”. Mostly this means that the people just keep doing what they were doing before, so none of the synergy that management thought could be achieved is reached.

Another thing that should be clearly defined is the divisions of roles and responsibilities in the new company. Even when one partner is stronger “before the merger” both old companies must feel good about the deal, and more important about the actual new work environment created.

        Intellectual property rights, and who truly has the knowledge.. 

We can help you to get this process going, what can you lose by talking?

Before considering a merger or acquisition some steps need to be taken;

Look at the existing costs

Reorganize the juridical/financial structure in a way that a profit center becomes visible. Most technologically driven entrepreneurs invest their earnings immediately back into the business as a whole, thus disguising the profit center which is harmful for further (external) investments or when establishing the worth (cash-in) of your company.

Identify possible take-over or merging candidates

It seems a very logical step, but when you are really looking (and brainstorming) sometimes “unlikely” candidates might present themselves. Also we have seen that sometimes the perceived bigger competitor is ruled out as a possible take-over candidate, we have seen quite a lot of cases where the smaller firm did actually acquire the larger one.

Make yourself replaceable in the daily operation

Although in many cases it’s true that the “owner” of a product or business knows everything about everything and can do anything faster and better than “new” people, that’s also the pitfall of many entrepreneurs. Somehow a distancing process must take place in order to make the business less vulnerable when key-personnel (including the owner) is not present anymore.

This strategy will allow you to recharge your battery and do some soul searching on what you really should do, and more important what you would like to do. Normally this leads to more focused and creative ways to market and sell the existing products into new market(segments) and/or important large scale product innovation enabling the business to address new users, depending on the profile of the entrepreneur in question.