Sell Your Business FAQs
You have questions - we have answers
We are looking for small Information Technology businesses located in the Washington, D.C. Metro area (DMV) which covers; the District of Columbia, Maryland & Virginia.
If you are located in the DMV – DC Metro Area (Washington, D.C., Maryland & Virginia) and are interested in selling your IT business please complete our seller’s form.
No. ITExitStrategy does not charge a fee to those who are selling their IT business.
At this time we are only looking for those who are selling their IT business.
At this time we are only looking for those who are selling their IT business. However, if you are interested in joining the ITExitStrategy federation please contact us.
WE ARE NOT A BROKER or in any way are representing ourselves as one. We don’t offer any transactional or legal services. All interactions are between the seller and potential buyer(s). Everyone should obtain professional legal representation when conducting any negotiations and/or contractual agreements. We do not provide any guidance in the valuation of a firm or regarding the interactions between the potential buyer and seller. We are not the intermediary between the buyer and seller. Issues that arise during negotiations or after the purchase are solely between the buyer and seller.
There isn’t a set formula for the percentage of realized business or for the number of years. This is negotiated between the buyer and seller. Some sellers want more up front and for less years, while others want to realize recurring income over a greater number of years. Again, this is negotiated between the buyer and seller.
Mirroring the Accounting firm acquisition illustration, this is the amount of business that is actually realized from the clients of the seller. Using a very simple model, let’s say that Company A is selling their client list and it includes 10 entities. In this example all 10 entities continue to do business with the buyer’s IT service company. Then the business of these 10 entities would be the Gross realized business by the buyer.
Now using the same model, if only 8 entities continue to do business with the buyer’s IT service company, then only those 8 would be calculated into the Gross realized business by the buyer. It’s not a trailing valuation, as many brokers treat service businesses. It’s generally a forward looking calculation, which adjusts up or down based on revenues realized. But again, the terms are negotiated between the seller and buyer on a case by case basis, according to what’s comfortable for each of them.
This also doesn’t have a set formula, for IT Services companies usually sell a not insignificant amount of hardware/software/licensing/virtual solutions that have an implicit cost associated, along with their services revenues. Obviously, the buyer company has to factor in those costs when calculating any profitability, and thus revenue sharing. The labor services provided are generally more profitable than the products, but they too have a cost component.
Again this is negotiated between the buyer and seller, though regularly any non-labor item is based on the actual Net. The labor is either based on the Gross or an agreed upon percentage, so that the cost of the engineer or technician is considered.
This process is obviously very important to both the seller and the buyer, so the specific details are negotiated and documented to be amenable to both. Normally reports are created from the accounting of the buyer’s company at the agreed upon interval, for example every year. Some agreements have an outside accounting firm generate the reports, but again this must be agreed upon by both parties.
Depending on the size of the selling company there are times that the selling company’s employees are hired by the buying company. The buying company may not have the technicians/engineers on staff to absorb the increased services demands and thus will offer to hire some or all of the selling company’s employees.
Other times if the selling company’s client list isn’t extensive the buying company isn’t in need of additional staff.
This is another item that would have to be negotiated between the buyer and the seller. Certainly, the labor costs associated with hiring whether in the normal activities of a business or related to this type of transaction isn’t a trivial matter. The costs associated with hiring employees or even the owner of the selling company – in those cases where the owner exit is accomplished over a period of time post-sale – needs to be negotiated and documented in how it relates to the calculation of profits and/or the percentage of profits paid to the seller.
The timing on the completion of the project varies and usually corresponds to the size of the company. We’ve seen transactions completed in a few weeks and others that have required months to complete. There are many factors involved in this process, eg demands on the seller regarding another job opportunity, owner of the selling company no longer involved, eagerness of the selling company owner to leave the industry, selling company owner moving out of the area… And demands on the buyer as they perform their due diligence.
We defer to your lawyer to provide proper legal advice, but all of the IT ExitStrategy Federation members use a lawyer to assist with any type of client list and/or business acquisition. We believe that everyone should obtain professional legal representation when conducting any negotiations and/or contractual agreements.
When dealing with IT Small Businesses the vast majority of purchases have been limited to the client list of the selling company. This has and can vary depending on the size and posture of the selling company. These additional assets would have to be negotiated between the buyer and seller.
The domain name used by the selling company is standardly an asset that is transferred to the buying company. The simple explanation is that any communications with the selling company must have an automatic redirection to the buying company, so any existing clients or other contacts are directed to the new company.