If you’ve decided to buy a business, you may have made one of the toughest decisions in your life. If you are planning to purchase a tech company, you need to know a few tips to help get through the process.
When it comes to tech companies, their products are their most valuable assets. When you are buying a flower shop, you don’t have to worry about purchasing flowers from suppliers. Meanwhile, buying a software development company is a completely different story.
Before making a purchase, make sure that the company owns all intellectual property rights to its key technologies. Go over all the licenses and agreements. You don’t want to end up losing revenue because you’ve forgotten to secure rights to an app or another piece of technology.
Why is the current owner selling the tech business? The reasons may vary from something as simple as retirement to something as serious as a looming bankruptcy. According to an expert business broker from floridacertifiedbusinessbroker.com, an owner may not always be straightforward about these reasons. It’s up to you to investigate the matter.
Look out for existing business debts, brand difficulties, location problems, poor equipment, license issues, and financial problems. When you are buying a tech company, you can get access to financial documents to make sure everything is an order.
To get a full picture, you may want to talk to existing customers, neighboring businesses, and unless you’ve signed an NDA, to employees.
Another important asset of any tech company is its employees. For example, maintaining a custom app properly could be hard without developers who created it. That’s why you need to discuss whether the talent is staying on board.
You may consider negotiating retention agreements. Think about what you can offer to the team so it stays with the company.
Explore the market to find out what similar businesses cost. While it won’t give you an exact number, you can learn the expected range. Valuation considers tangible (property, equipment) and intangible (intellectual property) assets.
You can calculate the difference between the company’s assets and liabilities to find out the net worth. Then you can calculate the value based on the possible future earnings. Consider hiring a specialist to help you complete a valuation.
When buying a tech business, pay special attention to intellectual property rights and intangible assets. Consider getting professional assistance to evaluate the business and discover why it’s up for sale.