As part of our occasional series of blogs about selling a software business, we look at some of key issues to consider, particularly when selling a software business;

1. Andrew Weaver
CEO at www.lawyerfair.co.uk
The legal procurement & comparison service for business
owners

2. 14 steps to Selling a Software
Business
As part of our occasional series of blogs about selling a software
business, we look at some of key issues to consider, particularly
when selling a software business;

3. 1. Always be prepared to sell.
Technology moves so quickly that you may get approached out of
the blue and without some basic M&A readiness, your value could be
affected;
2. Keep the books upto date
Make sure your books are up to date and accounts are in good order.
Check whether your accountant has deal experience and whether he
knows his M&A onions from his M&A potatoes. Inexperienced
advisors can cost you badly and in some cases, blow perfectly good
deals;
3. Always be on top of projections and make
them credible.
Buyers may not hold you to projections because that’s just what
they are but, your credibility is on the line if you create something
that is poorly researched and/or simply too optimistic. Think about
doubling the length of time and halving the amount of revenue – at
least within an alternative sensitivity analysis;
4. Always keep your cards close to your chest
about a potential deal.
Deals can unsettle stakeholders and many fail to complete and in
that scenario, you definitely don’t want to have created employee,
supplier unrest for no reason;

4. 5. Don’t over stress about value.
Fast growing technology companies are notoriously difficult to value
so prioritise about improving the value not about the number itself;
6. Buyer is good fit for you?
Think about your perfect buyer and start to align yourself with
aspects of their business so the acquisition has a better chance of
being seen as an ideal fit;
7. Concentrate on legacy products
Always move forward with products and be brutal with those not
driving profit any longer, so called ‘legacy’ products. Many
businesses lose sight of exactly which products drive their margin
and maintain some which loss is making;
8. Be realistic about Price
If approached, don’t be unrealistic about price expectations and
consider de-risking your position. Who knows when the next offer
might come? Many vendors have rejected offers that in due course
turned out to have been very attractive. Sometimes with M&A, it’s
better the bird in the hand …;

5. 9. Make sure all your contracts, supply
agreements, IP are in good order.
Worse situation is to agree a deal and then suffer through due
diligence as the buyer starts to pick holes in the security of your
revenue streams and business model. This is all part of ongoing
preparation;
10. Develop partnerships
Keep developing strategic partnerships, particularly with bigger
brands. This forms part of your commercial barrier and helps to
cement the future revenues of your business for a buyer;
11. Concentrate more on business than
selling
Always keep working the business, driving the numbers and never
assume any deal is in the bag until the fat lady sings. Even what
appear to be rock solid deals can fracture for any number of reasons
and you need to make sure you’re still driving forward that business
as if the deal is never going to happen;
12. Focus on Milestones
Further, keep driving the business towards clear milestones and
targets. Buyers like to see a road-map and story;

6. 13. Handover BD plan
Be prepared to hand over your own strategic BD plan to a buyer. No-one
knows your business better than you and buyers will be
delighted to get your insider knowledge, whether you stay with the
software business or not;
14. $ $ $
Hope for cash but anticipate some form of earn out, deferred and/or
ongoing role.
15. Finally, find the right lawyer …
Going back to find the right advisors, the right lawyer is crucial for
getting that deal away and protecting your value. Don’t just go with
the firm you’ve always used or the lawyer your networking group
recommend. Find a deal savvy lawyer with experience in your
particular sector. Use www.lawyerfair.co.uk to find expert lawyers
and get them competing against each other for your work.