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What is the Value of Your Company? January 19, 2009

Posted by Frank Coker in Finance, IT Business.
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There is a big difference between bringing value to your customers and building value for the owners. Having a valuable company starts with bringing value to customers, but there are more steps required to translate this into value for the owners.

There are over 100,000 small technology services and solutions businesses and probably half of these have little or no value from an equity or market-value point of view. These low value companies are hard to sell and generally result in very little cash for the owner if they had an emergency situation and needed to exit.

A large part of value in a service business is derived from the revenue stream. If the revenue stream is fairly steady, usually because of monthly service agreements, there is more predictability and therefore more value.

Unpredictable revenue, usually from break-fix work and from short-term hourly projects, is less dependable and has much less value. Even when revenues are on a clear growth path, if they are “lumpy,” the buyer is going to place a lower value on the company. The other reason a lumpy revenue pattern has a lower value is that a company without long term service agreements is going to be spending much more on sales than a company with long-term monthly agreements. Here is an example of a company with a strong growth trend but with big revenue swings – and a very low market value.

 cci-24month-revenue-graph1

Predictable revenues from contracts increase the value of your IT service company.

The challenge is that most technology companies are owned by technology experts and enthusiasts. Most are simply not aware of what they could and should do to build equity value in their business. It’s not hard to do, but if you haven’t learned about the fine points of building business value, it is unlikely to happen by accident. Unfortunately, most accountants and attorneys don’t know how to do this, so this information can be pretty hard to find.

I am very excited about a new offering that will be provided by SMBTN that is aimed at helping tech company owners get a better handle on financial planning and building business value. You will be hearing more about this in the weeks ahead. In the meantime, here are a couple of blog articles you might want to check out:

More information coming soon….

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Preparing for the Upswing January 19, 2009

Posted by Jim Locke in IT Business, SMB Summit.
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summit2009_lgo1The SMB Technology Network has selected “Preparing for the Upswing” as its theme and focus for 2009. Obviously, we all have concerns about the current economic crisis. With this in mind, we have decided to dedicate not only our SMB Summit Conference to the topic but to make it our primary focus for the year.

Our goal is to provide your business with insights and best practices for a changing economy that permit you to continue to grow your business in 2009. We hope you will derive a great deal of value from this and would enjoy any comments that you would like to make on the topic.

Welcome Frank Coker of CoreConnex January 19, 2009

Posted by Jim Locke in Finance, IT Business.
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I would like to take this opportunity to welcome Frank Coker, the president of CoreConnex, as a contribitor to the SMBTN Blog. Frank is the first of several authors that we will be introducing on the blog. Our goal is to provide you with high impact content that you can use to grow or improve your business.

Frank’s company, CoreConnex, is an SMBTN partner that manufactures the Corelytics Financial Dashboard for IT service providers. In the current economy, having good financial information about your company is critical. Hence, Frank has agreed to contribute to our blog on the topic of IT Finance. I am sure that you will find his posts very informative and applicable to your business.

Look for more new authors to the SMBTN blog coming soon. If you have any suggestions on potential authors that you would like to see contribute to our blog, please give us a call or contact SMBTN Member Services.