Selling your Internet Service Provider
The Marlin Group is a boutique merger and acquisition firm offering a full range of services, including business sales, acquisitions, valuations and consulting to closely held, privately owned companies. Our services are always provided in a confidential manner.
Since 1998 our emphasis has been on Brokering the sale/acquisition of small and middle market Business and Consumer Services firms. We were an integral facilitator in the consolidation of Internet Service Providers (ISP’s) in the Pacific Northwest and have been particularly active with the sale of Human Resources/Staffing firms and IT Services firms as well. In nearly all cases we are the seller’s representative.
If you have considered selling your ISP, the following tips may save you some headaches, and help maximize the value you may receive for your sale.
- Keep track of your sales in detail – break down your sales into business vs. residential customers, and further by type of service – dial-up, web hosting, dedicated, and other services. Different revenue streams have different perceived value by acquiring companies, being able to track in detail can maximize your value.
- Track your sales by month – with the current ISP growth, being able to show growth throughout the year becomes a strong selling point.
- Know your prepaids – Revenue collected for service not yet performed is typically factored into a selling price (and deducted from the purchase price). You will need to know this amount precisely when it comes time for closing.
- Reduce your prepaids – because prepaid revenue is a liability,it will have to be paid back. When selling is a factor, selling annual subscriptions for heavy discounts rarely gets an ISP seller a very good return on investment, and often limits the number of ISPs interested in acquiring.
- Considerations when signing equipment leases – whenever possible, avoid new equipment leases! When this is not feasible, try to obtain leases that are assignable, or allow for early payoff. In any case, be prepared to reduce your selling price by the amount of lease obligations you have outstanding.
- Have more than one key technical resource – If you have only one key tech who knows your system, a successful sale could be dependent on him/her. To facilitate a smooth transition, and to ease risk by an acquiring company, being able to rely on several resources to learn your system helps.
- Maintain confidentiality – Key employees, customers and suppliers are invaluable, and letting them know a business sale is possible may put you at risk of losing them. The reality is that most acquiring companies are looking for good talent, and are interested in keeping employees where possible. An acquiring company often also has the resources to offer similar or even improved service to your customer base. But until a sale is imminent, it is best to keep your sale confidential.
- Keep good records – As mentioned above in #1 and 2, detailed tracking can help maximize your business value. Likewise, good clean detailed records (Profit and Loss Statements, Balance Sheets, Aging Reports) help eliminate risk for a purchaser. Be prepared for an in depth due diligence process, but ONLY after you have reached tentative agreement as to price and terms for your business. For more information about this process, see our Considerations for a Successful Business Sale.
- Contact the Marlin Group. We would be happy to consult with you on a confidential basis, with no obligation on your part.