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Buying a business for MSPs. Negotiation and offer. Part B. The sales.

Who is involved in sales? What are the sales figures for existing clients? What are the sales figures for new clients? And how long is the average sales life cycle? Where and how did they get their opportunities and leads? What are their sales activities? What are their conversion rates? What are their targets, commissions and bonuses? Any particular problems, limitations or concerns to be aware of? The operations and deliverables. Who is involved in this part of the business? What products and services are offered? How are they delivered? What are the quality control processes? And again, what operational software, systems and processes are in place? And how effective are they and are they documented and available? And again, are there any particular problems, limitations or concerns? The administration, again, you need to know who is involved.

What software systems and processes are in place, their effectiveness, whether they’re documented and available, and again, problems, limitations or concerns. The finances. Who is involved in this part of the business? What are the revenues and gross net profits for recent years? What are the regular fixed running costs? Rent, rates, utilities, wages, debt, payments, et cetera. What are the regular variable costs, materials, commissions, licenses, etc. And the irregular costs, irregular liabilities, refunds, capital expenditure. What products and services are sold and what’s their prospective cost margins? Ask for full access to the key financial information. Check which software and systems are in place, whether they’re effective and documented and available. The training. Who is involved in this part of the business? What training programme is currently in place? What training is mandatory and what training is voluntary? What skills, qualifications and experience do staff require to start working there? And what skills, qualifications and experience do staff acquire whilst working there? Which training procedures are documented and available? And what’s the key industry media? Online portals, events, shows, printed material? Are there software, systems and processes effective, documented and available? And again, are there any particular problems, limitations or concerns?

You also need to look at the competition. What’s the health of the industry? What are the industry average costs, pay and turnover? Who are the main competitors and why are they successful? How many new companies are opening? Which products or services have the most competition and the least? Do they currently work with any competitors and if so, how? Which competitors have they had difficulties with? Are there any disputes, historic, ongoing or oncoming?

The staff. Who is involved in the business and what do they do? What’s the team structure? What is done in-house and what is outsourced? What subcontractors and consultants are used? What do the owners pay themselves in wages, profits, perks and other benefits? How are staff paid and what are their terms? What’s the situation for payroll, benefits, perks, vacations and pensions and so on? Which staff are indispensable and why? And which staff have they had difficulties with? Again, any dispute, historic, ongoing or oncoming.

Customers. Who are their best customers and how much do their best customers spend? Do watch out for over-reliance on key customers. Do any clients represent a large chunk of the revenue, say for more than 15%? Who are their average customers? What do their customers expect from them and what do they expect from their customers? What are their payment terms and other terms, their deliverables, timescales and refund policy and so on? And again, which customers have they had difficulties with? Suppliers. Which suppliers are involved and what are their terms and how negotiable are those terms? What issues will you need to know for contracts, insurance, securities and disclaimers? How insulated is the business against the sudden migration of key suppliers? And which suppliers are good, reliable, or poor and unreliable? Which suppliers have they had difficulties with? Any disputes? Other stakeholders. Who else is impacted by the business? The neighbours, other businesses, the local community, for example. How good is their relationship with the taxman? Is the business involved in any corporate, socially responsible initiatives? Does the business give or receive any awards, grants, industry recognition? Is the business part of any other organisations, memberships or initiatives? Lastly, any other questions? What areas within the company do they consider need to be improved and why? What are their plans after selling the business? And what would they change about the business and the industry? How is the industry performing at large and identify any internal and external SWOTs? strengths, weaknesses, opportunities and threats. Identify any pest issues, political, environmental, social and technological. What are their expectations and requirements within the whole business sale process? What type of person do they believe would be best to inherit the business? What would they like to achieve over the next 90 days? If they’ve had previous negotiations, how did they go? If the negotiation is successful, how do they see the transition happening? Will they provide access to financial management and other accounts during due diligence? And leave this killer question until last. Is there anything, as yet undiscussed, that will come to light during the due diligence process? Watch their reaction very carefully.

MSP marketing in bite-sized bits. It’s easier than you think with MKLINK. To get more of MKLINK’s MSP MBA Marketing and IT training resources, make sure that you’ve registered for your account for free now at www..MKLINK.org.