10 Dec Closing out the Strangest Year in Modern History, 2020
2020 has changed everything. With the year coming to an end, read our thoughts on how to close out what could be the most challenging year for business ever.
The reality is that most of us see 2020 through the lens the media has portrayed which depicts a world in unrest, an economy in a spiral decline as unemployment records soared, and story after story of businesses closing due to the economic challenges the world met in the face of COVID 19. However, in the world of IT Services, we have seen quite a different story as the dependency on remote connectivity and cybersecurity skyrocketed as employers rushed to bolster their technology infrastructure and accelerate digital transformation in order to enable a tidal wave of working from home demand.
We share in the compassion for American small businesses that did not survive the unrest but at the same time command our industry for building infrastructure and updated software tools that virtually overnight could handle upwards of a 700% increase in capacity, bandwidth, and complications as a result of the shift in employee enablement. These efforts have put the IT Services category in a position of power, increased valuations, and at the epicenter of increased interest from the investment community which has fueled major increases in consolidation.
With this renewed interest in our category, how do you navigate an inbound inquiry to buy your firm, or perhaps how do you get ahead of the consolidation and begin a search to buy another firm to increase your reach, expand your offering or simply join forces with a competitor?
We have filtered a significant increase of inbound inquiries from companies both interested in buying another firm or and selling their own business. The largest driver of the increases are business owners are very concerned about the process surrounding the preparation of the business for entering a transaction (either buy or sell) including the overarching questions about valuations. At Revenue Rocket, we support dozens of clients during this seismic shift in category interest.
We are now in the final month of this insane year, 2020, and many of our clients and prospects are looking for guidance on how to prepare for a transaction in 2021. Our advice is consistent with previous years, but it now includes a few additional focal points:
- The first is to finish the year strong: Don’t get distracted by a process of any kind. As a business owner or operator, your priority needs to remain on running a prospering business and avoid any dips in financial performance as you wrap up 2020.
- The second is to prepare your financials and strategic plan for a possible transaction: In addition to finishing the year strong, it’s important to bring focus to the comprehensive financial reporting of the company and a well-documented strategic plan for growth as you enter 2021.
- The third is to assess the impacts 2020 had on your business: while the IT services category has benefited from the changes to society and how we work, it wasn’t long ago that many of us were hitting the panic button in the eyes of the unknown and brought on debt in the form of PPP loans, SMB loans or other balance sheet impactful borrowing. The truth is while these may help fuel growth or pad the comfort zone of your firm’s bank account, they can be detrimental or at a minimum a discount metric when determining your company’s valuation. You should be looking at your cash flow needs and potentially satisfy some of this debt prior to entering a process.
- Specialize, Productize, and Verticalize: When defining your strategic plan, you should pay close attention to the positioning of your company and how others in the market perceive your offering, strengths, and weaknesses. At Revenue Rocket we leverage our SVP model to help companies identify these unique opportunities to position themselves in a segment of the market that is well sought after.
In closing our advice is to stay calm, finish strong, and to ensure you are entering 2021 with a well-thought-out plan that is tied to goals and objectives that you are prepared to achieve. For help navigating the end of 2020 or assistance in uncovering what lays ahead in 2021, please contact us at info@revenuerocket.com