But in the dynamic world of IoT, where new technologies are continually being developed and many investors are still finding their way, it can be difficult to know quite how to enhance your IoT business value.
Here are our top tips.
Think short and long-term
A clear business plan is non-negotiable when preparing your business for a sale, investment, or merger. This should include a clear strategy for the year ahead, and a detailed explanation of where you expect to be in 12 months’ time. But don’t make the mistake of stopping there. A three-year plan gives a much broader idea of where the business could realistically get to, and how it could get there, regardless of whether you are personally seeking to exit or not.
Demonstrating scalability is essential, since this will be at the heart of whether a prospective buyer generates a substantive return on their investment. As such, your business plan should clearly demonstrate how issues such as production capacity and recruitment will scale up as your business secures new sales – not just how those sales will themselves be secured.
Preparing your IoT business for a sale is no time to be coy, whether about your financials, your customers, your offering or your employees. Most potential buyers will be highly experienced in cutting through smoke and mirrors, identifying where details are vague or incomplete, and establishing deliberate gaps in the information supplied. As such, you should always seek to be as thorough, open and honest as possible, and have someone on hand to answer further questions as they occur.
Demonstrate recurring revenue…
Retained customers and ongoing contracts or subscriptions are amongst the most powerful ways of demonstrating reliable income and growth to potential buyers. They give a solid platform for expected revenue, a clear demonstration of your ability to generate and maintain loyalty, and a strong foundation on which to build in the future. They are also a clear indication of the quality of your offering. Spend time ensuring that all of your retained customers are absolutely happy, and if the list is uncomfortably short, find ways of extending it before you reach out to buyers.
…But diversify your customer base
That said, if a huge proportion of your revenue comes from just one or two customers – or even one or two sectors, depending on the industry you are in – this can look risky and off-putting to buyers. The implication may be that you are just a one-off incident or two away from losing your entire cashflow. So, just as you should spend some time building up a base of recurring revenues, so you should spend some time extending and diversifying your portfolio of customers.
Marketing, marketing, marketing
Ultimately, preparing an IoT company for sale is an exercise in marketing. All good marketing should be built on a foundation of a fantastic product or service offering – but, more than that, the product or service needs to stand out from the crowd. To improve the valuation of your IoT business, you need to be able to clearly demonstrate how your offering sets you apart from competitors who may also be clamouring for a sale – or for your customers. Furthermore, you need to demonstrate how those unique strengths are clearly showcased through branding and communications. That way, any buyer taking the business on will have a clear sense of how they can position it for future success.