This person has been helping ISPs, CLECs, WISPs, webhosts, and cable companies find a buyer since 1994.

by Alex Goldman ISP-Planet Managing Editor [June 29, 2007]

Tom Millitzer, principal of Cape Coral, Fla.-based New Commerce Communications, described his work succinctly. "We position a company for sale, allowing the seller to make more money. In part, we provide the buyer with the information they need."

Buyers want to know:

• Why you're selling (this can impact the sale price).
  
  
• Your company's history and background.
  
  
• Your company's ownership structure. "Sometimes, someone owns 5 percent or 15 percent of the company. If you're thinking of selling in the future, you'd better find these people now, or they could hold up a deal."
  
  
• Will you stay on to work with the buyer for 30, 60, or 90 days? "Of course, the buyer feels they can run the business better than you can, or they would not be buying it from you, but they might want you to stay on for the transition."
  
  
• What you sell. Is it just one product or many different products? Is there one price or many prices?
  
  
• Network. How expensive is your network? How long are your contracts for? "You want to have short term contracts when you sell."
  
  
• Employees or human resources. "Some companies have partners who do nothing except get a check. In others, the owner takes a $150,000 a year paycheck for a $70,000 job."
  
  
• Billing system. You want to have a good billing system and prices that are easy for the buyer to understand. You need to be able to tell the buyer how many services are prepaid and when the next payment is due.

Look better, feel better
"If you want to sell your company three years from now," Millitzer said, "there are some things you can do now to make you look better, things you can do now so you don't leave money on the table later."

Having audited financials could cost $10,000 per year, but will make you a more attractive acquisition, especially to a public company which has to produce audited financials of its own.

Millitzer also recommended capitalizing labor. This is an accounting matter and if you don't understand it yourself, talk it over with your accountant. If you are having your employees build an asset, such as a data center, you can account for the time spent on building that asset as an investment instead of an expense. This will raise your profits by reducing salary costs, raising your taxes in the short term. In the long term, however, it will add assets to your balance sheet and increase your profitability, delivering a higher sale price.

Proof your website! A website should have current information, starting with a current copyright date and contact information. There should be no broken links. The website should look good, like it was built by a professional, not like you put it together with Mircosoft FrontPage while learning HTML.

If you have the time, open a premium brand before you sell the company. Obtain even a few customers at a higher price, and you'll raise your average revenue per user (ARPU), which will raise your sale price. Charge $49, $79, or $99 per month, whatever amount is a lot more than you are charging now.

These days, Millitzer said, webhosts tend to have revenue of about $300,000 per employee per year, while ISPs tend to be closer to $72,000 per employee per year.

Close your accounts receivable. Solve all of your delinquent customer problems by collecting on debt or shutting down the account. Do so legally, warning the customer weeks or months before you turn off their service.

Be prepared to explain your marketing strategy.

Millitzer said he has pages and pages of suggestions and questions, and this was only and overview. He can be reached at the NCC website, linked at the start of this article. He also writes a blog for The Webhost Industry Review.

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