Maximize IT Company Business Valuation & Technology Startup Exit StrategiesBy James Blake on
Business valuation of IT companies and tech startups for the purpose of business investment or the sale and purchase of a tech company is often a fine art. Currently, ‘monitization’ and ‘revenue’ are the buzzwords that dominate this topic in the popular press. But too much emphasis on revenue alone is misguided because there are other big-picture components of business valuation for tech companies.
To maximize IT company business valuation for investment, business growth, business financing, selling a company, etc., your business should focus on building two types of value: intrinsic value and strategic value.
Intrinsic Value vs Strategic Value
Intrinsic value is a “sum of the parts” approach to the business valuation of an IT company or technology business’ assets, including equipment, intellectual property rights, revenue streams for products, services (ie, software as a service (SaaS)) or other revenue from intellectual property licensing. It might also include the company’s credit and ability to raise business financing or investment with intellectual property or other IT company or technology business assets. Intrinsic value is similar to liquidation value when selling a company.
Strategic value is a business valuation approach that adds a premium for intangible business assets, including the market advantages of an IT company or technology business, strategic partnerships and industry position, marketing and brand value, relationships with customers and vendors, and the structure of your business organization, its business contracts, skilled employees, and operations. When selling a company, the premium paid for some of the intangible business assets held by an IT company or technology business is attributable to goodwill and strategic value.
Business Law Strategy to Maximize Business Value
Focus on several business law principles can maximize intrinsic value and strategic value growth simultaneously:
• Business Organization: Company Formation for business tax efficiency; Business entity organization and growth with asset protection structures; Protection for shareholders in business partnership disputes; Investment agreements that provide security for your business financing.
• Business Contracts & Agreements: Designing business contracts for financial security and asset protection; Building collateral for investment capital and business financing: Hedging risks with insurance; Protecting intellectual property rights in IP licensing agreements, proprietary information and invention assignments (PIIA), employment contracts, independent contractor agreements, non-compete agreements, etc.
• Unlocking Intellectual Property Value: Developing intellectual property via a defined marketing, sales and licensing strategy; Structuring intellectual property into discrete units; Salvaging and repurposing abandoned intellectual property; Discontinuing underperforming “pet units.”
• Business Agility & Exit Strategy: Building an IT company or technology business that fully leverages its assets; Growing with a modular design for asset protection and business agility to emphasize fast iteration and revenue cycles; Structuring your tech business for efficiency in the process of selling a business, business succession planning, and other exit strategies.
Building a successful IT company or technology startup, selling a company, and pursuing other exit strategies requires careful business planning and precise execution. Our Austin Business Law Firm regularly advises IT company and technology business clients. Contact us today to engage a business attorney that will be a strategic partner committed to your success.
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Tags: Austin Intellectual Property Lawyer, BL, Business Lawyer Austin, Business Strategy, Development Contract, Exit Strategy, Intellectual Property, MT, Selling a Business, Texas Intellectual Property Lawyer