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Selling A Web Development Company

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This article explores some of the issues that are typically faced when selling a web development company.

Web development companies are extremely popular with buyers, a recent sale led to meetings with more than 20 potential buyers, but they do pose certain issues and challenges for the sellers and their advisors in completing a sale.
 

Why Are Web Development Companies So Popular With Buyers?
 
Two main reasons. Pretty much every business needs a website of some kind in the modern economy, and this creates a vast market for web development services. Basic off the shelf brochure sites can now be bought for a few hundred pounds, but there are still many thousands of companies that want something that looks a little different, or perhaps more advanced e-commerce or database facilities.

The second reason is continuing income off the installed customer base. A successful web development company will create websites for several hundred, perhaps several thousand, companies. Some of these companies will buy hosting and webmail services from the developer – often paying by direct debit on a monthly basis. Others will return on a regular basis for site maintenance, upgrades and eventually replacement. There is also potential to cross sell email marketing and social media services to the installed customer base. Web development companies typically get between 40% and 60% of their income from existing customers.
 
What Are The Challenges When Selling A Web Development Company?
 
Almost all the hard bargaining when selling a web development company centres around new projects in development. Buyers will want to be sure that the seller has not already been paid for work that will be completed under their ownership. They will also check that jobs quoted on a fixed price can really be completed at a profit. Balanced against this sellers will want offsetting credit for any unbilled work in progress. This always means a project by project negotiation of the value of development work in progress. Projects that are “stalled” awaiting copy or design approval from a customer are particularly contentious.

Despite these issues the underlying residual income, and ability to cross sell other services to the customer base, make web development companies one of our most popular specialist markets.

 

If you are interested in finding out more about these and other issues relating to the sale of a private company one of our business sale experts would be delighted to talk to you in complete confidentiality. Click CONTACT ME to book an initial phone conversation or call us on 01604 432964

 
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