Software Industry Global Importance - Delivering the Impossible
The growth of the software industry can be measured, in one way by the number of independent software companies (ISV’s) in the sector globally, estimated at 150k (Boss Equity, 2018 Estimate). A considerable number - and growing.
What can also be seen is the software industry’s contribution to the global economy. It is immense. It’s estimated the software industry makes a $2 trillion GDP contribution and provides over 20 million high-quality, well-paying jobs. Software is a major contributor to the global economy and its impact is growing exponentially.
Unlike other sectors of the economy, software does not need an external catalyst to bring about change. Software is revolutionising the way we work. The software industry is continuously innovating, delivering incremental advances, in a genuinely transformative way, for the benefit of all. Software is driving and facilitating the digital revolution, providing tools that can turn Big Data into manageable ideas. It powers business platforms that provide eco-systems for business communities, suppliers and consumers. It not only helps us deliver what was previously impossible but has changed the way we now live, providing in most cases, enhanced convenience.
Expansion of the Digital Universe
Between 2014 and 2020, the digital universe will have grown by a factor of ten. Digital information more than doubles every two years. Software gives us the potential to achieve much more with less and in a shorter timeframe. Software solutions and platforms bring benefits to our daily lives by letting us work with fewer boundaries of time and location, networked, smarter and faster. I am writing this article whilst sipping coffee in a village coffee house, linked via the web to research data on our office server. Prior to this level of connectivity, I would have been regarded as skiving; instead, I can be highly productive in any location that has Wi-fi.
Software provides traditional businesses with an efficient vehicle to the Fourth Industrial Revolution and the benefits of latest technology, including robotics, artificial intelligence, voice technology and the Internet of Things (IOT).
Freeing Entrepreneurs to Climb New Mountains
One observation we’ve made after completing hundreds of business sales processes, is that many owners and shareholders become emotionally attached to their business, which can detrimentally affect their strategic thinking and exit planning. Many entrepreneurs feel as though they are intrinsically linked to their business. They’ve become addicted to their past successes and this is not healthy for them or their business. They often feel that they’ve climbed their mountain and they now need to hang onto life at the summit like a limpet to a rock. Even when they know deep down their journey with the business has come to its natural end.
One of the important steps in our process is to help our clients to think about what could lie beyond their business. What would that ideal next step look like? The interesting thing we repeatedly see happening, is that, with the right questions, quite quickly business shareholders see that their life does not just have to be this one particular company forever. With this realisation, a weight is often lifted from their shoulders, which can result in renewed passion for the next step in their career or life. They can climb new mountains if they want to and this time they don’t need to start at Base Camp Zero.
To do this, though, they must stop and lift their head from the business to look beyond its boundaries. It can be a very liberating and beneficial exercise.
How Acquisition Talks Often Begin
We receive approaches from business owners wanting us to sell their business, often after they’ve had an approach from a potential buyer. The catalyst is often that initial call from an opportunistic buyer or they may have had a failed attempt at selling their business themselves. The failed attempt has often triggered by a cold approach from a buyer. The reason this happens is that it has given the business owners their first glimpse of a life beyond their current company.
Do not enter acquisition talks unless you’re personally ready to sell and your company is prepared for a full due diligence process.
What will be required of you during that due diligence process may surprise many and will frustrate all. It's painful and you won’t enjoy it. Therefore, unless you’re a masochist, you must be properly prepared for the acquisition process or, as we call it, “M&A Primed”.
Looking to ‘The Life Beyond’
Negotiating an acquisition can only begin once all shareholders are aligned and you have spent time thinking deeply about your collective objectives in selling the company. You also need to have at least a half-formed picture of what lies beyond the sale of your business for you personally. The picture beyond is far more important than many initially believe. Many overlook this future planning and miss out on what could be a major boost to the next stage of their life.
Once you have some degree of clarity of what you would ideally like to do after the business is sold and you are no longer involved in it, you can start to plan for that next step immediately. That means right NOW! This will give you the advantage of a running start to your next venture and the next stage of your life.
There are often opportunities that can arise during discussions with potential buyers that can help facilitate that next stage of your journey. The step of clarifying what lies beyond your current business is a complete topic in itself, which I won’t examine in detail within the confines of this article, other than to raise the point as something that should not be overlooked.
Be Proactive in the Direction of Your Exit Strategy
Don’t wait for buyers to knock on your door. “Build it and they will come” is not the best approach in this instance. You need to be proactive and take decisive action. This starts with the creation of an exit strategy. In its simplest form, an exit strategy is a clarified ‘end vision’ for your business, which becomes the main objective. The objective, broken down into steps, becomes the exit plan. The plan broken down into a series of actions makes the exit plan a reality.