Your Technology is Your Busines

For most businesses - regardless of size and industry - IT is crucial. Hardware, software, data, procedures, and IT personnel make a business run. Companies that use more current technology can produce more work with less effort, while those with older, outdated technology experience hidden costs associated with inefficiencies, security risks, increased maintenance and support, and more frequent downtime.

Old Systems Lower Value

Frequently, owners of businesses that anticipate a sale in the near future do not want to make an investment to update their IT systems. This may seem to be a sensible strategy as it saves money. But in reality it will lower the value of the company. Educated buyers know that outdated IT makes it less competitive than its peers. Any offer will also consider the future costs of replacing technology to bring deficiencies up to standard and for the training of employees to use new technology.

Is it Being Used Effectively?

While many companies believe they are using technology to its full advantage, this is rarely true. Expert analyses find that 80% of companies are using less than 20% of their technology capacity.

What About Hardware?

Hardware is a commodity, and it has very little value once it has reached a three-year life. While older hardware can continue to be used if economic conditions are tight and a current expenditure would not be justified, the value of the hardware continues to approach zero. While a functioning piece of hardware has some value, typically the maximum value would be the current replacement cost, which tends to be almost zero.

Transaction advisors regularly see deals aborted during due diligence because of deficiencies in IT. In effect, these deficiencies effectively reduced the value of the business to the point that no deal could be made. Don't let this happen to you! Give yourself an IT audit today and budget for the necessary upgrades, so you will be ready for a sale.

THIELGROUP does not provide legal, tax, or accounting advice and strongly advises its clients to seek independent tax & legal advice from professionals who possess an expertise in business transactions.