Software Executive Magazine

December 2017

Software Executive magazine helps software executives grow their businesses by showcasing the business best practices of our readers, executives from established and innovative software companies.

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Ways To Increase The Value Of Your Software Company I V A N R U Z I C Vice President, Corum Group 8 Whether you are considering selling in the short term or not, every software CEO wants to build a more valuable company. Here are some lessons I've learned from over three decades of helping soft- ware companies realize that value. HIRE A QUALITY MANAGEMENT TEAM When hiring management, consider what buyers and investors will want in terms of experience, creden- tials, ability to work well together, and how your team complements each other in skills and backgrounds. A great management team that is more than the sum of its parts gives buyers confidence in the future of your com- pany and therefore increases its value. 1 PRIORITIZE CUSTOMER RETENTION Minimizing churn is especially important for SaaS companies. As a subscription base becomes larg- er, any churn against that base becomes a large number. That loss of revenue requires more and more bookings from new customers to replace. As a result, growth slows. For many buyers, this will be the most important metric they look at. 2 BUILD A COMPELLING DEVELOPMENT ROAD MAP Your road map should plan for products and features to delight current customers, capture new ones, and create opportunities for revenue. Look for disruptive trends you can leverage to benefit your market. Road maps that bal- ance ambition and innovation with discipline and pro- cess are assets for you and potential acquirers. 3 DIVERSIFY YOUR CUSTOMER BASE Having too many eggs in one basket is a risk that will make buyers hesitate. If 20 percent of your business comes from one loyal customer, it may well be a safe source of revenue. But what if they switch IT strategies, file for bankruptcy, or are acquired by someone using a competitor's products? You could be hit hard by the loss of that income, and it takes a lot of time to make it up. Keep your customers happy, but diversify your base. 4 BUILD ALLIANCES & PARTNERSHIPS Many growing companies forget to play well with others because they are focused on building products and winning sales. Don't overlook the benefits of an ecosystem of business alliances and companies invested in your suc- cess. Alliances take time to build and maintain, but that's exactly why they create validation. A partner ecosystem will expand your value proposition, generate leads, extend your sales team, strengthen competitiveness, and make you an easier, safer decision for customers and acquirers. 6 EMPHASIZE YEAR-OVER-YEAR GROWTH Profits versus growth is a classic value question, but growth is the safer bet. It provides a clear metric of your company's operations and market reception. If you're investing your earnings into expanding geographically, in- creasing market share, and beating out the competition, a buyer will see this growth as reflective of future perfor- mance — and after all, the future is what they're buying. 7 TIME YOUR SALE You want to realize the value of your company when things are going well, inside the company and out. Obviously, it's better to sell when public markets are strong, demand is high, and valuations are attractive. But there are internal issues to consider — you shouldn't wait until health, relationships, or changes within your market degrade your value. Every company's timing is unique, but it is always better to sell too early than late. S 8 SHIFT TO A SAAS MODEL If you haven't made the leap, 2018 may be your year to move to SaaS. This means both a shift from a perpetual license to subscriptions, and from on-premises to hosted solutions. The subscription model eliminates "lumpy" perpetual revenue and increases predictability. Hosted solutions mean easier deployment using a common code base, eliminating version-control issues, and providing in- sight into customer usage, which creates opportunities to improve user satisfaction and retention rates. 5 THE LIST Index By I. Ruzic 8 WAYS TO INCREASE THE VALUE OF YOUR SOFTWARE COMPANY SOFTWAREEXECUTIVEMAG.COM DECEMBER 2017 8

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