Hourly Pay As You Go Firms: Meet The Ghost Of Christmas Yet To Come

If you are a Sage partner and you are still clinging to hourly billing and “pay as you go” – then meet the “Ghost of Christmas Yet To Come”.

What does the Ghost see? Go review the fire sale price that leading Sage partner Hightower Inc (apparently $3 Million revenues in 2011) commanded.

$350k plus $65k for delinquent IRS taxes. That’s the end result of 24 years of toiling to build a business.

The only price someone was willing to pay for 850 customers and 700 custom enhancement customers was a little over $200 each.

If this is not a wake up call and you start making plans today (assuming you have not already) to move off the billable pay-as-you-go business model — you should get out of the business while you still can.

Totally serious.

Hightower Inc Fire Sale

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Comments

  1. Great post. My 2 cents:

    Most owners of service businesses aren’t building a saleable business. The problem is a lot of them haven’t acknowledged that fact yet.

    It’s perfectly ok to have a lifestyle business and make a living taking care of your clients as you do it – as long as you are aware that is what you are doing and all the risks contained with this approach.

  2. I think the premise that a lot of owners of service business aren’t building a saleable business is correct, but it is especially true of Sage VARs. Accountants normally get from about 1X to 2.5X their annual billing when selling their business. That’s a lot better than Hightower got. It would be interesting to compare other ERP VAR’s selling price to this one. Especially situations where it is an urgent sale. This is a situation where you climb the ladder for years not to find that it was leaned up against the wrong wall, but rather that there was no wall there in the first place.

    • We haven’t accepted any customers over the last 5 years who are not enrolled in our own support plan (invoiced and provided by us). While I don’t have anything to back this up — I think the multiple for such a customer would be a lot closer to 1.x revenue.

      The biggest sticking point is how long the owner will transition. If the owner(s) are going away immediately the value is usually reduced proportionally.

  3. I would also add that when you want to sell your company vs. when you have to sell you company as in this situation, it is a lot harder to control the outcome of what you. It is a different process when it is a Sheriff sale than a Public sale.