Watch the sixth installment of F12’s M&A Video Series: Recognizing the Right Revenue
Are you confident in your ability to recognize the right revenue?
When analyzing your profit margins, revenue sources, and EBITDA, it’s important to keep an eye out for the right revenue; that is, the revenue that will make your business most attractive to a potential buyer. So what are some of those key performance indicators to look out for?
- Rate per user (RPU). Your RPU comes from identifying the profitability of each of your clients, and each user of your services. For example, this could mean the number of people employed by your client who use your IT services and devices.
- Revenue per employee. This KPI is a company’s revenue divided by the number of its employees. If your numbers are weak after evaluating this metric, you may be overstaffed, or not billing enough.
These revenue streams will help you answer Michael’s question about being a real MSP. That’s because the type of revenue your company earns indicates what type of business you’re running. For example, an MSP will likely have a lower revenue per employee than a traditional VAR (Value Added Reseller), because they focus primarily on services rather than products.
Don’t head to the bargaining table without ensuring your affairs are in proper order. Michael highlights the different revenue KPIs to hit before selling your business in his blog post about different revenue streams, and reminds entrepreneurs to never settle for the status quo when it comes to their business.
Missed the other 5 videos in the series? Watch them here:
- Selling your Business – Lessons from my MSP M&A Experience
- Succession Planning When Selling Your Business
- Recurring vs Re-occurring Revenue
- Why Should I Streamline My General Ledger?
- Know Your Ideal Multiple
Thinking about selling your business? Reach out to me, Michael Contento, at email@example.com.