Many say custom integration companies have no value without recurring monthly revenue (RMR). That’s not necessarily true.
We have noted multiple times that the custom integration business is made up of “10,000 different companies doing the same thing 10,000 different ways.” You might argue that not all companies do exactly the same things. Your company is different, right? But there’s no doubt they are run in different ways. Every integration company we have ever seen manages their company differently.
So when it comes to how you run yours, you’re 100 percent correct – your company is different.
Now, imagine an investor is interested in buying your company, along with a number of other companies. Would the differences in how the companies are managed be attractive to the investor? Probably not.
Which is why it’s often written that if you don’t have recurring revenue, your company has no value. We agree, sort of… If you don’t have recurring revenue and your company does not run on some sort of standardized management system, it would have little value to an investor. But if it did run on a standardized system – one that is used by other integrators – enterprise value could be significant.
No recurring revenue necessary.
We believe the entire industry would be better off if integrators managed in a more standardized way. Think of it, with a standardized way for running the business, integrators wouldn’t have to guess, or figure out their own way. The way would be documented. There would be FAQs; most problems would have ready solutions.
Companies would be more efficient. Customer service would be enhanced. Bottom lines would grow. Perhaps most significantly…
Financial and productivity performance could be readily compared amongst companies. There would be legitimate benchmarks of good vs. not-so-good performance. And every company’s enterprise value would be greater because would-be investors/buyers would know how the company was being managed and reported. Heck, the investor could even consider buying multiple companies because all were being run the same way.
The more we do things the same way, the better off all of us will be.
Steve Firszt began management coaching with integrators in 2004. He is co-founder of VITAL Mgmt with Paul Starkey. They have worked to create a standardized management system for their clients. For a look at the infographics they now use to measure companies’ performance, visit www.bi4ci.com.