Management Buyout Opportunities
Management Buyout Opportunities is the fourth article in our series, which looks at ways that contractors and permanent employees can make more money out of IT.
Too often contractors just turn up for work and don‘t look at the business opportunities that abound. When I was a CIO, I would have been perfectly happy for contractors to come to me with a solution or suggestion that would have benefits for us all. They never came.
Today we‘re going to look at Management Buyout Opportunities (MBOs) and the opportunities afforded there.
IT workers are always looking for schemes to make themselves rich from their profession.
They often try to think of useful software that they could writte and sell. They make the usual mistake of writing the software before they have a client.
A useful rule of thumb is that, if you can‘t find a client, then you won’t sell your software probably when it is written.
However, those in IT often miss out on their greatest opportunity. And it is right under their noses, i.e. management buyout opportunities (MBO).
This doesn‘t have to be of the whole company, although it can be, if it is a software company. It can be simply that the IT management, or a group of senior contractors, could simply buy out the IT department of the company.
It would cost far too much, I hear you say. Not necessarily.
In fact, you may find, especially in this market, that it is relatively cheap. It may even cost you nothing at all.
Why Would They Sell?
So why would they want to sell it to you?
Because it is normally a troublesome part of the company for them, and not core to what they do.
They also have little knowledge of IT. Often they would like nothing more than for someone to take it off their hands. If they were able to get a little bit of money for it too, they would be very happy indeed.
You would have to have some sort of agreement with them where you would provide a service for a certain period of time at a particular price.
A management buyout would be particularly attractive at a company that has skills that are attractive to the market.
Attractive to Venture Capital Funds
Those that provide Venture Capital funds are particularly keen on Management Buyouts. The reason is that there is a ready made business already there, with a major customer for its services. That’s unlike the many start-ups that ask them to fund them.
How do you find these? Don‘t worry, your company will know how to find them for you. What you need to do is to provide a credible business plan and get on board the key members of the department.
Try to get hold of the departmental budget and look to see how you could save some money.
Everyone knows, especially the Venture Capitalists, and the Finance Director at your company, that a motivated workforce, who have a stake in the company, will perform far better than a department of salaried employees.
That‘s what they would be banking on. They would be expecting you to grow the company.
Expand the Business
Although you have a major customer, you should also look to see how you could expand the business and get other customers. Do you have the kind of skills and business knowledge that other companies would have an interest in?
You could be onto a goldmine here. If you are a senior IT employee, or a senior contractor with credibility at the company, perhaps the first thing you could do is to approach whoever the IT department reports into, to fly a kite about whether the company would be interested in a Management Buyout of the IT department.
A good time might be when there has been some trouble, e.g. when a project is running late and well over budget. A private word with the Finance Director might be appropriate at this time.
Unless you ask, you never know. I think that you‘ll find that they‘ll give serious consideration to any proposal that you put up.
Could be a Bargain Buy
You may get a company with a turnover of quite a few million for just a few hundred thousand pound of money you borrow from Venture Capitalists. Even better, they may give it to you free for either a stake in the new company, or for a good deal on future work that you do for them.
Perhaps even offering them a fixed price for future work might do it for them – especially if they are in the middle of a runaway project.
Would your company or client be interested in this? Start thinking about it and how you would pull it off. Make discreet enquiries.
You might just be hitting on the idea that will make your fortune.