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Today we’re covering an industry that is one of the most popular amongst buyers, but you would probably never guess! 👀

That’s right! It’s the IT Services Industry in the US. While you might not consider yourself a ‘tech wizard’ (i.e. having your nephew help you log in to Netflix), we’ll show you that IT Services can make great business investments even without the tech expertise.

Let’s decode this digital code together! 

INDUSTRY BREAKDOWN

The IT Services Industry in the US: A Tech-Forward Leap for Entrepreneurs?

In an era where “smart” is the new normal - everything from watches that track your workouts and can send a text, to thermostats that can control your house from a click of a button, we have created a utopia of convenience.📱Yet, as anyone who's spent a frustrating afternoon trying to troubleshoot a "smart" device knows, these gadgets aren't always as intelligent as they claim. That is why it is no surprise that the IT Services Industry in the US is skyrocketing.

It's not just about fixing computers anymore; it's about leading the charge in the digital transformation of businesses across the spectrum. This irony of advanced technology's reliability issues has made IT expertise more crucial than ever. With a projected market size reaching USD 630.76 billion by 2029, growing at a CAGR of 6.47% during the forecast period, the industry looks like it is only going to go up from here. 📈

Industry Trends

The IT Services landscape is evolving at breakneck speed, pivoting towards proactive and reactive IT solutions to cater to the complex needs of today's businesses. The rise of remote work has underscored the necessity for digitalization, pushing companies towards IT solution consultants who emphasize digital transformation. 

With advancements in technologies like AI, machine learning, and big data analytics, the IT services industry is focusing on enhancing operational efficiency and decision-making. This shift towards a more integrated digital approach is driving financial growth in the sector, with the market projected to expand substantially.

The Finances 

The financial growth of the IT services industry in the US is significantly buoyed by the proliferation of smart devices and homes. 

As these internet-connected gadgets become integral to our daily lives they usher in a parallel demand for IT services for maintenance, repair, and optimization. This trend spans various sectors, including education, where smart devices facilitate remote learning; healthcare, with telemedicine becoming more prevalent; and businesses adopting smart technologies for operations and security. The increasing reliance on these devices not only propels revenue in the IT sector through direct servicing needs but also through the development and implementation of integrated systems designed to manage these smart ecosystems efficiently.

With technology continuously evolving and becoming more embedded in everyday life, the IT services industry is poised for sustained expansion, making it an opportune time for prospective business owners and investors to consider entering this market.

Buy or Bust?

The US IT Services industry is not just surviving but ✨thriving✨, offering a promising avenue for business ventures in an increasingly digital world. Whether it is diving into cloud services or leveraging AI for business optimization, the opportunities are vast for those ready to innovate and lead the tech-forward era. 

Check out these IT Services Companies for sale:

1. Exceptional IT Services Business with Untapped Growth in Lafayette, Louisiana - $499,000

2. Profitable 21-Year-Old IT Company in Dallas, Texas - $3,500,000

3. 30 Year Established IT Hardware Services Company  in Wheatley Heights, New York - $600,000

Interested in a particular industry? Reply to this email with the industry you are curious about and keep your eyes peeled in upcoming issues. 👀 

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DEAL REVIEW

Established IT Services Company

This week’s deal is a Well-Established, Multi-Decade Family Owned & Operated IT Company in Dallas, Texas. 

Deal Facts 🔥

Green Flags 🟢

• Leadership Excellence and Management Strength: The owner's deep roots in the electrical and telecommunications arenas, coupled with extensive leadership, safety, sales, project management, and business training, as well as a broad range of industry certifications, have shaped a commanding leadership style. This approach has effectively nurtured a highly competent management team, well-equipped to drive the company's innovation and success.

• Resilience Against Market Fluctuations: The ability of the company’s management to maintain profitability despite inflationary pressures and supply chain disruptions indicates strong operational resilience and effective financial management.

• Stable Revenue Streams: A reliable base of recurring service and managed services contracts account for about 50% of annual revenues, providing financial stability and predictability.

• Diversity Certifications: Being certified as a Texas State HUB, WBE, and Woman-Owned/Minority Business may offer competitive advantages in winning government and corporate contracts that prioritize diversity in their suppliers.

Red Flags 🔴

• Dependency on Major Clients: The mention of revenue spikes and dips associated with a large customer moving in and out of the area indicates client concentration risk, which could pose financial instability.

• Limited Marketing and Advertising Efforts: The observation that nominal investment in advertising could significantly boost revenues suggests that the company might not be fully exploiting its market potential, potentially limiting its growth. This may be a hidden green flag as it presents the opportunity for a buyer to scale the business. 

• Geographic Limitation: Despite the capability to service the entire state of Texas, there's no mention of national or global reach, which might limit growth opportunities, especially with the increasing trend of remote and distributed IT services.

Watch Our Video Breakdown 

For a more in-depth analysis, check out this video deep dive of the deal by our Founder, Morgan Tate:

Possible Deal Structure: Earn-outs are perfect for deals like this, where revenue and profitability are not consistent year-over-year. Further, the business owner would (obviously) like to get paid based on their best year of performance, not their worst, but you want the opposite as a buyer. 

The answer? Incentivize the owner by allowing them to ‘earn’ a purchase price equal to their best year of financial performance. For example, make an initial offer at a lower profit multiple, based on their trailing twelve-month (TTM) financials. The catch? Offer the owner a 24-month earn-out where they will be significantly rewarded if the business returns to their 2021 financial high of $4.5M in revenue. To do this, offering the owner a 12-month contract may help align incentives.

Turns out, 42% of you would rather keep your fitness regime strictly personal, opting out of integrating those lunges and squats into your professional lives. 🏋️

Want to learn more about this deal? Reply to this email with a “send me more details” and we will connect you with the broker!

Ashdown Capital stands as a specialized partner in the complex world of financing for business acquisitions. With a team of experts led by Michael Hopp, Ashdown Capital excels in providing professional guidance tailored to the unique needs of acquirers. Specializing in cash flow financing, the firm is adept at structuring financing solutions for management buyouts, leveraged buyouts, mergers, and dividend recaps. Their deep understanding of these transactions enables the provision of strategic insights and customized solutions that support clients' acquisition strategies.

Distinct from traditional banking models, Ashdown Capital enhances the buyer's position by initiating a competitive financing process. This approach ensures clients have access to a diverse range of options, aligning with their specific business objectives and enabling informed decision-making for securing the most suitable debt structures for their acquisitions.

Professionals seeking strategic growth through acquisitions and requiring expert financing guidance are encouraged to explore how Ashdown Capital's specialized expertise can assist in achieving acquisition goals with confidence and professionalism.

Follow this link to learn more about how they can help.

TWEET HIGHLIGHT

Climbing the corporate ladder might get you a cozy $100k, but why settle when embracing entrepreneurship could have you aiming for a 7x payday? Plus, imagine the freedom to slot in that midday workout class because you’re the boss and your schedule bends to your will - not the other way around.

Entrepreneurship is not just a long word that no one can spell, it is truly a step to becoming a top earner.

GOOD READS

Recommended Resources 📚

Below is a list of articles, books, and other resource we recommend for buyers or operators of small businesses!

1. Hey USA readers! 👋🏻 Looking for a new software that can help simplify the debt-raising process for self-funded entrepreneurs? Viso has released its brand new Deal Advisor platform for just that.

2. SDE? EBITDA? MPSP? The SMB world has too many acronyms to count - including “SMB” 😅… Before heading into your first buyer-seller meeting or navigating your first LOI (another one - sorry!) make sure to check out this all-in-one glossary of SMB lingo so you don’t spend time googling every term and getting a vague answer.

3. Interested in learning the ropes of financial empowerment? Want insider tips directly from the heart of the SBA? Although a little lengthy, you don’t miss this interview from Harvard Alumni Entrepreneurs.

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