The In’s & Out’s of Selling a Translation Services Firm
Timing is everything when selling a business. Do you have an exit strategy for your translation firm?
If there was one thing we emphasize to business owners when they are thinking about selling it’s this: timing is everything. Choosing the right time to sell your business can be the determining factor between a sales price you learn to live with or the exact number you were hoping for. So what circumstances make it the right time to sell? Generally, we advise business owners to begin exploring options when they see their business on a financial upswing with growing sales and a steady cash flow. A healthy economy and flourishing industry also make for great timing when selling a business. Due to technology and globalization, the language services industry is projected to see extreme growth over the next few years in terms of economic output, the job market, and global demand. Mergers and acquisitions are trending in the industry, giving business owners a rare advantage in today’s seller’s market. If you have been thinking about planning the next step for your translation services business, the timing could not be better.
The translations services industry has been named one of the fastest-growing industries in America with an annual growth rate of 4.9% and an expected economic output of $39 billion by 2018. Industry growth is being driven by corporate expansion into international markets and immigration, as the number of people immigrating to the United States increased by 12% last year. Industry demand has given way to a robust job market, with a 46% increase in translators and interpreters, making it the 5th fastest-growing occupation in America. Not only is the future of language services on track for expansion, but experts are calling the sector “recession-proof”, having been one of a few industries seeing little to no impact from the 2009 financial crisis. All of these factors give buyers good reason to explore investment options in the translation sector and as a business owner, the time to begin planning is now. The first step to planning for the sale of your business is finding out its value. We have provided a simple rule of thumb to give you an idea but keep in mind that only a professional business intermediary can tell you the true value of your business.
- 40-45% of annual sales + inventory
Now that you understand how the value of a language services firm is calculated, you can begin taking steps to increase the value of yours. To assist you in this task, we have compiled 4 ways you can boost the value of your translation firm.
Expansion through Acquisitions
Using mergers and acquisitions as a growth strategy is an emerging trend for small businesses in a variety of industries. Typically, using M&A to grow works best in fragmented industries with a few corporations and an enormous base of small to mid-sized business. Instead of opening a new branch in a different geographic region, business owners would rather purchase an existing business to cut down on start-up costs and reap the benefits of an established business such as customer lists, equipment, location and real-estate. Depending on your current position, using M&A as a growth strategy for your translation services business can really work in your favor. If you are looking to sell, you are in a great position with access to a large pool of qualified buyers actively looking for a business. If you are not ready to sell and thinking about how to grow your business, acquiring a firm in another market may be the best avenue to that goal.
Client diversification is one of the top items buyers look for when buying a business. When looking at potential investments, buyers access risk and when they see that 30% or more of your revenues are tied to one single customer, it gives them cause for concern. As business owners, we often wear many hats and it can be very easy to get caught up in the sales/customer relations side of your business. This is also a red flag to buyers who may worry that the client relationships are with you and not the business, therefore not transferring to them as the new owner. The benefit of planning your exit far in advance is that you have ample time to correct this and here’s how. More corporations are expanding into global markets and the demand for interpretation services is increasing on a variety of platforms. Industries utilizing translation services at the highest rate include health and medical, legal, and technology. Increase your offerings to include human-to-human interpretation as well as written translation services to increase your chances of capturing new clients. Also, take note of your current customer concentration; if you see that 50% of your clients are in the medical field, it may be time to strategize a campaign to target legal or IT businesses.
Due to the global nature of the language services field, switching from a brick and mortar facility to a virtual office can really help increase your profit margins and reduce your costs. Translation firms typically specialize in transcribing written documents, which can be done using advanced equipment, or voice translation, which is best with the help of a human translator. Translators can live all over the world and do not need to be in a physical facility and regular employees can simply load laptops with the necessary equipment and work from home. Translators can also be categorized as sub-contractors, which also helps with cost control. Businesses in the language industry can pull profit margins as high as 25% and reducing costs by switching to a virtual office could potentially increase that number. As mentioned above, valuation multiples place a heavy emphasis on revenues and implementing a virtual office would increase your bottom line.
One of the most valuable assets a business owner can have at their language firm is a wide variety of translators. While technology is huge in this industry, there is nothing quite like an actual person who understands the nuances and culture of the language you wish to translate. Buyers looking at translation companies will evaluate market trends and global trade to assess where translators are needed and will be thoroughly impressed by a repertoire of different language offerings. As mentioned before, translators have the ability to work remotely which can also coincide with different time zones and business hours based on the region of the client. Translators can also work remotely on a sub-contract basis, keeping your service offerings flexible and reducing costs. In an ever-changing market, having sub-contracted translators gives you the flexibility to change when the market does and add or subtract translators based on demand. By offering services in a variety of languages and dialects, you are giving your firm the opportunity to increase revenues and grow, which buyers will definitely take note of.
If you’ve watched your business consistently trend upwards over the last few years and you are ready to explore your options, the timing could not be better. Our economy is in a great place and the buyer market is plentiful in the Southeast, giving business owners a favorable advantage in the world of M&A. Even if you are not ready to sell for a couple years, valuations are a priceless tool that all business owners can use to their advantage. When you are ready to take the next step, Viking Mergers & Acquisitions is here to assist. Let 2016 be the year you take your business to the next level. Call today for a no-cost, no-obligation valuation and take the first step to securing your future.