Top Ideas for Computer Related Businesses

Digital Economy

All companies require computer related services. Computer related businesses are specially well suited to people who have a technical background or are very interested in the area. Following are computer and Internet related businesses for consideration if you want to operate in this domain:

Computer Repair Service

Most people now have multiple computers including laptops, desktops and smart phones. When these computers have problems, downtime can cause significant impact to business and other users. Computer repair businesses help people by fixing their computers. Computers can be fixed remotely using virtual private networks (VPN) rather than actually going to location of the computer (house calls). Computer technicians and computer repair businesses tend to be very busy given people reliance on computers for business and personal work. Computer problems may be related to keyboards, mouse, printers, internet connection, component failures, disk failures and so on. Additionally, computer repair firms can also provide data backup services. There are several tools that allow you to back up data online and becoming affiliates for the these backup service providers can add to your revenue.

Website Design

Big and medium sized companies have well established Websites. However small companies can also benefit from online presence. Small companies have smaller budgets and Website design consultants can help these companies create and manage their Websites for a fee. Initially one can start with a few small companies and do this part-time. Developing Websites is simple with several advanced content management systems (CMS) available. CMS systems like WordPress makes it simple to develop Websites. Website designers can develop digital products like CSS themes and sell them on online market places for additional income. Additionally, Website designers can also make a mark up on hosting websites. They usually buy hosting from cloud providers like Amazon Web Services (AWS) and Microsoft Azure, but charge a markup for hosting. On the softer side, website design business allows you to be creative every day.

Internet Marketing Consultant

Internet marketing relates to promoting businesses online. It includes Search Engine Optimization (SEO), SEO experts help companies get more traffic from Google, Bing and other search engines. To be an SEO expert, you need to keep up to date with the latest changes in search engines and analyze websites to check if they implement all the best practices. This is a good business opportunity because there are millions of websites competing for maximum visibility. SEO requires copywriting skills and analytical skills. There are hundreds of websites online that teach you SEO skills. Additional benefits of this business include working from home, starting small (part-time) and scaling the business.

Blog Consulting

Blogs are discrete posts (articles) written by one or more individuals to and presented in chronological order. That is the most recent article is presented on the top sorted by date and time. It is one of the most common and powerful way to present your voice online. Many well established news sites now use the blog format to present news as it happens. There are millions of blogs online on every topic conceivable. Blogs are not necessarily written by one person. Typically there is a team supporting a blog. If you are good at writing and have time to research topics, blog consulting can be a good business. You can start this business on part-time basis and then scale the business over time to include multiple blog consultants as the market for blogging is large. Blog consulting is primarily content writing, but can also include blog setup, site customization and site hosting. The start-up costs for blog consulting is minimal. Blog sites typically make money through affiliate marketing, sponsorships and advertising. On the downside, one must be aware a blog site requires two to five thousand unique visitors per day before it can attract a sponsorship opportunities, so it requires significant internet marketing effort to get traffic.

Online Bargain Finders

Looking for bargains online requires time and knowledge of the Internet. There is an opportunity to find bargains online and re-list the bargain item on your own website. The re-listing website must sign on as an affiliate to sites where the deals are available. Your website makes commission on each sale through the affiliate relationship.

Data Entry Business

Several professions like legal and medical require significant amounts of data entry. The service includes data entry from hard copies to database (soft) format, data cleansing, legal forms, making soft copies of hand written information and several others. Data entry businesses can provide a steady source of income where the business gets paid by the hour or by the amount of data entered or transcribed into a system. Data entry services include data entry from images, PDF document indexing, Like other computer related business ideas, data – entry businesses have low startup costs and can initially be done part-time from home.

Internet Research Business

The Internet know has millions of websites and each website potentially has thousands of pages of information. Looking for information online, even with the Google and Bing search engine, is like looking for a needle in a haystack. It can take hours to compile a report. Additionally searching for information on the Web requires knowledge of internet safety.

Ink and Toner Cartridge Recycling Business

Ink and Toner cartridges are made by HP, Cannon, Epson, Lexmark, Brother and several other printer and photo copier vendors. Ink and Toner recycling business can be run part-time from home and the main skill required is the tools and ability to fill cartridges. Startup costs for the business are low between $2000 and $5000 and the return on investment (ROI) is high. Your clients can get recycled cartridges for less than 50% of the cost of a new one. Additionally, its green business because toner recycling businesses prevent millions of used cartridges from showing up in landfills.

Custom 3D Printed Products

Custom 3D printed parts have opened up a hundreds of opportunities for startups. As the cost of 3D printing comes down rapidly more and more use cases become feasible in manufacturing, health care and several other sectors. Key areas to focus on 3D printing includes mass customization, rapid proto typing, personal part fabrication and fabrication of non-standard parts.

Computer Training

Computer training businesses include training people on Windows, Office, Macintosh, Internet and other software products.

Computer Consulting

Computer consulting in Software development, Windows and Linux systems. networking and other services. Software development is perhaps the toughest area to get into because it requires computer science skills. But if you have these skills the demand for computer programmers, database administrators, computer systems analysts and software architects is large.

Deals Closed in 2014 – Statistical Analysis

Approximately 50% deals took between four months to six months to close in 2014. See illustration below. Based on this distribution, on an average, a business will take 8.5 months to sell. The time required to sell a business depends on a number of factors including type of business and asking price for the business and type of buyer. Types of business include Manufacturing, Business services, Consumer goods & services, Health care & biotech, Wholesale & distribution and several others. There are two types of buyer’s strategic buyer and financial buyer. Understanding the buyer type is perhaps the single most important factor when it comes to engaging a buyer and negotiating a deal.

Time to sell Business

There are several reasons a business transaction may fall through. Top three reasons are valuation gap in pricing (29%), insufficient cash flow (22%), and lack of capital to finance (12%). Valuation gap is responsible for almost 30% deals not going through. Both the buyer and seller must complete valuation of the business independently and come up with a valuation range. If there is an overlap then zone of probable agreement (ZOPA) exists and there is a good chance the two parties will find a number during negotiations.

Insufficient cash-flow and lack of capital to finance is another major reason to deals do not go through. It is important to qualify buyers before negotiating a deal.

Reasons For Failing

Of the 30% deals that did not go through because of valuation gap, 65% of the deals had a gap between 10% and 30%. As expected the numbers deals failing for less than 10% gap is very low. When the numbers are so close the buyers and sellers should generally be able to agree on a number and come to a deal.

About 50% are strategic buyers and 50% are financial buyers. Financial buyers will not negotiate much as they have to stick to their financial models. Strategic buyers on the other hand have longer term view and may have synergies with existing assets. On a an average, 21% strategic buyers paid 0-10% more and 29% paid 11-20% more.

Valuation Gap Business Deals

For these reasons it is critical for sellers clearly understand the buyer persona. Financial buyers look for value and evaluate business financial statements in detail. They leave very little room for premium and remain close to the valuation price. They are driven by Return on Investment (ROI) and use large amounts of financing. A financial buyer may not hold the business for long. They may fix the business, improve the financial statements and sell the business.

Strategic buyers on the other hand tend to stay in the business for long periods of time. They may buy the business to enter into a new market, increase market share or foreclose a competitor from acquiring the business. In terms of duration, strategic deals are also done much faster. Strategic deals are preferred because they are done within six months, there are lower chances of valuation gap pricing issues and seller may walk away with a small premium between 10% and 30%.

 

Business Valuation Considerations

Business value is not a specific number and there is no one absolute value that defines it. But rather business value is range and varies greatly based on assumptions used and factors considered. Market value is one type of business value.

Fair market value is the price at which a business changes hands between a willing business buyer and seller. It is important to keep in mind there is no one true value for a business because the value of a business is influenced by many factors. So rather than think of the value of a  business as an absolute number, one should think of it as a range. There are many reasons owners value businesses including buying and selling businesses, employee stock ownership plans, estate taxes, business equity transfer, financing and so on. Business valuation is also required for tax purpose when a business transferred to the next generation.

One place to start is to engage a professional business appraiser. Appraisers tend to conduct detailed analysis and use intrinsic valuation techniques rather than using rules of thumb because it tends to be overly optimistic.  Business appraisers have their pulse on macroeconomic and microeconomic changes effecting the economy and they can help business owner’s trade-off terms with cash when negotiating a term sheet.

There are two factors that affect small business valuations the most namely cash flow and the value of assets it holds. Cash flow is the amount of cash the business generates. Other factors that influence a business include Supply and demand, Interest rates, nature and history of the business, location of the business and so on. When the number of businesses for sale is large the value tends to be lower and vice versa.  If interest rates go up money gets tighter, interest payment becomes larger and the value of the business goes down.

Some additional considerations for business valuation include:

  • Financial condition of the business. The best measure for this is the book value. Book value is the total assets minus total liabilities of the business. The book value of a business can be determined by analyzing the balance sheet and income statement.
  • Ability of the business to generate cash, pay dividends and so on.
  • Prior sales of businesses in the area. In the best case there would be similar businesses in the geographic location that can be used as comparable.

Following is a checklist of documents a business owner requires to value a business.

  • Financial statements which includes balance sheets, income statements for up to the last five fiscal years.
  • Income tax returns for the last five years.
  • Equipment list, depreciation schedule, Accounts Receivable, Accounts payable, inventory list, lease, and prepaid expenses.
  • List of stockholders or partners, with number of shares owned by each or percentage of each partner’s interest.
  • Description of business including competitive analysis and factors that make the business unique.
  • Regulatory filings, associations the business belongs to and relevant trade publications.
  • List of patents, copyrights, trademarks, and other intangible assets.
  • Is the business at risk from new regulations or legislation.