6 Best Tips to Selling Your MSP Business

I’ve spoken to hundreds of IT Managed Services Providers (MSPs) over the years and one of the common threads during my conversations is that many of them have the dream of selling their one day. Unfortunately for many of these business owners, their dream will never become a reality because their business will struggle and won’t achieve their desired value.

From 2004 through 2013, I owned an MSP company that became a successful multi-million dollar recurring revenue business which I eventually sold to a large US cloud services company.  I also helped that organization acquire 8 more MSPs in the US and Canada.  I’ve seen all shapes and sizes. We acquired well-run companies and companies that were upside down, and their valuations were reflected accordingly.

By the way, watch this video to drive up the value of your business

From my first-hand knowledge, I’d like to share with you 6 great tips to make sure your company is poised for a successful acquisition.

Best advice to MSP owners when you’re ready to sell your company

To ensure your company is poised for a successful acquisition when you’re ready to sell, you need to:

1. Establish your goals.
2. Understand the process.
3. Focus on your financials.
4. Identify potential suitors.
5. Don’t lose focus on your day-to-day business.
6. Have a rock-solid admin team.

So what are the 6 best tips to selling your MSP business?

The 6 best tips when selling your MSP business are:

1. Establish your goals

It’s important to define what a winning scenario looks like for you! Points to consider include:

• What’s your desired price tag to make it worth your while?
• Do you prefer to continuing running the company as it is today or are you comfortable with it getting absorbed and your brand identity going away?
• Do you want to stay on and continue to be employed or will you cash out and disappear?
• Is it important to you that your employees will stay employed or are you willing to let them go post-acquisition?
• Will you sell the entire company or just a piece?

2. Educate yourself on the process, understand the difference between an asset purchase and a share purchase

Talk to others who have been through the process. Points to investigate include:

• Any pitfalls to watch out for.
• Understanding the difference between a share sale and an asset sale, and which one is better for you.
• The estimated length of the process, and the associated milestones.
• The typical information that is requested during a due diligence exercise.

3. Focus on your financials

A healthy P&L and balance sheet makes a world of difference to your valuation. Ensure you:

• Set revenue goals before you sell.
• Get ORGANIZED.
• Get your debt under control.
• Get your accounts receivable under control.
• Keep the cash flowing.
• Become as profitable as you can to maximize your value.

 4. Identify potential suitors and get friendly with them

Determine what the ideal suitor looks like, then reach out to build and strengthen that relationship.  You should determine:

• • Whether a local competitor or a competitor who is not currently in your geographical area is most likely.
  • Is it possible that you already know this company? It may be one of your current business partners or vendors.
  • Is it someone in your industry or someone in a complementary industry?

5. Don’t lose focus on your day-to-day business

Once you engage in an acquisition process, don’t take your eye off of your existing business. Beware of:

• • Your business suffering while you jump through the hoops of the due diligence phase.
  • The process dragging out longer than expected or worse, if the deal falls through altogether, the damage to your business may be fatal.
  • Never take your eye off the ball with your day-to-day responsibilities

 6. Get a rock-solid administrative team in place

Having a strong administration department makes a world of difference before and during the acquisition process. Understand that:

• • When your books are up-to-date, your cash flow is strong, your receivables are healthy, etc., your business becomes that much more attractive to the buyer.
  • The acquisition process will put a huge burden on your admin team and it’s important that they do a thorough job during this process while maintaining the current business workload.

By the way, if you’re looking to outsource your bookkeeping and administration to a firm that specializes in MSPs, check out Numbers Wise Business Services Inc.

Conclusion

Selling your business will be one of the most important events in your life. You want it to go smoothly and you want to be satisfied with the outcome. Take the time to get it right.