MSP Exit Strategy: Maximizing Valuation

What defines a great MSP? If you’re thinking people, you’re only part way there. A great MSP is also defined by profit, or more specifically, the ability to be consistently profitable. Even better is an MSP that can increase profit margins each year.

The reality is that when you are a business owner, the objective has to be to increase the valuation of your business. And the reason is simple — one day you’ll want to exit. And when that day comes, the higher the valuation the better, for you and your family.

So where does profit come from?

In an MSP, profit comes from a few different places. People are definitely part of that, but process is even more important. This may sound cold, but it’s reality. A great MSP is full of talented people who are the cream of the industry and are compensated accordingly. But MSP owners have to embrace the fact that great people leave, and it’s ultimately process that minimizes the harm caused by such turnover.

So yes, you need to have great people, but you also need to have a plan in place so that your business — and your retirement fund — doesn’t depend on them.

The importance of processes

Most businesses go through a learning curve to determine the processes and systems that work best. You need processes that deliver great results operationally and financially, but that are replicable. Once you’ve spent months or years getting to the point where your company has a great rhythm and fires on all cylinders, you have great value. You must capture that value. Document it, and train it to all your new hires.

It is not enough to be great, you need to be able to store and transmit the information and processes that make you great. That way, you’re not just great today, but can sustain it for the future.

Capture value from institutional knowledge

This is where valuation comes in. When you’re looking to exit — maybe you have another venture you want to start, maybe it’s just time to retire — you want to be paid out for all the hard work you put into building a great company.

Everything that makes you great — all those processes and institutional knowledge — has to be captured somewhere. That way, you can show prospective buyers that they are paying not just for a company that is great today, but a company that will be great tomorrow when the new buyers take over. This is called selling high.

Don’t forget to be awesome in other ways

There are other things that great MSPs do that contribute to profit and valuation, too. They are rapid adopters of innovative new technologies. They invest in sales and marketing. But above all else, great MSPs recognize the value of process, and they recognize that to do amazing things consistently over time is the key to sustained success, long-run growth, and ultimately to valuation.

At IT Glue we are committed to the principle that when our partners succeed, we succeed. So we want to do what we can to make your MSP the best possible. That means providing you with a constant flow of product upgrades and value-added services, a Knowledge Base over 150 articles strong, and an entire team committed to your success. Let’s take this journey together.