Join or Sell? Our Advice to MSPs
It’s no secret – M&A activity in the MSP space has once again heated up. After a minor lull following the historic dealmaking in 2021, we’re seeing a near return to the record-setting levels of that watershed year.
This is all to say: if you’re an MSP owner, you might be feeling some pressure to sell – to ‘get in on the action’ while the going’s good. A few months back, we put out an article about whether to sell now or later. Check it out if you haven’t.
In this post, we’re exploring a slightly different question – a question that’s relevant to any MSP thinking about entering the M&A arena, and especially relevant to those who’ve singled out The 20 as a potential buyer:
“Should I sell my MSP to The 20 now or become a member of The 20’s growth platform/peer group and sell my company at a later date?”
Before we get into the nitty-gritty, we want to share our general viewpoint on this matter. The truth is, if your MSP isn’t a member of our growth platform, The 20 MSP Group, you should give some serious thought to joining the group before approaching the table for a deal. Keep reading to find out why.
Join First, Sell Later
Does selling to The 20 right away make sense for some non-member MSPs? Yes! In fact, our most recent acquisition brought such an MSP into our tent. But for the majority of MSPs, it’s a good idea to join our peer group before engaging The 20 as a buyer. Here are eight reasons why…
Reason #1: Your MSP Isn’t Big Enough!
The first reason to become a member of The 20 MSP Group before selling your MSP is straightforward – your MSP isn’t big enough to secure a favorable deal (or any deal at all).
Size isn’t the only thing we’re looking for in an acquisition candidate, but it is an important consideration. MSPs below a certain revenue threshold simply aren’t worth buying, as they haven’t achieved the operational maturity and inherent scalability that larger MSPs possess.
To get concrete, if your MSP is pulling in less than $1 million in annual revenue, chances are, you’re too small to secure a deal with us – and with most prominent buyers for the reasons mentioned above.
The 20 MSP Group was created to help small and medium-sized MSPs grow and scale faster than the competition. So, by becoming a member, you can fast track your MSP’s growth, and achieve ‘sellability’ a heck of a lot faster than you could working alone on an island.
Reason #2: Your MSP Could Be Even Bigger!
Let’s say your MSP does pull in $1M+ in annual revenue. Does that mean it’s a good idea to sell the company to The 20 – or another buyer? Not necessarily.
Everyone’s circumstances are different, and if you’re desperate to exit the MSP game, then who are we to tell you to hang on another couple of years? That said, it’s important to keep in mind that deal size does not increase linearly with MSP size. In other words, if a $1M MSP can expect to secure a $5M offer, that doesn’t mean a $5M MSP can expect to secure the same multiple – i.e., a $25M offer.
As MSPs grow larger, they achieve greater economies of scale, efficiency, and scalability, resulting in exponentially higher valuations (for more details check out our free M&A guide).
To break this all down in plain English: Becoming a member of The 20 MSP Group can help your pretty big MSP get really big, and, as a result, secure a much better deal when you decide to make your exit.
Reason #3: Accelerate Growth with a National Footprint
When you become a member of our group, your small to medium-sized MSP is effectively plugging into the power of a national company. With our 100% US-based, 24/7 live-answer support desk and robust national footprint, we empower our MSP members to take on larger clients with multiple locations. We also support members with branding, marketing, and sales, giving your business the exposure it needs to grow.
In short, if bigger MSPs get better deals, it’s in your best interest to get as big as possible as quickly as possible (unless of course your number one priority is simply getting out). Joining The 20 helps you do exactly that.
Reason #4: Community! Fun! This sh*t is awesome!
Running a business can be a lonely journey, which is why joining The 20 can be such a refreshing experience for MSP owners who’ve gotten used to struggling ‘on an island’ – to the extent that anyone can get used to such a thing!
Newer members are consistently blown away by how much the MSPs in our tent communicate and collaborate. Check out this 2-minute video to hear one of our current members speak about The 20’s unique culture and ‘the power of the people.’
There is of course immense business value in having a large community of likeminded MSP owners who are ready and willing to help you out. But there’s another perk worth mentioning – it’s a lot of fun. Or, as we prefer to say, this sh*t is awesome!
So, if you’re looking to sell because you’re feeling burned out, or just sick of the IT business, know this: joining The 20 can give you a radically different entrepreneurial experience, one defined by less busy work and stress, and more camaraderie and growth.
Reason #5: Derisk the Deal
One of the biggest risks when selling your MSP is a cultural mismatch with the buyer. Did you know research suggests that culture is the cause of 30% of failed integrations?
If you’re considering selling your MSP to The 20, joining our peer group before doing so allows you to experience our model, culture, and processes firsthand. That’s because our members adopt our business model – we need the MSPs we help to be on the same page operationally speaking, as it makes it possible for our support desk to provide excellent service across the board.
Plugging into our system as a member ensures that if you do eventually sell your MSP to us, the integration will be seamless, and you’ll have complete confidence in the decision. With other buyers, like private equity firms, it can be hard to build this level of trust.
But don’t just take our word for it; visit our MSP acquisitions page for video testimonials from folks who sold their MSP businesses to us.
Reason #6: Focus On/Find Out What You Love
We give our MSP members a lot, but perhaps the single most important asset we can give you is more time!
MSP owners are typically bogged down by busy work. But not our members. With our support desk handling up to 90% of your MSP’s tier 1-3 tickets, you and your technical team will have significantly more time to tackle higher-value projects and initiatives.
In this way, joining The 20 gives you an opportunity to figure out what it is you really love doing in the MSP space. This means when you do sell your MSP, you’ll have a better idea of what kind of role you want to step into – if any.
Reason #7: Avoid the Woulda, Coulda, Shoulda…
Before selling your MSP, don’t you want to see just how far you can take your business with the right tools and support? Joining The 20 gives you access to proven processes and growth strategies that maximize profitability. Selling without ever leveraging these resources might leave you wondering, “What if I could have done more?”
Reason #8 – Second Wind for the Win!
Finally, you may find that joining The 20’s growth platform revitalizes your passion for your MSP business. With a better work/life balance, more success, and fewer operational headaches, you may decide you’re not ready to sell after all. Just think – you could enjoy several more years as a business owner, with the added bonus that when you do sell, your MSP will be worth significantly more.
Final Thought
As you can see, there are plenty of reasons to consider becoming a member of The 20 before seeking an M&A deal. But at the end of the day, your ideal exit plan will be just that – yours.
To figure out what the best path forward is for you and your MSP business, we recommend sitting down with Tim Conkle, The 20’s CEO and the visionary behind our M&A strategy. To set up your one-one-one with Tim, fill out this short form with basic info about your MSP business and we’ll get back to you in a jiffy about scheduling up your call.