Some say it has never been a better time to build a managed services provider (MSP) business. By some estimates, the market for global managed services is expected to reach $274.2 billion by 2026, up from $152.05 billion in 2020. This is an incredible market opportunity for any business owner with the skills and know-how to take advantage.
These same growth factors also lead to a new trend: it has never been a better time to sell a successful MSP business. Business owners that have already built a strong business in this space can see the significant potential financial upside, as demand for their capabilities and services is at an all-time high for buyers looking to acquire these services ready-to-go instead of building them themselves.
There are many reasons an MSP owner may determine it is the right time to sell. Perhaps the most common is an offer for the business that presents significant financial upside to the owner and the employees. Additionally, there may be circumstances where selling to a larger or adjacent MSP may allow the MSP to better support its customers in new ways, such as offering new capabilities or serving new markets. Finally, it may be a personal decision for the MSP business owner to start a new venture, retire or spend more time with family. Ultimately, it is up to the business owner and the key stakeholders in the MSP business to discuss these factors and decide if the time is right.
No matter the reason, an MSP may want to consider several things when selling the business. First, it will want to ensure it has found the right buyer for its particular business. To search out a buyer if one is not already knocking on the door, the MSP business owner will want to consider what its differentiator is and which prospective buyers this might appeal to, and then begin reaching out. Additionally, the owner will also want to consider how the customers and employees will benefit from this transaction. Many of these factors apply if a buyer is already considering the company.
Once a buyer has been identified, the MSP must determine the right price for its business. This is a tricky calculation that is often subjective. The MSP may consider factors that will weigh into the appropriate sale price: multiples of EBITDA (perhaps one of the most common), net profit percentage, total profit, growth trajectory, location, customer base, and overall revenue makeup. From there, the MSP and the buyer can arrive at a price that works for all.
Once a buyer and a price have been agreed upon, the two businesses will likely go through a thorough due-diligence process that will validate all the information provided by all parties and ensure that the two businesses are a good match. During this process, or once it is complete, the two businesses will also likely discuss a transition plan for employees to find new roles at the acquiring business or even reward them financially for staying on board in the transition.
While selling a business may seem intimidating, the opportunity is ripe in today’s market for MSPs willing to take on the challenge to benefit the ownership, customers, and employees. If not, the opportunity is also ripe to continue growing a thriving and increasingly successful MSP business to serve customers for many years.
Download our free guide to learn how MSPs can change their business approaches to maintain high profits. In this guide, you will find:
- Key ways to analyze your opportunities and business health
- Practical steps for boosting your profits
- Tips on how to review your marketing strategy