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How to find the perfect buyer for your MSP business

MSP owners often find selling their businesses more challenging than running them. It’s not because selling is particularly hard, but because exits are often an afterthought and founders don’t spend enough time learning about the processes, jargon and options.

Finding a perfect buyer is key to maximise your return and ensure a great future for your team and customers. Here are 5 steps that will help you find the acquirer you’re looking for: 

1. Attract the right buyer

More than finding buyers, it’s important to find the right buyer. What we mean is that you have to ruthlessly focus on vetting and qualifying prospects to make sure you don’t walk out with a deal you might regret later. 

Ideally, you’d want to find a buyer that works within your industry or knows it well. It can be a larger competitor looking for acquisitions or a strategic buyer looking to leverage your business to expand its reach and infrastructure. Similar vision, mission, team culture, and customer fit will only make it a smoother process. If the buyer is from the same industry, look out for non-compete agreements and earn-outs (EOs) as they might impact your post-exit plans. 

Once you know what type of buyer you want, focus on networking and spreading the word. Trade shows, seminars, events, and even networking events can bring in interest. 

2. Prepare early, get ready for due diligence

Buyers want to make sure they don’t come across any nasty surprises later and that’s where due diligence comes in. It’s a company-wide audit of practices and documents to gauge the risk factors and investment terms. 

Due diligence (DD) is an essential part of mergers and acquisitions and it’s best to be proactive about it. Some of the major aspects that fall under scrutiny are employee and vendor contracts, intellectual properties (IPs) and infringements, warranties, pending and possible lawsuits, and accounting practices. If you implement healthy business practices, due diligence will be a breeze, making your MSP all the more attractive to buyers. 

One of the best ways to ensure proper due diligence is by following the MSP machine framework. 

Learn more: MSP Machine Method.

3. Keep KPIs strong

While due diligence analyses overall business practices, key performance indicators (KPIs) help buyers understand the raw numbers behind the acquisitions.

Buyers may look at any metric that can help make a decision, but here are a few of the most important KPIs you should maintain to attract the right buyer:

  • Growth rate and future pipeline to understand the growth potential
  • Monthly recurring revenue (MRR) and contract lengths to understand revenue stability
  • Transferability to anticipate merger issues
  • Resiliency to judge vulnerabilities against competitors
  • Efficiency to understand resource waste
  • Security to understand security risks across the business

4. Try different methods 

A strong, growing business will attract potential buyers but that doesn’t mean you shouldn’t experiment with multiple channels. Hiring an M&A broker is one way to fast track the process (ensure you get recommendations). Business brokers calculate valuations, create marketing strategies, screen buyers, and help you get the best deal. Having said that, it’s important to understand their processes, commission terms, and their industry expertise. 

Apart from brokers, you can network with fellow MSP owners to find organic leads and learn from people who have exited successfully. You can also pitch directly to bigger players and private equity firms to have firm control over the discussions. On top of that, online marketplaces might also come in handy. The goal is to try different methods to widen your search pool, and to create interest from multiple buyers to drive the value up.

5. Build a business to sell

Far too many MSP founders don’t think of M&A or exit while building and growing their firms. When you have an end goal in mind, you can structure your business in a better way and prevent random pivots. If you plan to sell eventually, build it that way from day 1. 

Even if you don’t sell your MSP, you will have a stronger and healthier business for it.

This means keeping the business lean and agile, employing best practices, and prioritizing KPIs to meet short-term goals. This way, you’ll attract the right customers, the right buyers, and the right valuation.

By following the MSP Machine Method from the beginning, you can set your business up for a successful exit.

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