Since AppSmart, Upstack, a variety of PE firms and VC-backed agencies are hunting for partner businesses to buy, I thought I would help you get ready to sell.
The MSP market has been overflowing with M&A activity for going on 3 years. Partners have been merging, acquiring and getting bought out by private money. Even the vendors have been seeing a bunch of M&A.
Now it is the agency’s turn. That’s right, they are looking to roll up bases and buy regional master agencies.
You need some structure to get acquired. You need sound financials. If you don’t have a CPA, you should at least have QuickBooks for your business. Can you pull a P&L at request for a buyer?
Then there’s the matter of your CRM. I know, what CRM? Or the incomplete CRM. Your base of customers is what they are buying. The more detail you have – contacts (plural), company info, contract details, what they bought, when the contract expires, etc. It’s a lot of work, but the more info (Data!) you have, the better.
Do you have a banker? Do you have a line of credit? If you do, that highlights a sound financial footing.
Other factors are taken into consideration for valuation. Factors can include EBITDA, cash flow, customer churn, recurring revenue, contract lengths, growth, geography and size of customers, type of customer and assets (like intellectual property).
Does one customer make up much of your revenue (10% or more)? That may be probed.
Variables may be investigated, such as business processes, especially for service providers, where repeatability can mean growth. Special talents, certifications and perhaps government contracts can also play into the calculations.
In other words, the more structure you have around your business the better off you will be. Businesses put systems in place for growth and efficiency, but those same systems have an ROI during a sale or merger.
Don’t have a CRM? Give me a call and we can pick one for your business. (813) 963-5884