Final Sale: MSP Owner Reflects on 25 Years in the Business
If you’re a managed services provider (MSP), a reseller, or have a business of any sort in the IT channel, Joe Popper understands your world.
For the past quarter century, Popper owned and operated Computer Gallery, an independent reseller-turned-MSP in posh Palm Desert, Calif., just outside of Palm Springs.
At different stints, the certified Apple dealer boasted a glitzy clientele that included former President Gerald Ford and Frank Sinatra.
This year, Popper sold the business he built from the ground up, accepting an offer from a larger MSP that had come calling several times before.
Recently – a couple months into a six-month contract job assisting the buyer – Popper reflected on the lessons he learned during 25 years of ups and downs in the channel, as he slowly begins to consider life after Computer Gallery.
“It has been incredibly emotional,” Popper said of the time since he fully handed over ownership on March 1. “It’s an emotional rollercoaster, no matter what the circumstances are.”
Computer Gallery opened in 1990, after Popper lost his job in the IT department of a local hospital.
He secured financing from G.E. Capital and soon generated a brisk business repairing hardware, and as a dealer of Apple and Connecting Point products. About 10 percent of his revenue came from maintaining and repairing IT equipment for local organizations.
“The market was pretty good,” Popper said, adding that his company always hovered around a dozen employees. “You could still make pretty good margins on hardware.”
At the time, the Apple Macintosh was all the rage, and the machines were selling like hot cakes to local businesses and his many well-to-do customers.
But as the 90s wore on, Computer Gallery began to feel the pinch of competition, as companies like Staples, BizMart, Costco and other big box retailers began springing up, taking larger and larger bites out of the retail computer market.
Computer Gallery pivoted, moving upstream to focus more on sales and repairs for business customers. Products like high-end Macintosh graphics stations with multiple monitors sold well to customers like the local newspaper’s art department.
“The problem was margins were getting tighter and tighter,” Popper recalled. “And the Macs didn’t break that much.”
Then the Internet came along.
In very short order, Computer Gallery’s earnings from hardware were seriously squeezed. Each year, the firm had to move 30 to 40 percent more product, just to maintain the revenue of the year before.
Computer Gallery did find ways to increase sales and keep pace, but by the late 90s, it was clear something had to change.
Popper made another strategic shift. This time, he refocused the company on growing its managed services component and boosted the profile of a related business entity, JSP Consulting.
The reinvention got traction, and Computer Gallery’s managed services revenue climbed steadily.
Local businesses, already familiar with the brand, increasingly signed up to have the firm set up and maintain IT networks and equipment.
But adjusting to the new market focus was not without challenges.
Some business customers would send large equipment lists requesting price quotes and expertise for a proposed new IT project.
“It took us a lot of time and energy and then they’d take our list and buy it mail order,” Popper said.
It didn’t take him long to learn how to avoid getting cut out.
“We said, ‘we’ll give you the equipment list and here’s the design fee,’” Popper said, adding that he’d waive the design fee if the customer did the deal through Computer Gallery.
Last November, after several failed attempts, the owner of a 50-employee MSP again approached Popper about Computer Gallery. This time, Popper said, something was different.
“It’s deeply personal to each person,” Popper said, unable to point to a single reason. “For me, there was a number of personal and professional reasons that said to me, it was time.”
Negotiations quickly heated up and by the time he sent the buyer a Quickbooks file, managed services accounted for nearly 90 percent of Computer Gallery’s revenue.
From there, things moved swiftly. They reached a deal just after the new year, with little difficulty deciding on a price that both sides could agree upon.
“I felt the valuation was fair,” Popper said. “It wasn’t a low offer. It wasn’t a high offer.”
They began the transition on Feb. 1, and the new ownership assumed full control a month later.
Under the deal, Popper received an up-front check and an earn-out to be paid over 18 months. He also gets a salary under the six-month contract, after which he’ll decide whether to stay on or leave for good the company he created.
“I’m not the boss anymore, so how am I liking that? I have to decide that,” Popper said. “So far, there’s lots of it that’s positive.
“The other piece that I’m finding interesting is that it doesn’t matter how big the company is, the problems are the same,” he continued. “The size changes. The problems don’t.”
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