It’s been roughly three months since ClearPointe acquired Do IT Smarter, a well-known Master MSP. We decided to check back in with Do IT Smarter’s Lane Smith (pictured) to get some perspective on (A) how he built Do IT Smarter and (B) key lessons learned from the M&A process. Here’s the update.

In terms of the M&A process for managed services providers, Smith confirms “obviously recurring revenue is king, this is what brings the multiples on the valuation.”

But to really focus on growth and a potential M&A, Do IT Smarter brought in a virtual CFO to run the finance side of our business. That virtual CIO completely re-organized Do IT Smarter’s financial books, helped with cash flow and really helped the company focus on profitability.

“We did this about two years ago and it was the best thing we ever did for our company,” says Smith. “When it came time to show potential acquirers our books not only did we know they were accurate but they showed a very strong company from not only a “managed services” side but also from a management perspective. They were actually impressed with how we ran our finances.”

M&A Guidance

When Do IT Smarter began exploring potential M&A opportunities, Smith reached out to Weaver & Associates Ltd., an M&A firm, for guidance. Weaver & Associates was launched by Charles Weaver, president of the MSPAlliance, an association serving MSPs. Smith has been an active MSPAlliance member over the years.Smith notes that M&A is like a marriage — one party proposes, the other says yes… but there are finances involved and you need to carefully consider the pre-nup (the actual financial arrangement). Smith says Weaver was very helpful working through all of those details and considerations.

No doubt, there seems to be a boutique industry for MSP M&A advisors. In addition to Weaver & Associates, some MSPs have mentioned Cogent Growth Partners to me as a buy-side advisor on M&A deals. Also, Martin Wolf Securities has advised dozens of service providers on M&A deals for more than a decade.

Back at Do IT Smarter, Smith says there isn’t much he’d change about his M&A experience — other than to “get the lawyers involved sooner, this definitely slowed us down a bit.”

Next Moves

Now owned by ClearPointe, Do IT Smarter retains its brand, remains a master MSP, and is “looking to focus our efforts on more established MSPs.”

Smith points to an MSPmentor article about five-year entrepreneurial fatigue — “those are exactly the guys that we are looking to work with. We know that we can take a stalled MSP and get them to that next step. We will be helping our partners with all aspects of their business, finance, marketing, sales, services, etc… getting into their business and figuring out what is holding them back and helping them overcome those obstacles.”

Looking Back to Get Ahead

But how did Do IT Smarter get to this point? That is, how did Smith and his team actually build Do IT Smarter?

“Our vision was to do something different,” says Smith. Do IT Smarter launched back in 1999. At the time, managed service providers (MSP’s) were not as prevalent as they are today. The MSP sector was an infant industry, and companies like Do It Smarter that offered managed services to VARs and aspiring MSPs were untested. No one knew how successful a company could actually be in such a sector.

“Back then they even had a different name for MSP’s,” said Smith, recalling the early unpredictable days of the company. “They were called ‘smart support’ at the time.”

Since its founding, Do It Smarter has expanded from a small firm offering its services to MSP companies exclusively in San Diego to a business with offices in San Diego, Wisconsin and a soon-to-come facility in Dallas, Texas. Additionally, Do It Smarter has key partnerships in Europe and Canada and business relationships with McAfee, Labtech Software and Level Platforms, among others.

Do It Smarter faced several inflection points that led to new growth. One came in 2000 when the company released a comprehensive support package that includes help desk services, on-site services and remote monitoring. In 2005, Do It Smarter began offering business and technical knowledge to value-added resellers (VARs) from coast to coast. All the success of the company has come almost entirely without direct sales. With over 100 channel partners, today’s Do It Smarter profits come exclusively through channel relationships, so the company’s main 2011 goal should come as no surprise:

“We want to increase our channel partnerships,” said Smith.

While other similar service providers are striving to expand overseas, Do It Smarter is focusing on offering its service within the United States. “We’re not actively looking for overseas opportunities,” said Smith, with an added disclaimer. “Unless a golden opportunity comes along.

Additional reporting by Joe Panettieri. Sign up for MSPmentor’s Weekly Enewsletter, Webcasts and Resource Center. Follow us via RSS, Facebook, Identi.ca and Twitter. Check out more MSP voices at www.MSPtweet.com. Read our editorial disclosure here.