MSPs: What’s Your Exit Strategy?
While meeting with an MSP in Miami this week, I had the tables turned on me. The CEO of major managed service provider pushing into the cloud market asked me the following question: “What’s your exit strategy?” Here’s my response, along with thoughts on MSP exit strategies.
When it comes to exit strategies I have a standard mindset: Stay organized, build assets, and you’ll always have options. Fortunately, my business partner (Amy Katz) has the same mindset.
The overarching goal: Focus on long-term business health. I’ve known quite a few start-up businesses that were launched simply to be sold to someone else. I think that’s putting the cart before the horse. You’ve got to focus on building assets. That approach will allow you to succeed as a solo company, or it will ultimately attract a suitor. Either way, you win.
Launch a company simply to sell it off, and you could wind up pursuing quick-win customer engagements without building a sustainable business model.
How Some Success Creates More Success
J. Michael Drake, CEO of masterIT, often tells me how his company “measures everything” — call activity, pending engagements, close rates, response times… everything.
Ultimately, the “measure everything” approach helps you to compete against yourself. Your Q1 financial metrics were good. Can you beat them in Q2? Your response times in February were solid. Can you bolster them in March? Also, are you pursuing the right opportunities: Growth markets where customer engagements generate recurring long-term revenue.
For me, an “Exit Strategy” conversation always goes back to an asset discussion. Build business assets and your net worth will increase — whether it’s through the salary you’re able to pay yourself or through the ultimate sale of your company.
I realize MSPmentor spends quite a lot of time covering industry consolidation, mergers and acquisitions. But don’t get caught up in the hype. Dozens of MSPs are completing M&A deals. But thousands remain independent. Also, it’s difficult to determine if the deal involve distressed companies.
When you’re time comes, make sure you’re selling from a position of strength rather than weakness. Focus on your assets. Everything else will sort itself out.