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Erick Simpson’s MSP Newsletter | February 2023 | Adjust Your Revenue Streams to Increase MSP Company Value at Exit…

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Adjust Your Revenue Streams to Increase MSP Company Value at Exit...

As an MSP, you’ve probably developed a broad product and service portfolio to meet your clients’ needs over time. Your service and solution stack may include product resale items such as hardware and software, and hourly labor-based services, such as projects, time and materials, or block time support, along with recurring revenue subscription-based managed services and cybersecurity plans, and maybe some cloud hosting services.

While the products and services in your portfolio all grow top-line revenue for your MSP practice, the share of total revenue each represents impacts your company’s valuation during an M&A transaction.

For example; based on public sources at the time of writing, every dollar of break-fix or block time labor you collect is valued at .15 cents, while every dollar of managed services is valued at $1.45 – that’s an amazing 867% higher! This is a powerful motivator to stop delivering reactive time and materials, and block time support to your clients and serve only those under a managed services agreement. But beyond that, it allows you to utilize your billable resources more efficiently and forecast for hiring to support growth more effectively, especially during the current tech shortage.

Here’s a breakdown of the most common MSP services and their respective revenue valuations, courtesy of this excellent blog post by Paul Dippell:

Revenue Mix Valuation:

When preparing to make an offer to buy your MSP practice, an acquirer will typically use multiple methods to arrive at their valuation, including an assessment of your EBITDA or net income, your revenue mix, discounted cash flow, MRR percentage, or others. Each of these financial valuation methods will yield outcomes that may be averaged to come up with a final offer, which can also be influenced by the strategic value your company brings to the buyer.

Numerous factors can significantly impact your MSP business value and its ultimate business valuation, and the revenue mix multiples in this article. These include internal factors that an organization can control and improve, as well as external factors that cannot be controlled, such as supply chain issues, the inflation rate, the cost of finances, the impact of world events, and more.

Take a hard look at your product and service mix and EBITDA and implement the appropriate adjustments to improve your MSP business value.

The information and opinions in this article do not represent an actual valuation of any business and should in no way be considered a substitute for a thorough and rigorous business valuation.

Webinar This Thursday, March 2nd @ 10am PT

The latest surveys and statistics all point to the same thing. When it comes to what MSPs are worried about most in 2023, ransomware is still #1. And no wonder … ransomware attacks are destructive and disruptive to client businesses and to the MSPs that serve them. So, creating great protection plans and upselling clients should be the biggest no-brainer in the history of tech.

But it isn’t.
In this engaging LIVE webinar, you will learn from the best in the industry:

  • What the current threat assessment for ransomware is in 2023
  • How to build and price a ransomware protection package that clients want to buy
  • Once you have that plan, how to communicate it to real-world clients
  • After you sell it, how to set up that plan
  • And much more…

Panelists:
Jeff Hardy─ Solution Marketing Manager, Acronis
Jeff has served in leadership positions in the technology space for more than 25 years. He has seen the industry from every angle – software, services, hosting, and cloud. Today, he is the Solution Marketing Manager for Acronis for Service Providers.

Erick Simpson ─ Multi-Award-Winning MSP Growth Expert
As one of the most influential advisors and business consultants in the Service Provider space, I’ve helped hundreds of MSPs position themselves to improve customer acquisition, lower churn, and accelerate overall growth.

Dave Millier – CSO of Quick Intelligence, a boutique VAR, cybersecurity consulting and Managed Security Service Provider.

Harry Holmes – Solution Engineer, Acronis

This could be the most valuable webinar you attend this year. Register now because you won’t want to miss a minute of it!

Business Coaching Openings Available Now

My cost-effective MSP Mastered® Business Coaching and  Advisory programs are designed for growth-minded IT Business Owners looking for help and accountability to get to the next level of performance and profit. Click below to set up a call with me to find out if my coaching program is right for you.

Erick Simpson's MSP Sales App

My MSP Sales App Prices Your Services & Creates Your Proposals, SOWs, and Business-Winning PowerPoint Sales Presentations in Minutes!

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When preparing your sales proposals, statements of work, and sales PowerPoint presentations for new business opportunities:

  • Does it take way too much time to do?
  • Is it so complicated that it falls to the bottom of your to-do list?
  • Are you challenged when pricing to maintain consistent margins?
  • Do you have to use too many different tools/platforms/calculators?
  • Are you the only one that can do this critical function, hence the bottleneck?
  • Are late proposals to prospects and clients the norm, delaying new revenue?

With my new MSP Sales App, you can build and price your offerings customized for each prospect or client to maintain your margins and export a professional, consultative sales proposal, SOWs, and sales presentation in minutes!

See for yourself in my short demo video:

Erick Simpson
Founder & Chief Strategist
ErickSimpson.com
[email protected]
(800) 414-1441
2271 W. Malvern Ave., #169
Fullerton, CA 92833
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A pioneer and leader in the managed services industry, Erick Simpson built and sold one of the first MSPs. He is an MSP business & channel growth expert, influencer, thought leader, speaker, and author with four best-selling books and 50 white papers. His strategies and programs help MSPs overcome business challenges to realize consistent, profitable, managed services recurring revenue growth. His M&A expertise has helped dozens of MSPs sell their businesses at the highest valuation or expand through acquisition.
He delivers strategic MSP market analysis services and builds and improves channel programs for IT vendors and distributors, and helps recruit and enable their channel partners through his thought leadership podcasts, webinars, workshops and event keynotes and breakouts.
Erick’s industry recognition includes Channel Futures’ 7 Thought Leaders Defining the MSP Market, Jay McBain’s 100 Most Visible Channel Leaders, 2 Time ChannelPro 20/20 Visionaries, 2 Time MSP Mentor 250 and SMB Nation’s SMB 150 award recipient.

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