How to make your MSP business attractive to buyers
MSPs are becoming critically important. The difficulty of finding security specialists and the high costs of managing their own security have led medium-sized companies to hire MSPs to keep their digital security up to date while they focus on their business. Growth in the MSP market means buyers are now showing interest. We are frequently seeing large and small MSPs being acquired by other larger managed services companies or private equity firms. The reasons why MSPs are attractive are obvious: providers with a solid base of satisfied customers receive recurring revenues that makes them a good investment.
In 2021, the global managed services market was valued at $161.37 billion and is expected to reach $311.32 billion by 2027, at a CAGR of 12.44% during this period. With this growth in sight, companies are bound to continue to want to move into this sector by buying MSPs. However, some MSPs who are interested in selling their business do not know what they need to do to attract the attention of buyers. To gauge what needs to be done, we need to start at the beginning by understanding what buyers want.
What do buyers look for in an MSP business?
There are seven elements that demonstrate the business value of an MSP:
- Profitability of the business: there is no doubt that when it comes to acquiring a business, profitability plays a key role. Strong revenue growth, good margins and low costs make the business more attractive. It is advisable to keep clear records, as they will show that this growth is not down to luck, but to well-planned sales and marketing efforts that prove the stability of your business.
- Comprehensive, scalable and efficient solutions: a valuable MSP offers advanced solutions that enable it to deliver a comprehensive security offering. To achieve this, it must offer endpoint protection, multi-factor authentication, Wi-Fi and network security technologies in its portfolio, which make it easier for the team to detect and respond to threats.
- Single security platform: to be truly competitive, MSPs need to leave behind individual tools that address a single function, as they require a lot of time, effort and specific skills and can generate security holes or incompatibilities that translate into risks. Instead, a way to differentiate your service is to adopt a comprehensive solution that enables you to manage tools from a single platform, simplifying customer management and ensuring quality service. Adopting a unified approach shows in-depth understanding and insight into the business and transmits confidence to potential stakeholders, as they feel they are dealing with a competitive company.
- Customer satisfaction: in addition to ensuring an MSP has the best technology; buyers will want to see that the business they are thinking of acquiring is well-rated by its customers. Beyond satisfaction surveys, they will talk to your key customers. Talent retention also plays a crucial role as, together with customer satisfaction, it signals a good service culture.
- Clear value proposition: an attractive MSP must be clear about its customers' needs, e.g. what their pain points are and what regulatory requirements they have to meet and match these with its service offering to create strategies to address these needs.
- Differentiation in the market: providing unique services or specializing in addressing the needs of a specific sector can be a good option. Customers expect their managed service providers to be their partners and support their teams effectively. This means they expect their MSP to understand the market they operate in and the security needs that come with it. Ensuring that your team has the functional knowledge to solve your customers' problems in different sectors is an efficient way to increase the attractiveness of your MSP business to potential buyers.
- A strong team: it’s important to build a team that leads relationships with suppliers and customers, so that buyers can be confident that your MSP has a stable foundation and can adapt to change. Leaving it to the CEO or owner as the only one in charge of maintaining the relationship with suppliers and customers could hinder a potential acquisition. Therefore, start now to enable the team to work through the transition with the new buyer and beyond.
If it can't be found, it can't be bought
We’ve covered what buyers are looking for in an MSP. However, if they are not able to find your business, they will not be able to see all the advantages it can deliver. This is where marketing becomes crucial for your business success. And, why it is important to invest in marketing to build a good online presence, including a well-designed website and active social media profiles. These platforms should include all the information about the company and its services, but they are also a means of demonstrating what the MSP is capable of. Developing relevant content for potential customers and posting guides on how to purchase different products shows expertise and builds confidence in your business being robust.
By taking into account what buyers want and meeting each requirement, it is unlikely to take long for a buyer to acquire your MSP business. Satisfying buyers' requirements is easy if you have the right solutions for your business which, as well as meeting the end customers' expectations, help the MSP grow and develop into what buyers want it to be. Opting for a security vendor that will drive your MSP forward is also a key decision in building a good reputation.