The M&A (mergers and acquisitions) market in the IT industry is seeing a noticeable decline. Fewer transactions are happening, and the big multiples some MSPs were getting a few years ago are no longer on the table. Buyers today are much more discerning—they’re looking for quality MSPs that can deliver predictable, consistent growth and solid financials. If you’re hoping to sell your IT business in the next three to five years, you need to start preparing now.
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The time to build your MSP into a business that buyers will flock to is well before you even think about selling. Let’s break down what it takes to make your business attractive to potential buyers.
Buyers Want Best-In-Class MSPs
If you can turn your MSP into a “best-in-class” business, you’ll have buyers lining up—and you might not even want to sell! Once you reach that level, your MSP becomes a cash cow that’s difficult to walk away from. So, what does “best-in-class” look like?
First and foremost, you need to have at least $1 million in true EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This is critical. Don’t get this confused with your personal salary or what you’re paying family members—you’ve got to eliminate all distortions in the numbers. Clean financials will be the first thing buyers look at.
Next, they want to see consistent growth over a period of at least three years. Buyers don’t want to see massive spikes in revenue followed by dips. They’re looking for steady, predictable growth in the 15-20% range year over year. If you’re also showing an 18% EBITDA margin or higher, and your MRR (Monthly Recurring Revenue) is growing at 20% per year, you’re in the “best-in-class” league.
Build A Business That Doesn’t Depend On You
One of the biggest mistakes I see MSP owners make is being too involved in every aspect of their business—especially sales and marketing. While it might seem impressive to a buyer that you built your company from the ground up based on your personal efforts, this actually lowers the valuation. Why? Because a buyer knows that when they take over, you won’t be part of the equation, and they’ll need to hire people to replace your role as the “Swiss Army knife” of the business.
You want to build an organization with strong leadership in place, a dedicated sales and marketing team, and efficient account management processes. That way, when a buyer steps in, they aren’t faced with the task of rebuilding your sales engine from scratch.
Start Thinking 3-5 Years Ahead
If you’re even thinking about selling your business, start working on your exit strategy at least three to five years in advance. Buyers will be looking at your business’s performance over the last three years. Even if your company is performing well today, if you had a rough year or two before that, it’s going to lower your valuation.
Many MSP owners, myself included, don’t think about the M&A side of things early on. We start our businesses with the goal of making a good living, and that’s fine. But if you’re in the position where you can not only make great money now but also build an asset that can be sold for a premium later on, why not aim for both?
Start thinking strategically about your growth, profitability, and long-term business health. It’s not just about earning a paycheck today—it’s about creating a valuable asset that will pay off big time when you decide it’s time to exit.
Conclusion: Your Time To Start Is Now
Selling your MSP is not something that happens overnight. If you want to sell your business for top dollar, it requires long-term planning and intentional actions starting today. Focus on cleaning up your financials, growing your MRR, establishing strong leadership, and ensuring consistent year-over-year growth. And remember, buyers are looking for quality, so position your MSP as a best-in-class business that will have them eager to make an offer.
