Peter Kujawa, Vice President of Service Leadership, a ConnectWise Solution explains why service providers seeking to acquire or be acquired should court MSPs exhibiting similar Operational Maturity Levels (OMLs).
Speaking with CEO Larry Cobrin on MSPCFO’s M&A Insights – Perspectives from Thought Leaders webinar series, Kujawa said that MSPs seeking to expand through acquisitions may look to purchase unprofitable or marginally profitable businesses at a discount. They believe that their higher-performing company will elevate the new firm’s profitability. A better approach, he said, is to consider MSPs that share critical attributes.
Target Market
Technology Adoption
Service Leadership’s OML performance assessment and improvement tool diagnoses technology and managed service providers’ competence by analyzing answers to 150 questions measuring 40 traits. He said there is a direct correlation between OML scores and profitability.
Over the last several quarters, companies with poor OMLs of less than 3 consistently lose money.
Those at 3.7 or higher rank among the most profitable, with EBITAs of 18% to 20%.
MSPs can boost EBITA through a number of areas MSPCFO’s software identifies like:
Service Leadership’s OML performance assessment and improvement tool diagnoses technology and managed service providers’ competence by analyzing answers to 150 questions measuring 40 traits. He said there is a direct correlation between OML scores and profitability.
Using itemized budgeting, forecasting, and scheduling tools to manage costs and guide capital expenditures, demonstrates fiscal responsibility that attracts buyers.
Narrowly defining a target market, precise client persona development, and meticulous adherence to marketing to that demographic shows an understanding of your niche.
Learn more about how you can improve your profitability, operations, and client relations with these insights
ConnectWise’s Arlin Sorensen and MSPCFO’s Larry Cobrin discuss the MSP M&A landscape and optimal owner exit strategies.
Strong Overall Results May Hide Pricing and Productivity Inefficiencies All MSPs have “great” clients that pay hefty monthly fees but don’t require much engineering time
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