We are back from a short spring and summer break with new episodes and guests for you. I also wanted to share the news that beginning in August, Frankly MSP will become Frankly IT.
We’ve learning that our focus on productivity and efficiency is helpful to IT teams and leaders in all kinds of environments. That definitely includes MSPs and it also includes in-house IT teams.
The new podcast will have the same format, same host, same polar bear on the cover art, and we’ll still be focusing on how to improve productivity and efficiency for your team. What’s changing is that we’ll be talking about those things in the context of IT teams within any kind of organization.
The kind of stuff we’re going to be exploring… how to build and manage a high-performing IT team, ways to optimize your service desk or help desk, best practices for IT project management, systems, processes, automation & productivity hacks for helping your technical team do more with less, effective network management in an age when everything relies on being connected, and technology, business & industry trends that are changing the way we all work in IT.
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In the meantime, for this episode, one of the last as Frankly MSP, I wanted to bring you some powerful MSP-focused content and I think Linda Rose, our guest today, is just the person to do it.
Linda is the author of a book called Get Acquired for Millions: A Roadmap for Technology Service Providers to Maximize Company Value. She has founded and sold multiple technology companies and now spends her time brokering deals for others.
We talk about her book, and the merger & acquisitions market for service providers during COVID-19. She also shares a free assessment to tell you the estimated value of your MSP.
How to Get Acquired for Maximum Dollar: Interview With Linda Rose[04:12] You know when it’s time to sell, says Linda. You feel it in your gut. It’s when you want to move on and do something else, or you’ve taken it to a point where you probably can’t take it any further and would like to be part of something else.
[04:52] It takes time to prepare your company to be sold. The first thing to start with is your financial reporting. You want full accrual accounting and to accurately state costs of goods sold.
[06:06] It’s also important to know what type of buyer you want to appeal to. There are strategic buyers and private equity groups who are looking for different things.
[07:25] Private equity firms want to see a self-sustained company with good management. Strategic buyers are most interested in gross profit margins, human capital, and the technical team.
[10:20] You need to align with a CPA who can accurately state your financial statements. Contract revenue needs to be deferred over the months of the contract. The sooner you get accrual-based financials going, the better off you’ll be.
[12:12] Don’t confuse top line or bottom line revenue with growing your company. Think about growing your recurring revenue more.
[13:38] The rule of 40 means that you want your year-over-year revenue increase plus your bottom line to equal 40. Don’t wait until you are in a decline to sell.
[15:51] With COVID-19, we’ll probably see fewer acquisitions by strategic buyers. People are sitting on cash, because they don’t know how long this will go on. But private equity firms are still on the hunt.
[18:46] Valuations haven’t gone down for people who are maintaining their revenue. There has been an uptick in service demand because of virtual work.
[21:06] There’s consolidation in the channel. Smaller players are being pushed out. Having a larger organization will help with longevity.
[23:24] The Value Maximizer tool that Linda created gives you the value of your company. It also helps you figure out where you’re leaving money on the table. It’s important to know what your company’s worth and equally important to know where you can make it better.
[25:27] The best thing a seller can do is be as educated as possible. Never go into a deal blindly. If you only have one buyer, you have nothing to leverage. The structure of the deal is also very important.
Links from this episode
- RoseBiz Inc.
- Linda Rose on LinkedIn
- 4 Key Metrics to Track Now So You Can Sell Your Business for Millions in the Future on LinkedIn
- How Is the Coronavirus Outbreak Affecting M&A Activity in the Partner Channel?
- Get Acquired for Millions: A Roadmap for Technology Service Providers to Maximize Company Value
- Value Maximizer Assessment (free valuation estimate – use the access code provided in the episode to start)
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