Small businesses start with a founder who wears all the hats. One of the biggest hats worn for the longest time is sales representative. MSPs are no different than other small businesses. Most MSPs are grown by the founder initially.
Eventually, everyone must exit their business, either voluntarily (via a sale) or involuntarily (via health or other reasons). You can’t sell your business when you hold key tasks. So, who will do those tasks when you’re gone?
Sales is one of the hardest things for MSP owners to move off of their plate. It makes sense, though. If you’ve never hired a sales rep before, how can you successfully move sales off your plate to allow you to sell?
The answer: You must set up a system for sales to succeed.
Sales Systems Are Rare in MSPs
At any given time, there are roughly 45,000 MSPs in the U.S. market, according to Fox & Crow research. Only 8,000 or so have more than $2 million in annual revenue. That represents nearly 18% of the total market.
That figure is important. Under $2 million, sales are sporadic. The owner will have enough time to process and handle inbound leads personally. Referrals from existing customers, the owner’s network, and the odd vendor partner sustain business needs.
When you hit the $2 million mark, referrals no longer meet the needs anymore. While you can and should create systems to be more intentional around referral generation, growth targets require larger piles of dollars. In addition, the MSP’s owner or owners generally have more requirements of their time. There also is enough free-flowing cash to allow for strategic investments. Around $200,000-$400,000 in EBITDA, it allows for some risk-taking and growth investments.
Those $2 million MSPs are much harder to sell than a larger organization. The amount of time needed to integrate a $2 million organization is identical, if not greater, than what is needed for a larger organization. Smaller businesses, in general, have less:
- Documentation of processes and systems
- Resources to implement said systems properly
- Leadership and management maturity to run and coach to their systems
Why would someone bother with a smaller organization? Well, a smaller MSP that has a mature sales system in place outperforms 80% of the market. Only 18% of the market has the potential to build one properly. By investing in a sales system, you’re ahead of the 80%. That’s worth considering for a buyer.
A Sales System Helps You Sell Your MSP
A sales system is appealing to buyers for multiple reasons.
A business that is system dependent — or not reliant on a person — is healthy. It can take employee turnover events in stride. Having sales off of the owner’s desk allows the business to scale its sales organization. Additional capacity can be recruited, trained, and put in place to accelerate growth.
When sales migrate away from your desk, there’s less risk for the buyer. A buyer cannot “force” you to perform in a sales role. You’ve been paid. Nothing is tying you to the business. You can walk out the door. If sales are dependent on you, there is a significant issue for the company. With sales reps in place, this issue is mitigated for the buyer.
A Strong Sales System Results in ROI for the Buyer
Having a healthy, scalable business is the primary reason a buyer would purchase an MSP. It wants to make money, more than it would make investing into the market or an index fund. Your sales system is a key part of that return for a buyer.
Ian Richardson is a partner at Fox & Crow Group. Learn more about buyer motivation and the process of selling your MSP in the company’s e-book, “MSP Exit.” If you’re an MSP struggling with building a sales organization, reach out to foxcrowgroup.com/contact. For more great insights, check out Fox & Crow Group’s author page here.
Featured image: iStock
