In this episode of the IT Experts Podcast, we are joined by Daniel Welling and we help you increase the value of your MSP business, especially in getting ready for you to exit.
Normally, we’re talking about business growth, but in this episode, we’ll take a different turn and talk about some of the tactical things that MSPs need to do to build their business value so that when they exit, they have a business that had a good valuation and worth all the hard work, pain, and stress.
To start off, Daniel introduced himself, what he does in The MSP Finance Team, and who they help. Daniel and I will also record two more episodes, one about what to do when you actually sell the business and how does that transaction work, and another one about what to do if you want to buy another MSP.
Daniel and I then talked about the vision that people have for their exit. I asked him about his experience in the business owner’s view as he also formerly owned an MSP before and sold it. He thinks that given the volume of the market, you can see pretty much every scenario. It depends on who you talk to.
We then talked about why it is important for business owners to have an exit plan even though it might just be a loose idea in their heads.
Daniel thinks that it’s going to form a good and healthy business plan. We also talked about how much of the exit plan should the business owner keep in his head and how much should he share with his team.
We then continued on to talk about the things that MSP owners need to do to increase the value of their MSP. Daniel answered with a four-method solution.
- Annual Recurring Revenue
- Gross Profit from Annual Recurring Revenue
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
- The Business Plan
He then explained each of the methodologies and why they are relevant.
Daniel and I both agree that the most critical way to increase the value of an MSP is to have systems and processes in place so that the business operates easier. The more you can automate or delegate, the better. Daniel also says that a business owner has to be all over their numbers, which dials us back to the episode with Adam Morris about knowing your MSP numbers.
To wrap up the episode, I asked Daniel about the common mistakes that he sees when people come to plan their exit. Daniel says that the valuation is the main one, and the second would be preparedness to go through a sales process.
I hope you enjoyed this episode. Be on the lookout for the future episodes that Daniel and I will be recording.
To get to know more about Daniel, you can visit his website here – https://www.wellingmsp.com/
You can connect with Daniel Welling on LinkedIn here – https://www.linkedin.com/in/daniel-welling-54659715/
At IT Experts, we have years of experience helping IT & MSP Business of all sizes to leverage their talents and take back control so they can scale confidently.
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Until next time, you look after yourself and I’ll catch up with you soon!