What is my managed services practice worth? I'm sure a lot of you have been asking yourselves this question recently. Most of you who have been involved in building a managed services business have at least contemplated the day when you can divest yourself of a precious and valuable company. However, in order to get to that happy day, you have to be willing to invest in your company. No, I'm not talking only about money; i'm talking about time and other resources that can have a very big impact on how your company operates and on how people view your company.
There are some very simple things you can do to help increase the value of your company and prepare for the day when you want to sell. On a side note, if you are buyer looking for MSP's these items also apply to you.
Keep Good Records
IT providers are very adept at solving technology problems but not all IT providers are good at keeping financial records. No, I"I'm not talking about just having a copy of QuickBooks on your PC. Companies, even MSP's, have to have good financial records for a number of reasons. First, keeping good financials will help you make better decisions about your company. Any well run MSP has access to solid financial data so they can understand exactly how their organization is operating. Equally as important is the ability to sell or merge your company. If you are planning on going through a merger or acquisition (or even a funding round) you will need to have your financial records in good order. That means having an accountant review your financials and keep them organized on a regular basis.
Service Level Agreements
It is funny how some MSP's will invest a lot of money in their technology and then pay little attention to their service level documentation. SLA's aren't just for binding clients to multi year contracts; they are useful and necessary tools for setting client expectations and defining obligations. Perhaps most importantly though, having revenue that is tied to a contract will significantly enhance your company's value. Even your product and non-recurring revenue will be enhanced if it flows from a service agreement. Having a properly drafted and reviewed service contract can not only help protect your company but it will make your company more appealing to buyers.
Service Delivery Consolidation
Many young MSP's start off by partnering with other MSP's. This is an excellent and highly advantageous model, especially if you intend to broaden your service capabilities without wanting to take risks. There is a time, however, when a MSP needs to evaluate the services it delivers to clients and whether those services should properly be delivered internally or through an external partnership. For MSP's who are considering a sale or merger, the more services you deliver through external partnerships the less valuable your company is. Now, if you have the customer relationship that is a good thing. Owning the customer relationship is the most important thing. But, if you can deliver a majority of the services internally a MSP will likely maximize its customer satisfaction as well as its corporate valuation.
Doing these simple things can have a dramatic impact on how your company delivers managed services and on how others value your organization. In the end, having happy clients is probably the best indicator of a valuable company. If your clients are happy, chances are you have many, if not all, of these best practices in place.
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