Business Is Booming For MSPs
And It Will Lead To Huge Paydays
By Fred Voccola , CEO Of Kaseya
It ’ s an ideal time to be an MSP . The pandemic transformed the way we work . Companies were forced to go remote , and organizations turned to MSPs to help them navigate their new IT environments . The pandemic has stabilized , but many businesses opted for hybrid work scenarios moving forward and , in some cases , went virtual permanently . Business for MSPs soared and continues to do so given the current digital transformation .
Mergers and acquisitions ( M & A ) activity is all the buzz in the MSP industry right now . Technology is growing at a fast pace , and investors are paying attention , especially to disruptive , high-growth companies such as large MSPs with 55 employees or more . Smaller MSPs will also continue to do well , but the larger ones are poised for a higher growth
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6 | MSPSuccessMagazine . com • VOLUME 3 ISSUE 3 rate and profit margins . The reason is because they tend to have more resources , time , and opportunities to work on the business , therefore improving core functions and processes .
What Drives The M & A Movement ?
There are various factors driving MSP mergers and acquisitions . First , it ’ s a massive market . Businesses with lower churn , good margins , and a large total addressable market attract private equity interest . The accessibility of private equity , whether it ’ s venture , capital , growth equity , or buyout equity , has grown to unprecedented levels , providing funding opportunities for growth-oriented technology .
Additionally , the tech economy is exploding . Even in the private equity world , there is a labor shortage . The number of professionals with software , technology , and technology distribution experience is still relatively small . As the industry evolves over the next several years and the private equity sector gains experience , more financial experts in the space will come online , and there will be an increase in asset allocation to that category . More funds will go toward software and technology services .
Become More Attractive To Potential Investors
The top way to catch the eye of investors is to make the revenue stream predictable , and this can be achieved by having customers sign multiyear contracts . Many MSPs are reluctant to go this route because they fear pushback from clients , but the reality is that most customers appreciate it because it allows them to lock in prices during times of high inflation . When investors are courting a company , this is among their biggest concerns . They ask , “ Will customers leave ? What happens with the revenue when the company changes hands ?” The predictable revenue stream is one of the primary differentiators between MSPs that receive high valuation and financial success and those that do not .
Overcome Organic Growth Limitations
One of the greatest challenges for MSPs when they think of growth is their focus on acquiring new customers . They erroneously believe new sales are tied to