Operationally mature MSPs aren’t all the same. However, they do exhibit two key traits:
- They are not dependent on their owners.
- They can scale without sacrificing profitability or quality of life for the owner.
Operational maturity enhances an MSP’s value to potential buyers by reducing risk of client or employee attrition when the owner steps away. This assures buyers that the business can grow sustainably.
But achieving it is hard. It requires standardizing, documenting, and continuously refining processes when founders are often focused on winning clients and meeting payroll. It also takes consistent, disciplined project management to integrate these processes into the company’s business-as-usual process and make it part of a company’s culture.
It is both rare and valuable, so operational maturity commands a market premium. A $5 million MSP generating $1 million in EBITDA can sell for multiples higher than an immature peer. Meanwhile, even a $10 million MSP might struggle to sell if it lacks operational maturity.
These insights were gathered from conversations with channel participants, including Peter Kujawa, executive vice president and general manager of Service Leadership and IT Nation. Along with that, LinkedIn data and anecdotal evidence helped create some details on what constitutes a best-in-class MSP.
What Does it Mean to be Operationally Mature?
Service Leadership trademarked the term “Operational Maturity Level” (OMLTM) in relation to technology service providers.
Service Leadership’s OML™ rates MSPs on a 1–5 scale based on execution and ability to implement business plans across finance, service, sales, strategy, and compensation. Soon, it will include security and compliance.
Here’s a closer look at each rating:
- OML 1: Startup mode, meaning the business wins clients by compromising on stack and client quality.
- OML 2: Very hard stage, where the business is highly inefficient, working hard for little gain, struggling to stay afloat.
- OML 3: The business has stabilized financial performance.
- OML 4: The business boasts best-in-class profitability. It is ready to acquire and integrate firms.
- OML 5: The business displays elite performance across all areas.
Climbing the OML ladder should be deliberate. MSPs that try to grow too quickly or skip stages often end up worse off.
MSPs should take an incremental approach to improving their overall OML performance by focusing on two to four traits a quarter. Work on those before moving on to others in the next quarter.
6 Best Practices of Operationally Mature MSPs
1. Governance: Delegate Past $5M in Revenue
MSPs reaching roughly $3 million–$5 million in revenue (typically 50 clients, $2 million in managed revenues and $2 million in other revenue) tend to face local market saturation and need to expand to new geographies. At this point, owners must delegate tasks to free personal time to focus on strategic growth. MSP owners must
- Identify trusted employees for roles like director of technology services, head of project management, and client success manager for account management.
- Family members or experienced employees should take charge of brand development, business development, and marketing. Their goal is to penetrate nearby markets.
- Hire a chief revenue officer (CRO) to take over sales. Owners often spend about 50% of their time on sales. Hiring a CRO can free them to focus on strategy. MSPs should consider drawing less annually and diverting those funds for hiring the CRO.
The next governance moves, which may add costs but improve marketability, include:
- Hire a fractional CFO to ensure books are reconciled, financial performance is monitored, and margins are optimized.
- Bring in a head of HR to professionalize recruiting, retention, training, and employee development.
2. Finance: Move from Cash to Accrual
Most sub-$5 million MSPs operate on a cash basis. This can make their books volatile and hard to forecast. Since the timing of receipts and payments from clients and vendors don’t align, accrual accounting smooths out revenue and expenses. This facilitates clearer forecasting.
Best-in-class MSPs hire a fractional accountant to produce GAAP-compliant, accrual-based statements and use these statements to generate dependable financial forecasts.
3. Operations: Standardize Processes and Track KPIs to Measure Performance Efficiency
Standardized and documented operational processes help track performance and scale. MSPs just starting out often customize solutions for every client. This approach becomes unsustainable as the MSP grows. By identifying commonalities across clients, best-in-class MSPs streamline processes and services.
Sean Maguire
Top MSPs are relentless about developing standardized and scalable approaches for their business processes. They may not need that standardization early on, but they will need it eventually. They realize it is best to set up in the beginning.
“Having a standardized approach that you are providing for your customers really makes a lot of sense for both the customer and the organization and of course the team who is supporting that,” said Sean Maguire, CEO and founder of Synivate, a Massachusetts MSP.
When it comes to measuring cost efficiency, it is important to have actionable metrics. Two key performance indicators (KPIs) many best-in-class MSPs use to track operational efficiency are:
- Hours per Endpoint per Month: Tracking this metric can identify inefficiencies and focus on reducing labor costs without compromising service quality.
- Tickets per Technician: By monitoring the average number of tickets worked per technician and analyzing ticket trends, MSPs can ensure that their technology systems are reducing workload over time. A simple goal for an MSP is to make sure the ticket count doesn’t grow in proportion with the number of devices managed.
4. Sales and Marketing: Develop a Sales Process. Don’t Wing It!
Many MSPs rely heavily on referrals, but top performers develop structured sales processes and track metrics such as:
- Lead generation and conversion rates (MQL → SQL → client).
- Cost of client acquisition, customer lifetime value, and sales ROI.
Ethan Farlow
They also develop client matrices to identify cross-selling and upselling opportunities.
“We identify clients not using our full services, then create 90-day marketing sprints targeting those gaps,” shared Ethan Farlow, COO of ComTech Network Solutions, a North Carolina-based MSP.
Hiring the right salespeople requires onboarding them properly, accompanying the founder on calls, and avoiding commission-only structures that incentivize signing poor-fit clients. Best-in-class MSPs invest the time and energy needed to ensure the sales team they have hired has been empowered to succeed.
“I promise you, you are not going to get a good salesperson on a commission-only [contract],” Matt Koenig, Nodeware vice president of channel sales said on a recent podcast. “You get what you pay for … someone that is desperate to do stuff that pays their mortgage and car payment. Do you really want [that type] of sales?”
5. Client Relationship Management: Client Satisfaction Surveys, Referral Programs
For most MSPs, referrals are among the most productive ways to acquire clients. Best-in-class MSPs run client satisfaction surveys to identify their best clients. Then, they will approach them at networking events and quarterly business reviews to ask for referrals.
Top MSPs are actively involved in their respective communities and consciously build client relationships with centers of influence in their community. These can include schools, libraries, hospitals, and/or community banks.
6. Hiring: Attracting and Retaining the Right Talent
For MSPs to grow, swift hiring without sacrificing quality is crucial. Best-in-class MSPs have a clear, consistent hiring framework. They provide detailed job postings with salary ranges, transparent processes, and time-bound onboarding plans that reduce uncertainty. Best practices include leveraging internal referrals and platforms like LinkedIn and Indeed. Transparent, structured hiring helps operationally mature MSPs attract and retain talent aligned with their goals and culture.
Most sub-$10 million MSPs avoid offshoring to maintain a U.S.-based premium service, despite higher costs. But many remain open to offshoring selectively in the future to control costs while maintaining quality.
Thaddeus Susara
Offshoring makes the experience less personal, but many large MSPs use offshore solutions. In fact, they may even have their own branches in countries like India, Brazil, and Costa Rica.
Offshoring is also an option for MSPs looking to improve margins before exiting in 2-3 years. According to Thaddeus Susara, vice president of global sales at Techno Global Team, “There’s going to be a lot of consolidation in the MSP community because of the regulations and requirements coming down the pipeline. A lot of people are probably going to start selling their MSPs. We’re here to support them and hopefully help them get a bigger multiplier when they sell because they’re more structured.”
Should You Run Your Business As If You’re Preparing to Exit?
Many industry experts strongly endorse the philosophy that MSPs should run their businesses as if they are preparing for a future sale — or in case they are ever forced to sell under emergency circumstances.
The elements that make a business attractive to buyers — profitability, scalable operations, recurring revenue, low customer concentration, and strong retention — are the same traits that make a business easier and more profitable to own.
For instance, MSPs that operate with high EBITDA margins and larger absolute EBITDA outputs are positioned to command premium valuation multiples. They are also more financially resilient and capable of reinvesting growth, planning for downturns, and rewarding ownership.
Madhur Duggar
Strategic pricing, contractual escalators, and efficient service delivery systems contribute to higher valuations and smoother daily operations. Firms that invest in service quality, retention strategies, and scalable internal systems tend to experience both higher client loyalty and lower employee churn. These are critical traits valued during M&A but equally beneficial for day-to-day management.
Reducing customer concentration is another important example. If a business is overly dependent on a small number of clients, it presents risk to both buyers and owners. Spreading revenue across a more diverse base mitigates volatility and creates a more durable business model.
Conclusion
Ultimately, operating with an exit mindset introduces a level of discipline and foresight that serves the business owner well, regardless of whether a transaction ever occurs.
“100% of owners will transition their business,” said Arline Sorensen, chief evangelist at ConnectWise. “It’s just a question of whether they do so by choice or by circumstance.”
Planning early and operating with a future buyer in mind ensures that when that time comes, whether it’s expected or not, your business is ready, valuable, and desirable.
Madhur Duggar is senior advisor at Excendio Advisors, an IT-focused M&A advisory firm.
Featured image: DALL-E
