Building a successful MSP takes more than technical expertise. Owners must make smart operational decisions, find the right resources and prepare for opportunities that could shape their companies’ futures.
For more than half a century, Wilmington, Delaware-based law firm Ciardi Ciardi & Astin has helped businesses navigate those challenges. The firm’s experience spans industries and includes business reorganizations, acquisitions and sales.
Danny Astin, co-founder and managing partner emeritus, brings decades of business experience to the conversation, including time with the U.S. Department of Justice overseeing business reorganizations and liquidations. Astin recently talked with ChannelPro about how MSPs have become essential advisers to businesses. But succeeding in that role requires more than delivering technology services.
Astin shared his insights on overcoming operational challenges, becoming a trusted business adviser and preparing for a successful exit. His responses have been edited for clarity..
What would you suggest to MSPs struggling with operational challenges?
Astin: Let’s go with a few assumptions first. Let’s assume that they’re solvent, that time is not of the essence and they’ve got some runway to figure it out. Really, you’ve got to go first to the resources that are available to you, and that’s your team internally. If that’s not there, you have to think about filling out your team with the knowledge and skill set that you need. But that’s not always practical.
What if an MSP doesn’t have the resources to hire additional expertise?
Danny Astin
Astin: They have to be practical. If you can’t find it internally and you can’t afford to bring it in from outside, then you’ve got to do it the old-fashioned way. Trial and error, read a good book, talk to your peer group, find yourself a great hands-on mentor and put your best effort into it. That’s not the answer that people want to hear. They want the magic elixir, a little pixie dust. But if you don’t have the money to bring somebody on, make do with what you have.
If [managed services is] your passion, the most important thing is don’t give up. Put your shoulder into it and slug on.
How has your experience working with businesses across different industries shaped your perspective on MSPs?
Astin: A lot of the fundamentals apply whether you’re a butcher, baker or candlestick maker. Our clients come from all industries. It just so happens that over time, you wind up with more technology clients. In my generation, technology was almost nonexistent in business. Everything was manual, even the bookkeeping. Now you can’t think of a business that doesn’t have technology at its core.
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What does that mean for the role MSPs play in their customers’ businesses?
Astin: It used to be the lawyers and the accountants, but now the new trusted advisers are the MSPs. That’s not just a trite phrase. Whether you’re suited to be a trusted adviser is an entirely different thing altogether.
In the 1970s, if you worked for RCA in Camden, New Jersey, you had your pocket protector and your calculator. But you weren’t necessarily a trusted adviser. You went to your bench and did your work every day. Today, you have to do both, or you at least have to hire people who can do both. You have to be willing to be creative with the resources you have at hand.
With private equity and other investors showing interest in MSPs, how should owners prepare if they eventually want to sell?
Ciardi Ciardi & Astin’s technology client base reflects the industry’s expanding role in the IT channel.
Astin: Once you decide that you’re not doing it for lifestyle and you’re not doing it for legacy (meaning transitioning through a family member), you have to think about your exit strategy. If you’re going to sell your business for a multiple of, say, EBITDA, you have to pay very close attention to the fundamentals. Everything from corporate governance to books and records to your minutes. Track your success and your shortcomings and achievement of your goals over time. Document everything that’s going to help you paint that picture when it comes time to get that valuation.
What mistakes could hurt an MSP’s valuation?
Astin: If you’re ever going to sell your business successfully, your books, records and contracts have to be in good shape. If your cap table [a record of the company’s ownership structure] is upside down, you can’t just say, “I’ll sell my business because I’ve got too much debt.” It’s going to affect the valuation eventually, and the market has a way of bringing reality to your doorstep very, very quickly.
What should MSP owners watch out for when acquiring another business or evaluating an acquisition offer?
Astin: If you’re acquiring a business, I wouldn’t go with the crowd that does the valuation and the diligence on the back of an envelope, or doesn’t check to see if the MSP’s contracts are assignable. And I wouldn’t necessarily go with the crowd that promises you something on the back end. You already have the promise of a rainbow. That’s what you’re building. You need to have a deal that makes sense in the light and in the dark, and is going to leave you at least no worse off than where you started. If that’s your goal, it’s all achievable. That’s the American dream. Start your business, get to the end, sell your business and do something that was on your bucket list that wouldn’t be possible if it weren’t for that business.
Anjali Fluker is managing editor of The ChannelPro Network, where she covers news, trends and best practices for the MSP community. She specializes in telling the stories that matter to IT providers serving the SMB market. When she’s not reporting, writing or editing, she’s connecting with channel pros at industry events across the country.
Images: Nattapun — stock.adobe.com, Ciardi Ciardi & Astin, Anjali Fluker/ChannelPro
