What Do Buyers Look for When Buying a Business Like an MSP?

Clean Contracts: The First Window

What does a buyer actually see when they ask for your contracts? In one deal an owner described, contracts were the gate. He'd been through similar deals before, asked the broker to show contracts before signing a letter of intent, and the broker wouldn't. The deal stalled.

The lesson isn't about brokers, it's about where the gate sits. If yours wouldn't survive a stranger reading them cold, that's your first problem.

How do you know if your contracts are clean enough? Pull the five largest ones and read them as if you'd never met the client. Would you know what you're delivering, for how long, and what happens when it renews?

Revenue Mix: What Predictable Income Looks Like

Your revenue mix tells a buyer how predictable next year looks. One owner watched a $15M MSP with strong margins and long-term contracts sell at 9x. Smaller shops in that same owner's observation, under $2M, were getting 1x to 3x. Those are individual reported deals, not going rates, but the direction in that owner's observation is worth noting.

What's your current recurring revenue share? If your top five clients are 40% of revenue, ask yourself what happens if two of them leave in the same quarter. If 60% of your revenue is break-fix, ask whether a buyer is paying for an asset or for a job you have to keep doing.

Book EBITDA: The Number a Buyer Adjusts Before Paying

In my view, the earnings work comes before the multiple. I'd reconcile the profit your books show, identify what recurs, and document each proposed adjustment before using it in an offer calculation.

That $3M shop with $1M book EBITDA and $850k reality? That was one owner's reported deal. My view: reconcile a gap like that rather than treating it as a rounding error.

How do you reconcile your books to reality? Start with a simple test: what would EBITDA be if you paid yourself a market salary for your role, cut the truck your spouse drives, and removed last year's one-off legal bill? That's a starting point for what a buyer might see.

Three Years Out: The Monday Start

You have three cleanup tracks, and you don't start all of them Monday. You pick the one where your gap is biggest, especially if you have no dedicated salesperson or CPA on staff to run all three at once. At 5 to 40 people, you may not have either. Sequence, don't parallelize.

My view: start with contracts if your terms are informal, because everything else builds on them. Start with revenue mix if your top five are over a third of revenue. Start with books if you genuinely don't know your real EBITDA number.

Here's the three-year shape. Year one, inventory every client contract and move your top twenty to written, multi-year terms. Year two, push recurring revenue toward 70 to 80% of total. That's an illustrative ambition to set against your own numbers, not a buyer requirement. Year three, reconcile books to reality and document every adjustment you make.

The Earn-Out Trap and Other Exit Pitfalls

The deal can fall apart after the letter of intent, and one culprit to watch for is the earn-out. One operator reported watching a client sell to a private equity firm with a three-year earn-out tied to quarterly numbers. The operator described the targets as unachievable from the start and said the seller effectively received about a year's profit.

Another owner avoided that entirely. He sold to a larger competitor without a broker, negotiated all cash upfront plus two years of salary, and walked away with no earn-out at all. Those outcomes vary with deal terms, but the pattern in those two deals is worth naming: earn-outs move risk from buyer to seller, and the targets are written by the buyer. That's my reading of the two deals, not a rule about every earn-out.

The same logic applies to brokers who want a signed letter of intent before showing contracts. One owner stalled that way. Another only signed an NDA to see documents, and held the line that a letter of intent comes after good-faith negotiation, not before. Your exit strategy isn't a price. It's the process you refuse to skip.

You may never sell. That's fine. Running your numbers through a buyer's lens still shows you where the business is fragile, and three years is enough time to fix it. Pick the gap that scares you most and start Monday.