If you’re looking to grow your MSP or position it for a future sale, there’s one thing that can significantly increase your value in the eyes of potential buyers: a well-structured vCIO (Virtual Chief Information Officer) program.
For many MSPs, the vCIO role gets overlooked, misunderstood, or confused with basic account management. But done right, it can transform client relationships, boost profitability, and make your business far more attractive to buyers.
In this article, we’ll break down what a true vCIO program looks like, why it matters for your bottom line, and how it can help future-proof your MSP.
Many MSPs claim to have a vCIO, but in reality, what they’ve built is closer to a Technical Account Manager (TAM) role. These roles often focus on troubleshooting issues, managing tickets, and occasionally pitching products.
The problem? That approach doesn’t deliver the strategic value clients expect from a true vCIO.
A proper vCIO shouldn’t just manage day-to-day technical issues. Their job is to:
When the vCIO role is treated as strategic instead of transactional, MSPs unlock better client retention, stronger trust, and higher-value relationships.
A well-executed vCIO program isn’t just about better client relationships. It directly impacts financial performance:
Bottom line: vCIO-driven MSPs tend to operate at a higher operational maturity level, which leads to stronger EBITDA and more predictable growth.
If selling your MSP is on the horizon, a strong vCIO program can make a huge difference in valuation.
Buyers today don’t just want to see your ConnectWise dashboards or ticket closure rates. They care about long-term client relationships and strategic alignment. A well-documented vCIO program shows:
This last point is especially important. If clients only trust the owner, buyers see risk. A strong vCIO program creates transferable relationships, making your MSP more attractive and less dependent on you.
If you want to make your MSP more valuable and scalable, here are a few steps to focus on:
Your vCIO isn’t just an engineer or account manager. Choose someone who can speak to business leaders, understand growth strategies, and bridge the gap between technology and business outcomes.
Not every client needs the same level of vCIO engagement. Segment them based on factors like tech maturity, business size, and strategic needs. Some may need quarterly meetings, while others only require annual check-ins.
Move beyond patch reports and ticket stats. Your QBRs should focus on budgets, risk reduction, compliance, and growth opportunities that directly impact the client’s business.
It’s tough, but sometimes the best way to scale your vCIO program is to fire clients who don’t value strategic guidance. This frees up capacity to focus on clients who see IT as an investment, not just a cost.
A mature vCIO program creates happier clients, higher margins, and a more attractive business for future buyers. It helps MSPs:
In a competitive MSP market, this is the kind of differentiation that matters.
If you want to grow your MSP or maximize its value before selling, investing in a structured vCIO program is one of the smartest moves you can make. It strengthens client relationships, improves financial performance, and positions your business as a true strategic partner.
Want to see a deeper dive into this topic? Watch the full webinar replay here: Watch Now
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When it comes to selling your Managed Service Provider (MSP) business, first impressions are everything. And we’re not just talking about your website or the way you present your company to prospective buyers. The real first impression is made by the state of your internal systems, processes, and data.
Your Professional Services Automation (PSA) platform is at the heart of this. A well-organized PSA doesn’t just make your team more efficient; it makes your entire business easier to evaluate, transition, and integrate after a sale. In short, a clean PSA signals to buyers that you run a tight ship, which can directly boost your business valuation.
We hosted a webinar, Optimizing Your PSA for Acquisition Readiness, where PSA optimization consultant Monica Ozaruk walked through PSA optimization tips with real world examples. Watch it here. Here are five recommendations from the webinar.
Your PSA (or CRM) should be the single source of truth for your sales team. However, many pipelines suffer from “deal bloat,” with old, stale opportunities that inflate your forecast and make your sales process look disorganized.
Recommendation: Regularly filter for past-due close dates, identify ghost deals, and archive them. Consider using an “Admin Close” status to clean up old opportunities without marking them as lost.
While many MSPs don’t carry much inventory, it’s becoming more common to accumulate shelves full of hardware like firewalls, switches, and other devices. Untracked inventory ties up cash flow and makes your financials less transparent to buyers.
Recommendation: Record inventory as an asset in your accounting system and align it with your PSA data. For hardware-heavy projects, consider down-payment invoicing to cover upfront costs.
Waiting until a project is 100% complete to bill for all the labor can choke your cash flow and increase your risk if a client delays payment.
Recommendation: Use progress invoicing and bill monthly for any active project work. This creates steady cash flow and reduces exposure to unpaid invoices. Make sure your contracts allow for interim billing and clearly define scope.
Over time, your PSA can become cluttered with unused boards, statuses, automations, and workflow rules. In an acquisition, a messy PSA makes migration harder and reduces operational clarity for a buyer.
Recommendation: Conduct an internal audit to remove or consolidate unused elements. Organize workflows by verticals or service lines so they can be easily “lifted out” during a partial or full sale.
Even with great SOPs, things can fall apart in the hand-offs between departments. Without clear accountability, deals can stall between sales, operations, and finance, which hurts both cash flow and buyer confidence.
Recommendation: Document a “quote-to-cash” process showing exactly who owns each stage, from signed quote to final invoice. This demonstrates operational maturity to buyers and speeds up the due diligence process.
Buyers look for businesses that are easy to understand, operate, and integrate. A clean PSA with accurate data demonstrates that your MSP is well-managed, financially healthy, and ready for a smooth transition, which can directly boost your valuation.
Thinking about selling your MSP?
Contact us today for a free, confidential valuation and expert guidance through the selling process.
Ever feel like valuing a Managed Service Provider (MSP) is like staring into a black box? The profit and loss statement might not actually reflect what a business is truly worth. Whether you’re considering an exit or looking to grow through acquisition, there’s one key financial metric you absolutely need to understand: Adjusted EBITDA.
In this post, we’ll pull back the curtain on what Adjusted EBITDA is, why it’s important for MSPs, how to calculate it properly, and how it impacts valuation.
EBITDA of course stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Adjusted EBITDA goes a step further by normalizing earnings to reflect the real, ongoing profitability of your business by removing personal expenses, one-time costs, or income/expenses that wouldn’t carry over to a buyer. In short, it estimates what a new owner could reasonably expect to earn post-acquisition.
A multiple of Adjusted EBITDA is the most widely used metric in MSP valuations. The biggest factor influencing the multiple is how much top line revenue there is. For instance, a small, solo MSP generating low six figures might trade at roughly 2x Adjusted EBITDA. But a larger MSP with $10M+ in revenue could see a multiples as high as 8–10x. Here are some other factors which influence the multiple:
When you’re crunching the numbers for Adjusted EBITDA, the main goal is to adjust the P&L to reflect which revenues/expects a buyer would actually inherit. Here’s a breakdown of what might typically get adjusted:
These are costs the seller incurred that a buyer wouldn’t expect to absorb.
These are income items that aren’t part of the core, ongoing operations of an MSP.
It’s in the seller’s interest to maximize Adjusted EBITDA to boost their valuation. But it’s important for sellers to be reasonable, because inflating add-backs or being overly aggressive with your adjustments can backfire. Buyers will scrutinize add backs, and if a seller’s add backs are unreasonable, it can seriously damage trust and potentially even derail a deal.
We hosted a webinar titled ‘How to Calculate Adjusted EBITDA for MSPs’ that walks you through the methodology using a fictitious MSP’s P&L and discusses the impact on valuation.
Watch the webinar here: YouTube – How to Calculate Adjusted EBITDA for MSPs
Thinking about selling your MSP?
We’ve helped hundreds of IT service providers navigate the sale process successfully, from valuation to closing. If you’d like a confidential conversation or a free evaluation, contact us.
There’s no question: mergers and acquisitions activity in the MSP space has picked up significantly over the past few years. We’ve seen first-hand more inquiries, higher valuations, and a growing diversity of buyers. Private equity firms are increasingly targeting smaller MSPs, more solo buyers are entering the market, and of course, existing MSPs are still thirsty for growth opportunities. All this attention has led some to speculate: are we in a bubble? To answer that, we need to understand what’s driving this surge in M&A activity. So in today’s blog, let’s take a look at three of the most important factors we see driving M&A acquisitions for MSPs:
The scope of services provided by MSPs has expanded considerably in recent years. Whereas the traditional focus was on infrastructure management, cybersecurity is now a core component. This has created challenges particularly for smaller MSPs, who may not have been able to invest in broadening their services to include robust cybersecurity. Those who are unable to-do-so may not qualify for cyber insurance, and neither may their clients. This poses not only a risk for the MSP in terms of not being protected, but also a risk that clients may churn.
Regulatory obligations have also become more complex, with MSPs expected to comply with frameworks such as HIPAA, NIST, and GDPR. Smaller MSPs may find it difficult to meet the standards. For some, the best path forward is to exit and be absorbed into a larger MSP that has the needed infrastructure and expertise.
The question becomes, do you foresee a future where cybersecurity threats are lessened, or will they continue to increase? While the future is hard to predict, when you consider our current geo-political climate, it seems unlikely that cybersecurity concerns are going away anytime soon.
Another major factor driving acquisitions is the age of MSP owners. Many MSPs still operate under their original founders who started their businesses in the 1990s or early 2000s. Those owners are now approaching retirement age and are looking to exit. Even among younger founders, burnout and family priorities often lead them to consider selling and retiring early.
This trend aligns with broader demographic patterns. Baby Boomers and older Gen Xers are retiring across all industries, and IT services is no exception. It seems probable that the wave of exits is going to continue over the years to come.
Nearly every MSP I’ve ever spoken to gets most of their leads from word-of-mouth or referrals. But this approach only takes you so far, and often MSPs find they hit a ceiling somewhere between $1.5m-$2m in yearly revenue. Scaling beyond that requires significant investment in marketing and sales. But many MSPs aren’t keen to incur the costs to-do-so, and don’t have the patience required to see it through. So, they get stuck.
Even when solid leads come in from marketing efforts, it’s very competitive, and there’s a good chance the lead may be speaking to 5+ other MSPs. Prospects may not appreciate the true value of managed services and may be inclined to go with the lowest bidder.
In instances where you are reaching out to a company who already has an MSP, they likely won’t want to switch providers unless they experience a service failure. Which makes the timing of outreach tricky.
Acquisitions can bypass many of these challenges. Instead of fighting for every new seat, MSPs can grow quickly by acquiring a book of business with established relationships. So, as organic growth becomes tougher, more MSPs are looking at M&A as their preferred option.
Looking ahead, will organic growth become easier? It’s unlikely. Larger MSPs are investing more heavily into marketing, automation, and AI-driven outreach. So going forward, small-to-mid sized MSPs may find it even harder to compete.
When we look at these important factors driving M&A activity in the MSP sector, there’s a strong argument that all three of them are going to persist for the foreseeable future. Could valuations soften or buyer interest shift? Sure, markets always change. But the core reasons behind increased M&A activity don’t appear to be going away anytime soon.
Considering buying or selling an MSP? Contact us today — our team can guide you through the process.
When it comes to selling or buying a Managed Service Provider (MSP), misinformation can cloud good decision-making. We often hear MSP owners assume their business is “too small” or “not ready” for a sale. But the market is far more dynamic and flexible than many realize. In this blog, we’ll walk through five of the most common myths about MSP M&A.
Or if you’d prefer, we also recently released a short video where we break down these five myths in detail. Watch the video: 5 Myths About MSP M&A
Truth: Smaller MSPs are sough after. While the multiples may be lower compared to larger firms, there’s still strong buyer interest, especially from mid-sized MSPs looking to expand their footprint or acquire accounts.
In some cases, where the MSP for sale is very small, the deal may be structured as a simple referral arrangement. The seller would earn a percentage of revenue over time rather than a lump sum upfront.
Truth: Key-man risk is a real concern, but manageable. Buyers often address this risk by structuring deals to include earnouts, where future payments depend on customer retention.
Owners of one-man shops who are leaving the business may also need to take on more responsibility during the transition period. However, this doesn’t make the business unsellable, it just means the transition plan becomes critical.
Truth: About half the MSPs we help sell don’t have formal customer contracts. An absence of contracts may affect deal structure, with a higher proportion of the valuation tied to performance-based payments. But many buyers appreciate client relationships and service continuity more than just paperwork.
Truth: If one or two or five clients make up most of your revenue, it raises concerns and will be a deal breaker for some buyers. However, for others this risk can be addressed through creative deal structuring (e.g., earnouts, holdbacks) and by clearly demonstrating account stability.
Truth: While MSPs with monthly recurring revenue (MRR) command stronger interest and more favorable terms, there are still lots of buyers interested in MSPs with substantial revenues pertaining to projects, time-and-materials, or block-hours. In fact, some buyers will see these MSPs as ripe for upselling, where recurring contracts can be introduced post-acquisition.
Each deal is unique, and many perceived “deal breakers” can be addressed with thoughtful planning and creative deal structuring. If you’ve held back from exploring M&A because of one of the myths above, it may be time for a second look.
If you’re thinking about selling your MSP, whether you’re ready now or just exploring your options, we’re here to help. Contact us to start the conversation.
In today’s fast-paced managed services environment, operational efficiency isn’t just a nice-to-have—it’s the cornerstone of sustainable growth and enhanced enterprise value. Whether you’re aiming to scale your MSP, improve profitability, or prepare for a future sale, refining your operations can unlock significant financial rewards.
Operational maturity reflects how effectively your business functions without constant owner intervention. At lower levels, MSPs spend most of their time reacting to urgent issues. As you advance up the maturity scale, predictable processes and clear accountability reduce firefighting and free up bandwidth for strategic growth.
Why It Matters:
Action Step: Conduct an operational maturity audit using a 1–5 scale (e.g., Service Leadership’s model). Pinpoint gaps and choose one process to standardize this quarter.
Impact: These issues cap revenue—often below the $2M mark—and erode potential valuation multiples.
Action Step: Identify your biggest bottleneck (e.g., sales dependency). Delegate proposal creation to a dedicated team member and track weekly conversion rates.
A fractional integrator (similar to a part-time COO) partners with visionary MSP owners to:
Benefits:
Action Step: Track how much time you spend on operations versus strategy. If operations exceed 30%, explore contracting a fractional integrator.
Frameworks like EOS, Scaling Up, and Gazelles provide structures—One-Page Business Plans, 90-day Rocks, Level 10 Meetings—that bring clarity and accountability to leadership teams.
Options:
Action Step: Choose your path and schedule your first leadership retreat or discovery call this quarter.
Action Step: Run a service-line profitability review. Select one unprofitable client to offboard or repricing discussion this month.
Action Step: List three tasks to delegate next week, measure the hours freed, and plan how you’ll deploy that time.
We hosted an in-depth webinar exploring these concepts and real-world MSP examples.
➡️ Watch the Webinar: The Implications of Operational Efficiencies on Valuation from an Integrator’s Point of View
Empower your MSP to run smoothly, scale efficiently, and achieve the valuation you deserve. If you’re tired of putting out fires and ready to build a sustainable, high-value business, contact us now. Let’s work together to move up the operational maturity ladder, unlock new growth, and maximize your MSP’s valuation!
In this insightful webinar, Hartland Ross speaks with operations expert Kevin Heggeroser about how operational maturity affects MSP valuation. Kevin shares his experience as a fractional COO helping MSP owners implement systems that increase enterprise value and make businesses more attractive to potential buyers.
The webinar emphasizes that MSPs focused on reducing owner dependency through operational systems and specialization will command higher valuations. For owners considering eventual exit, investing in operational maturity delivers better ROI than simply chasing new clients or raising prices.
Contact The Host Broker if you’re planning to sell your MSP.
So much attention is paid to the valuation in M&A for IT services businesses but sometimes the importance of other factors isn’t fully appreciated. Buyers should realize that sellers also judge offers by the deal terms, payment structure, timeliness of the sale, and whether the sale is an asset or share sale. Additionally, having a level of trust between buyer and seller, having a cultural fit between both companies, and addressing the seller’s role post-close are crucial factors for putting forward an attractive offer. The combination of these factors, which we’ll discuss in today’s blog, may influence a lower valuation offer to be seen as the better offer from the seller’s perspective.
The deal terms refer to the specific conditions of the sale and have a significant impact on the perceived strength of an offer. Deal terms can include structures such as bonuses or earnouts, which are performance-based payments. Earnouts are often preferred by buyers when there is risk associated with the acquisition. For instance, if the business has a key client that makes up the bulk of revenue, an earnout can help mitigate the risk of that client leaving; or maybe the business has customers in countries where there’s a tumultuous business climate, and an earnout mitigates the of regulatory risk. On the flipside, because earnout payments are based on the future performance of the business, they may also be an attractive option for sellers who believe their business will continue to grow post-sale.
Payment terms refer to how the buyer plans to pay for the business, whether it’s a lump sum payment on close or installment payments over time as well as the frequency of these payments. Sellers likely prefer a lump sum payment on close, but installment payments can allow a buyer to get to a higher valuation, aid with cash flow, in addition to providing some security by maintaining a degree of leverage.
Another important factor is whether the sale is an asset sale or a share sale. In an asset sale, the buyer only purchases specific assets of the business — most importantly the customer list and annuity stream (goodwill) — but also potentially equipment, inventory, or even real estate. In a share sale, the buyer purchases the entire company, including all assets and liabilities. Asset sales are typically less complicated and less risky for buyers, while share sales can make taking over operations much simpler but may come with lower valuations. There are also tax implications, with sellers usually benefiting from a share sale and a buyer usually benefiting from an asset sale. Most transactions we broker are asset sales due to the simplicity and generally lower costs.
From the onset, sellers want to feel confident that the buyer is trustworthy, reliable, and committed to completing the sale. This trust and confidence can be established through sincere communication, transparency, and trying to build a rapport with the seller. While negotiations typically start with an online meeting, eventually taking the time for an in-person meeting (if feasible), can go a long way. Buyers who make the effort to get to know the seller, understand their goals and motivations, and demonstrate a genuine interest in their business may put themselves ahead of a competing offer at a higher valuation.
Read our blog about why ‘First Impressions Do Matter’.
Culture fit refers to the compatibility of the buyer’s organizational culture with that of the business being sold. A lack of cultural fit can complicate the sale and post-sale transition, resulting in a drop in employee morale, productivity, and retention which has the knock-on effect of creating customer churn. Buyers are well advised to assess the existing culture of the business, identifying areas of compatibility and incompatibility, and present a plan to bridge any gaps.
Cultural integration is a two-way street, and the seller also has a responsibility to be open to the buyer’s culture and values and to work collaboratively to achieve a successful integration. By working together, the buyer and seller can ensure that the sale of the IT services business is a positive and productive experience for all involved, and that the cultural fit is aligned for long-term success.
Sellers are often emotionally attached to their business and want to be involved for a period post-sale to ensure that it continues to be successful after they leave. In other cases, they might be motivated to retire, or to focus on other business endeavors, in which case they would view a lesser role appealing. In either case, sellers are interested in knowing what their involvement and compensation will be post-sale.
Discussions should be had about the transition period, the seller’s involvement in the business, and any potential consulting or advisory roles. Buyers can also communicate their plan for integrating the seller’s knowledge and expertise into the business. By addressing these concerns upfront, buyers can build trust with sellers and establish a positive relationship that can lead to a stronger offer.
A timely sale is important to most sellers. In addition to being prepared and organized, buyers can also ensure a timely offer by having funding secured in advance. This helps to streamline the process and ensures that the buyer can move quickly once an agreement has been reached. If a buyer is unable to secure funding or is otherwise delayed in the process, it can cause frustration and uncertainty for the seller and may cause them to prioritize other offers.
While there’s no doubt the valuation is very important, these other factors we discussed in today’s blog are also key considerations for sellers when evaluating offers for their IT services business. Favorable deal terms, rapport and trust with the buyer, culture fit, employee retention, the seller’s role post-close, and the timeliness of the offer all play a role. Buyers who take these factors into account when making offers are more likely to successfully close deals. The more favorable elements a buyer can integrate into their offer, the more likely their offer will be compelling, and there is the real potential to be a successful bidder despite a lower valuation.
Any business owner who tracks their books knows how valuable EBITDA (earnings before interest, taxes, depreciation, and amortization) can be. EBITDA measures core (or operating) business profitability, before debt, taxes, or asset maintenance come into play. Even though EBITDA is not part of GAAP, it’s almost universally included in income statements because it helps external parties better understand how a business is performing. Knowing EBITDA answers a critical question — is this a fundamentally good business?
If EBITDA is negative, for example, it tells you that the business has serious operating issues. It might be spending too much on marketing to attract new customers, having too few customers to cover fixed costs, or even not charging enough to offset variable costs for each customer.
That said, positive EBITDA doesn’t mean a business is profitable, especially if it spends a lot on CapEx to operate.
Still, EBITDA is routinely used in the business community to compare company valuations, usually expressed as a multiple. A growing technology company might sell for anywhere from 3 to 10x EBITDA. Large companies with a significant moat (e.g. proprietary technology) might expect even higher multiples of between 10 and 15x or more.
While EBITDA tries to get to the core performance of a business by subtracting non-operating expenses, there still might be some non-recurring expenses that muddle the picture. Subtracting those can help clarify business performance even further — in a metric called adjusted EBITDA.
Adjusted EBITDA drills down further to analyze the core operating business by adding back additional one-off expenses or subtracting non-operating income – COVID-related loans for example. The expenses can vary widely and include debt write-offs, employee bonuses, legal expenses, COVID-related spending, etc.
Unlike EBITDA, adjusted EBITDA varies for every company. Knowing how to calculate it properly (and reasonably) for your business can be the difference between being valued at a lower or higher multiple in an acquisition or investor negotiations.
That’s why adjusted EBITDA is crucial for IT service providers that are looking to sell their business or bring in external investors. Getting the adjusted EBITDA right can increase the company’s valuation by a whole multiple (or more) — meaning hundreds of thousands or more added to the purchase price.
Although adjusted EBITDA is different for each company, there are still common adjustments that tend to be used by most IT service providers.
Note: EBITDA adjustments can both increase and decrease the value of your company. While they are more likely to do the former, it’s important to be clear truthful, and reasonable, so others can see how your business really works.
Here are just a few typical EBITDA adjustments you’ll see ISPs make.
Additionally, the COVID-19 pandemic has added lots of one-time expenses that could obscure the true health of the business:
As mentioned above, while adjusted EBITDA is not a strict accounting metric, it helps outsiders (e.g. financial analysts) evaluate the core of the business without unusual gains or expenses. Adjusted EBITDA growth over a few years, for example, shows that the core business is in a good place and makes forecasting easier.
In turn, this gives potential acquirers a solid base from which they can calculate the company’s valuation based on growth and future returns, without being distracted by extraordinary events, such as the COVID-19 pandemic.
Since EBITDA and adjusted EBITDA are common industry metrics, they are often used for benchmarking and comparing different IT firms. If one company’s adjusted EBITDA margin is 40% and another one’s is 30%, we know that the former is more efficient and can take a closer look at its financials.
It’s easy to be swayed by one-off gains and happily book large increases in profitability. But why rely on lottery tickets and external events?
Adjusted EBITDA helps keep the business grounded, growing its core operations, which results in more realistic and resilient measurements over the long term.
Not sure where to start with adjusted EBITDA? Contact the Host Broker, and we’ll guide you through the process — and even give your business a free evaluation.
Know more about your business and how it performs compared to your industry peers by connecting with us today!