When you start your MSP Business many of the challenges you will face can be viewed with a short-term perspective. This means that IT companies literally need to generate enough business to support themselves. The problem with this situation is things that work in the short term to bring sales work against when you attempt to exit the business. What issues are we talking about: how do you keep your books, do you show a profit or loss, do you offer short or long-term contracts and lastly do you take any business you can get or are you picky and select customers with long term viability in desirable industries?
The Books and Taxes
Many MSP business owners would answer the question about book keeping with a short-term view by admitting they don’t keep their books accurately. This is because most small IT companies have their owners responding to emergency issues that they feel they don’t have time to keep their financial books in order as it doesn’t seem like a pressing issue. After all, sitting down and getting all the records straight can’t be as urgent as responding to a client whose network is down.
The other financial dilemma comes up every year when an MSP Business needs to file their taxes to Uncle Sam. The question at stake here is whether the IT company should take every single deduction so they can get as much money back or show some profit and pay extra taxes. For the average MSP, their short-term viewpoint causes them to take every single deduction and show a business loss.
However, making short-term decisions like not keeping accurate business records and taking a loss will dramatically affect your end game. It could also cause suspicion and lead to a potential tax return. To avoid this sort of situation, it might be better for IT companies to consider using H&R Block (see here for discounts) to help them file their taxes properly.
Type of Contracts
Once again, most IT companies just focus on getting new business and resort to short-term marketing tactics like offering month-to-month MSP agreements. This can be a very alluring strategy because it takes away the risk associated with switching IT providers in the eyes of end users. Often a long-term agreement can be a deal killer for sketchy end users. Ironically, while this technique works like magic it runs counter to what IT investors are looking at when purchasing an MSP business. If you look at the issue from the investors point of view the idea of buying an MSP without long term agreements is a risky venture. After all, many of the customers may baulk at the idea of being purchased by having a knee jerk reaction to cancel. The problem is this would be easy for them to do with a month-to-month agreement. However, long-term IT contracts would allow the new owners to prove themselves.
Type of Clients
Lastly, IT investors look very intently at the long-term viability of the business verticals your MSP Business supports. Typically, this is an issue that never crosses the mind of a small to medium sized IT company as the short-term view is to take any business no matter what industry. However, if you have a large portion of your customers in high risk or volatile business sectors then this will dramatically lower the overall value of your company from an IT buyer’s perspective.
Savvy MSP business investors look for detailed financial records, want to see profits, long term agreements and see no value in customers that are not in viable businesses industries. Therefore, if you plan on exiting your business it’s incumbent upon you to look at these issues with the end in mind. If you’re not following the best practices that investors want to see then it’s time to reevaluate your process with a view to the end game. Just look in the mirror and make a change!
About the Contributor
David Walter is the Marketing Director at MSP SEO Factory, a company providing IT marketing to businesses in the United States. Their expertise is creating managed services marketing ideas and turning them into original, optimized blog posts. Their process involves in-depth brainstorming, thorough editing, and effective promotion of fresh and unique articles for their MSP Business clients.
He has 16 years experience in marketing for the IT industry, as well as experience in direct MSP marketing, internet marketing, article writing. David speaks at trade shows, webinars and is a sales trainer for major IT companies. He is also a published author; his latest book is ‘Stratospheric Marketing Secrets’.