BlogPlan 2027 on Data, Not Gut Feel: The Metrics That Should Drive Your MSP’s Priorities
By: Reed Warren, CEO and Founder, iTValuations
Your 2027 business plan shouldn’t be built on what you hope will happen. It should be built on what your numbers tell you needs to happen.
For many managed service providers (MSPs), annual planning starts with ambitious revenue goals, growth projections, and a long list of initiatives. But without a clear understanding of which metrics actually drive enterprise value, even the most well-intentioned plans can miss the mark.
In a recent iTValuations webinar, CEO Reed Warren and Greg Northrop explored how MSP owners can use data to identify their biggest opportunities, prioritize the right initiatives, and build stronger, more valuable businesses in 2027.
Their message was straightforward: Stop wishing and hoping. Start planning and measuring.
Why MSP Valuation Multiples Still Matter
When it comes to enterprise value, most MSP owners understand the importance of growing EBITDA. But EBITDA is only part of the equation.
The other critical component is the valuation multiple, which reflects the risks and strengths of the business.
According to iTValuations’ analysis of approximately 200 MSPs, the average EBITDA multiple was 7.43x. However, the spread between lower-performing and higher-performing businesses was substantial, with multiples ranging from approximately 2.6x in the bottom quintile to nearly 9x in the top quintile.
What accounts for that difference?
Factors such as customer retention, organic growth, owner reliance, employee stability, and operational efficiency can significantly influence how buyers assess a business.
And as the MSP M&A market evolves, those fundamentals are becoming increasingly important.
Warren noted that iTValuations is seeing more sellers enter the market, giving buyers greater choice and increasing scrutiny of business performance.
The implication for MSP owners is clear: Growing EBITDA is important, but improving the quality, predictability, and sustainability of that EBITDA can be just as critical.
The Metrics That Actually Drive Enterprise Value
Not every operational KPI has the same impact on valuation.
While traditional performance dashboards are important for managing daily operations, MSP owners should also understand which metrics influence buyer confidence and the potential value of their businesses.
During the webinar, Warren and Northrop highlighted several key value drivers worth evaluating as part of 2027 planning.
1. Rule of 40: Balancing Growth and Profitability
The Rule of 40 combines a company’s growth rate and EBITDA margin into a single performance measure.
A business growing quickly but generating limited profitability may carry different risks than one producing strong margins with little growth.
The objective is to find a sustainable balance between the two.
But Northrop cautioned against making the Rule of 40 a planning priority simply because it carries significant valuation weight.
If your organization struggles with customer churn, employee retention, or pricing, addressing those underlying issues may be the more effective way to improve your Rule of 40 performance.
2. Net Dollar Expansion: Growing the Customers You Already Have
New customer acquisition is important, but sustainable growth also depends on increasing revenue from existing customers.
Net dollar expansion measures how revenue from an existing customer cohort changes over time, accounting for expansion and contraction.
Warren shared that iTValuations likes to see net revenue expansion of approximately 112% to 115%, reflecting 12% to 15% growth within the existing customer base.
Achieving that level of performance requires a thoughtful approach to:
- Strategic pricing and rate increases
- Cross-selling and upselling additional services
- Expanding services as customer needs evolve
- Demonstrating increasing value through service improvements
The key is to make sure customers recognize the additional value they’re receiving.
As Warren explained, successful pricing strategies should be supported by a service roadmap that continually improves the customer experience.
3. Customer Churn: An Increasingly Important Valuation Driver
One of the webinar’s most notable findings was the growing importance of customer churn in MSP transactions.
According to iTValuations’ recent transaction experience, customer churn has emerged as the value driver having the greatest impact on transaction values over the past six months.
Buyers are looking beyond financial statements and requesting more detailed customer-level data, including revenue by customer, revenue by service line, customer additions and losses, and customer lifetime value.
Why?
Because financial performance can be a lagging indicator of customer instability.
A company may appear financially healthy today while experiencing retention challenges that threaten tomorrow’s revenue.
Historically, customer concentration received significant attention in buyer evaluations. While concentration remains a risk, Warren explained that low customer churn can demonstrate an organization’s ability to maintain strong customer relationships—even when revenue is concentrated among a smaller number of clients.
For MSP owners, customer retention deserves a prominent place on the 2027 scorecard.
4. Owner Reliance: Building a Business That Can Operate Without You
Many MSP owners wear multiple hats, serving as CEO, salesperson, account manager, and operational leader.
While that approach may work in the early stages of a business, excessive owner reliance can become a valuation concern.
Buyers need to understand whether the business can continue operating successfully after a transaction.
If the owner is responsible for several critical functions, a buyer may need to account for the additional expense of replacing those responsibilities.
Reducing owner reliance through leadership development, documented processes, and clear accountability can improve both operational stability and business value.
5. Employee Retention and Labor Efficiency
A business cannot scale effectively without a stable team.
High employee turnover creates disruption, impacts service delivery, and increases the risk of customer dissatisfaction.
Similarly, poor labor efficiency can constrain profitability even when revenue is growing.
Warren and Northrop emphasized that strong people and strong processes work together to create a scalable organization.
The goal is to move beyond a business dependent on individual employees solving problems and toward one supported by repeatable, efficient processes.
Build Your 2027 Priorities in the Right Order
One of the biggest mistakes MSP owners can make is focusing on growth before addressing the foundational issues preventing their business from scaling.
During the webinar, Northrop introduced a framework for understanding the stages of business maturity and identifying where to focus improvement efforts.
Stage 1: Financial Foundation
Establish reliable financial reporting, accurate data, and a clear understanding of profitability. Without financial discipline, it’s difficult to identify the right opportunities or measure progress.
Stage 2: Organizational Stability
Focus on customer retention, employee stability, leadership effectiveness, and reducing owner dependency. A stable organization creates the foundation for sustainable growth.
Stage 3: Operational Excellence
Develop repeatable processes, improve efficiency, and establish the operational infrastructure necessary to scale without sacrificing service quality.
Stage 4: Scalable Growth
With a strong foundation in place, accelerate sales and marketing efforts, expand services, and pursue growth opportunities with greater confidence.
These stages aren’t necessarily mutually exclusive. Financial improvements, for example, can often happen alongside operational initiatives.
The important thing is identifying the constraints that are holding your business back.
As Warren emphasized during the discussion, improving the metrics that matter most often requires working backward to find the underlying problem.
How to Turn Your Data Into Actionable 2027 Rocks
Understanding your performance metrics is only the beginning.
The next step is turning those insights into specific, measurable priorities—often called Rocks in the Entrepreneurial Operating System (EOS).
Warren and Northrop recommended a practical approach:
Step 1: Find the gap. Evaluate your current performance against where you want your business to be. Identify the metrics revealing the greatest opportunities for improvement.
Step 2: Set a meaningful target. Establish a measurable outcome tied to that gap. Rather than simply targeting higher EBITDA, identify the specific operational improvements needed to achieve it.
Step 3: Define the actions. Determine the initiatives, milestones, and resources required to close the gap.
Step 4: Assign accountability. Give each priority a clear owner who can influence the outcome and report on progress.
Step 5: Measure consistently. Incorporate the relevant metrics into your weekly scorecard and regularly evaluate performance against your targets.
Before committing to a Rock, ask:
- Does this initiative improve something buyers value?
- Does it address a meaningful constraint in our business?
- Can one leadership team member own it?
- Can progress be measured consistently?
If the answer is yes, it may deserve a place in your 2027 plan.
Why Fewer Priorities Can Produce Better Results
Perhaps the most practical advice from the webinar was also one of the simplest: Don’t try to fix everything at once.
Warren shared how, during iTValuations’ own planning process, an initial list of five priorities quickly expanded into 14 once the necessary milestones were defined.
It was a reminder that even experienced business leaders can underestimate the resources required to execute a plan.
The solution isn’t necessarily to work harder. It’s to focus more intentionally.
Rather than pursuing five major initiatives with limited progress, organizations may create greater value by executing exceptionally well on one or two priorities that address their most significant constraints.
A successful 2027 plan should be ambitious, but achievable.
Build a Better Business, Not Just a Higher Valuation
The value of understanding your business metrics extends well beyond preparing for an eventual transaction.
Better customer retention creates more predictable revenue. Stronger financial reporting improves decision-making. Reduced owner reliance creates greater flexibility. Operational efficiency supports healthier margins and more sustainable growth.
Together, those improvements create something every MSP owner should want: optionality.
Whether your long-term goal is to sell, acquire another business, accelerate growth, or simply build a more profitable company, understanding the drivers of enterprise value can help you make better decisions today.
And with 2027 planning underway, now is the time to put that knowledge to work.
Ready to Make 2027 Your Most Strategic Year Yet?
At iTValuations, we help MSP owners understand what their businesses are worth, identify the factors influencing that value, and prioritize improvements that support their long-term goals.
Rather than relying on assumptions, our valuation approach helps owners see where they stand today and where targeted improvements could create meaningful opportunities.
Connect with the iTValuations team to learn how a data-driven approach can help you build a stronger, more valuable MSP.