What Buyers See That You Don’t: 7 Lessons Every MSP Owner Should Know Before a Sale

By Corey Kerns, VP, M&A, iTValuations

Every conversation with an MSP owner eventually gets to the same question:

“What are buyers really looking for?”

On a recent webinar, I had the opportunity to moderate a discussion with three experienced M&A leaders who collectively have completed dozens of MSP acquisitions. While each organization has a different investment strategy, there was remarkable consistency in what they value—and what causes deals to stall.

The takeaway wasn’t that buyers are looking for perfection.

They’re looking for businesses that are healthy, transparent, and built for long-term success.

Here are the biggest lessons from our conversation.

1. Customer churn is still the fastest way to derail a deal

When asked what most commonly causes transactions to fall apart, the answer came quickly: material customer churn after signing a Letter of Intent (LOI).

Losing significant recurring revenue during diligence changes the economics of the transaction. Buyers can work through many issues, but unexpected customer losses create uncertainty that is difficult to overcome.

The lesson?

If you’re considering a sale in the next few years, protecting customer relationships should be just as important as growing revenue.

2. Clean financials create confidence

Several panelists emphasized that messy books create unnecessary friction.

Buyers don’t expect every MSP to operate like a Fortune 500 company, but they do expect financial statements that clearly explain how the business works.

That means:

• Separating managed services from product revenue
• Clearly identifying recurring revenue
• Organizing cost of goods sold appropriately
• Eliminating unnecessary complexity

Clean financial reporting speeds diligence and reduces surprises. More importantly, it builds trust between buyer and seller.

3. Transparency beats surprises

One of my favorite comments during the discussion was that diligence shouldn’t be viewed as a “gotcha” exercise.

Strong buyers aren’t trying to uncover hidden problems so they can renegotiate.

They’re trying to understand the business well enough to integrate it successfully after closing.

That’s why transparent sellers consistently create smoother transactions.

If there’s an issue, discuss it early. Buyers will almost always discover it anyway, and early conversations lead to better solutions than late surprises.

4. Don’t sacrifice tomorrow just to maximize EBITDA today

One topic generated a lot of discussion: maximizing EBITDA before a sale.

The panel largely agreed that owners sometimes take this advice too literally.

Slashing hiring, cutting marketing, or eliminating strategic investments may temporarily improve margins—but experienced buyers recognize when those decisions come at the expense of future growth.

Instead, buyers are asking:

• Is this business positioned to grow?
• Are investments creating future value?
• Is this margin profile sustainable?

Healthy businesses command stronger valuations than artificially optimized ones.

5. Build your business like you’re going to own it forever

One comment that resonated with me was simple:

Make decisions like you’re going to own the business forever.

That means continuing to invest in your people, improving operations, and building scalable systems—not managing for the next quarter.

Ironically, the businesses that create the most long-term value are often the most attractive acquisition targets.

Buyers aren’t purchasing yesterday’s EBITDA.

They’re investing in tomorrow’s growth.

6. Revenue quality matters more than revenue size

Another important reminder: not all revenue is created equal.

Recurring managed services revenue, long-term customer relationships, and predictable cash flow consistently receive more attention than simply growing top-line revenue.

Likewise, buyers pay close attention to customer concentration.

A business with one or two oversized customers may appear successful today, but concentration creates risk that can reduce valuation.

Diversification is valuable.

7. The best time to prepare for a sale is years before one

Perhaps the biggest takeaway from the discussion is that preparing for an eventual transaction isn’t about dressing up your financials six months before going to market.

It’s about consistently building a stronger company.

That includes:

• Improving financial discipline
• Strengthening recurring revenue
• Reducing customer concentration
• Investing in people
• Maintaining healthy growth
• Running a business buyers can easily understand

Those same improvements don’t just increase valuation—they make your business more enjoyable and profitable to own today.

Final Thoughts

Whether you’re planning to sell next year or ten years from now, the message from this panel was remarkably consistent:

Great businesses don’t become valuable because they’re for sale. They’re valuable because they’ve been built intentionally over time.

That’s exactly why we believe every MSP owner should understand the drivers of business value long before they’re ready to transact. When you know what buyers see, you can make better decisions today that create more options tomorrow.

If you’d like to understand how your business measures up against the characteristics buyers value most, we’d love to help you start that conversation.