One goal of every business owner is to increase the value of their organization. Whether intentionally building operations systematically and measurably to achieve a high sales price at some point in time or expanding the offerings and support capabilities to provide each client with the best experience possible. Some entrepreneurs seek fortunes, while others simply want to be in control of their own lives and careers or have a specific mission.
The reasons for owning a business can be multifold. As many MSPs have discovered, sometimes at the most inopportune times, the reasons for selling a business can be even more complex and taxing. From poor health and employee-related problems to burnout and retirement, providers may decide it’s time to cash out, and some may have less time to plan and execute that process than others.
No matter what’s behind an MSP’s decision to sell, maximizing the valuation should always be a top priority—the greater the price tag, the more financial security for the principals. Of course, there can be other considerations, such as continued employment for the seller and current team members or a stake in the acquiring company. Raising an MSP business’ value provides owners with many financial opportunities.
Cash Flow Opens the Door
Whether selling, merging with another IT services firm or leveraging the company’s equity to purchase a peer or competitor, the more the business is worth, the better the available options. Equity is power.
Potential sellers should always focus on commanding top dollar for the business. Enhancing the revenue and profit potential of an MSP makes it a highly attractive option for M&A firms, potential investors and buyers, and stronger cash flow will ensure stakeholders get a higher return on a sale. Financial leverage is a key factor in valuation.
Knowing which metrics to use to gauge the value of an MSP makes it easier for owners to fine-tune their operations, optimize their profitability, and gain the upper hand in M&A-related conversations. In this recent blog post, ConnectBooster detailed nine key performance indicators (KPIs) that IT services business owners can use to calculate their net worth (click here to check out that list).
With robust recurring revenue streams and an effective collections process, MSPs can boost their business’ price and expand the pool of potential suitors. Many investors will gladly pay more for an IT firm that can generate (and collect) a consistently larger flow of revenue each year. That steady income minimizes the unknowns and reduces the risks for prospective buyers, which tends to increase the number of interested parties and the asking price. Demand is a wonderful thing for those selling a business.
Rapid Payments Bolster Cash Flow
The best way for MSP’s collections teams to ensure they can quickly collect all that steady revenue and boost the value of the business is by utilizing an automated billing solution. Contracts don’t guarantee that clients will pay on time every month. They may make promises and receive invoices on time, but without an effective process and system in place, it remains an iffy proposition with no real assurances.
Automation and a secure portal can directly impact cash flow. A platform like ConnectBooster ensures that clients cannot forget or delay payments or put IT teams in the awkward position of being “collections enforcers.” Most tech professionals prefer not to be responsible for calling or emailing businesses to discuss an overdue invoice, so avoiding those situations can improve morale and employee retention—both positives in today’s tight labor market.
Those are just a few reasons why a proactive payment system is business-critical and has become a channel standard over the past few years. With MSPs leveraging technology to streamline virtually every part of their operations to optimize productivity and profits, adding a secure platform like ConnectBooster is a no-brainer. Automating the billing procedures from contracts and invoice generation to payment processing makes life easier for everyone, including clients, and helps maximize an MSP’s cash flow. That drives up the organization’s value for potential M&A activities by default.
Remove the Stigma (and Pain) Associated with A/R
Since collections are a key piece of the M&A equation, MSPs should spend more time honing those processes. Manual billing and A/R management can be repetitive and tedious for employees, leading to burnout and potentially massive mistakes. Even worse, these interactions can easily go awry and damage client relationships, especially if the people making the call have little or no training.
Not everyone is cut out for collections. Dealing with difficult and frequently late-paying clients can get frustrating—even for the most level-headed people. Automated payment systems will minimize, if not eliminate, those conversations and potential conflicts. MSPs should have clear and concise collections policies and review the details with prospective clients before closing the deal and again during the onboarding process as part of the mutual exchange of expectations.
The use of a secure payment platform should be part of those conversations. Mandating a system like ConnectBooster will ensure timely payments and reduce “friction points” between MSPs and their clients while boosting cash flow. The result is higher customer satisfaction, profits and company valuations.
Collections don’t need to be difficult or create anxiety. MSPs deserve to receive on-time payments for the services they deliver each month; automated payment systems make that a reality.
Schedule a discovery call to learn how ConnectBooster can help your MSP get paid faster, cheaper and more reliably.