Increasing your EBITDA value? 5 tips for MSPs and other tech companies

More and more Private Equity firms are interested in acquiring tech companies, including MSPs (Managed Service Providers). I was talking to a relation about that recently at a tech event. It got me thinking. Because the question “What is my company worth?” has no ready answer. To reduce subjectivity, business value is determined using EBITDA, so first some explanation:

What does EBITDA actually mean?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization.

In short, earnings before interest, taxes, depreciation and amortization. It’s an important measure of how profitable a company really is, without accounting choices distorting the picture. Here are my five tips to help increase your EBITDA and become an (even) more attractive acquisition candidate:

Tip 1: Optimize your daily operation – be your own example

It starts with something you probably also advise your own clients: automate where possible, make smart use of AI, reduce overhead and structurally monitor your monthly costs for cloud services, for example. Yet MSPs can struggle to set this up properly for themselves. You are then symbolically “the painter with chipped windows.” A good first step is to objectively map your internal processes: where is waste, and where can you make improvements? As an additional tip 1b, you can of course enlist the help of external parties.

Tip 2: Focus on scalability

Buyers are especially interested in businesses that are easy to scale and integrate with other business systems. Do you have a lot of custom running, complex customer solutions or undocumented processes? Then an investor knows that significant investment is needed first to take the company to the next stage. As a result, the value of your business drops. So make sure your processes are standardized, repeatable and transferable. This will also make your organization less dependent on individually specialized employees and thus more attractive to buyers.

Tip 3: Increase your revenue per customer

This is something you should deploy well in advance of a potential acquisition. This is about structurally offering additional services through upselling or cross-selling. For example, as an MSP you can offer user support in the form of adoption training in addition to IT management, so that clients get more out of their existing investments. Another example is offering license management and reporting, which helps clients work more efficiently while you provide additional added value. Tip 4 and 5 will also have a positive effect on increasing sales:

Tip 4: Strengthen your security proposition

Investors, such as private equity firms, are looking for assurance. They want to know if, as an MSP, you are able to structurally protect your clients from digital threats. Your value will increase if you can demonstrate what security measures and strategies you employ. This requires more than a few separate tools. I wrote about this earlier in my previous blog: [Link to blog: ‘Why (unfortunately) MSPs are not always secure – 3 examples.’]. For example, also show that you work with proven security frameworks and how you manage monitoring, logging and updates. Investors, as well as customers, will appreciate that.

Tip 5: Compliance as a strategic value driver

If you have compliance in place, you show as an MSP or tech company that you have risk under control. That’s crucial for investors. An organization that demonstrably complies with laws and regulations (such as the AVG, NIS2 or ISO standards) is less vulnerable to fines, data breaches and reputational damage. In addition, good compliance makes you more attractive to clients in regulated industries (often larger organizations) such as healthcare or financial services. The result? More stable revenue, less risk, and thus a higher valuation of your EBITDA. Therefore, don’t think of compliance as a

obligation, but mostly as an opportunity to be extra appreciated in a literal and figurative sense.

Is your company future proof when it comes to business value?

The market is changing rapidly, and investors increasingly expect transparency and assurance. We help MSPs set up a technical security environment that is both compliant and future-proof. This is how you keep a grip on risks, increase customer satisfaction and make your company more attractive to investors, now or when the time comes.

Please contact me if you would like to talk further about value-adding your business. No doubt we can strengthen each other in that area too by having an exploratory conversation about it.

Kenneth van Surksum