The Unplanned Business Exit

Author: Kayla Sanderson, channel marketing manager, AppRiver, a Zix company.
Author: Kayla Sanderson, channel marketing manager, AppRiver, a Zix company.

There are many types of MSP business owners:

  • The intentional entrepreneur, who starts a business with a plan, financing in place when required, and their end goal in mind.
  • The accidental entrepreneur, who starts a business with a few “repurposed” clients from a former employer and then finds themselves, because of or in spite of their decisions, running a multi-million-dollar managed services firm
  • The lifestyle entrepreneur, who does IT support for extra cash with no intention of exponential growth beyond what is necessary to pay for their cost of living and some savings.
  • The serial entrepreneur, who finds or starts, then fixes and sells multiple companies.

You may start as one and move to another at any point in your entrepreneur’s journey. As your business changes and grows, the leadership of that business adapts. Most business owners will agree, their biggest limitation in business growth was recognizing and resolving their own shortcomings.

While most MSP owners do not start their companies with an eye towards how they will exit, it's inevitable we will all exit our current businesses one day, horizontally or vertically. It makes sense to spend some time thinking through how you will leave your business.

Exiting At an Inopportune Time

You may not be nearing retirement age, but there are still many triggering life events that could force the sale of your business. No one likes to think about them. A serious illness, death, divorce, a business relationship going sour – these are all events that may force a sale. That sale will be more profitable if you have intentionally built your company knowing it is only a temporary vehicle created to assist you in a path to a comfortable future.

If you are a serial entrepreneur or an intentional entrepreneur you’ve likely already taken steps to ensure that your MSP business will be attractive to a buyer, but let’s quickly review the steps any MSP business owner would need to take to be able to exit their business profitably.

  • You’re paying yourself an industry standard salary.
  • You have defined effective processes and systems.
  • Your team is able to operate effectively without you in the office.
  • You’re charging industry standard rates.
  • You know where your money is going to and coming from.
  • You sign clients to multiple-year agreements with structured price increases.
  • Your business is adding new and profitable clients year over year.

The Ultimate Unplanned Exit

Planning for retirement is often one of the biggest aha! moments for entrepreneurs: especially if there is a deficit between what you believed you needed to retire comfortably and what you truly require. This planned exit is a fantastic goal to strive for. But what happens if don’t make it to retirement?

Nobody wants to leave their business partner or spouse unprepared in the case of their death. Without a detailed estate plan and a will, your spouse (especially if they are not involved in the day to day operations of your business) may be left overwhelmed. Imagine them being forced to deal with grief AND a business they’re ill-prepared to run.

There are lots of variables to consider in solving for this potential outcome, but in short, get your personal affairs in order. Speak with your family. Speak with your mentors. Speak with a wealth manager and insurance advisor, and then sit down with an estate planning attorney. Estate planning – at any age – is an extraordinary gift to your future self and your family. It can be adjusted as your health or goals change, or as life events come and go.

You may not want to sell your business and you are likely expecting to make it to retirement. However, if you are put in a position where you must face an unplanned exit – the more work you do now, the better the process will go for you or those closest to you.

Author Kayla Sanderson is channel marketing manager at AppRiver, a Zix company. Read more guest blogs from Zix AppRiver here.