If you read our article about the difference between national and local MSPs, you know they are structurally and operationally different.
Today, we’ll discuss the importance of local MSP ownership and the differences you should be aware of and look for, particularly between those that are privately held and looking to stay that way, and those that are either positioning themselves to be acquired or are private equity-backed.
For starters, we want to let you know we have our biases as a privately held company. We pride ourselves on how we’re owned and operated and are big believers in people and culture. That’s not to say an acquired or larger MSP will lack good people and culture, but certain constraints in place may make it more challenging to maintain. We’ll detail that below.
Also, we understand that we’re not for everyone. Some businesses will want “just” an IT company, and we don’t say that in a derogatory sense. Every business is different, which means every business will have different IT needs and wants.
While each type of MSP ownership model has good and bad examples, we’ll focus more on the good. If you’re dealing with a bad company, their type of ownership matters a little less. We’re here to inform you of the differences and let you decide what’s best for your business.
Why is MSP ownership important?
First, you might be asking why the ownership model matters. At its core, it has to do with consistency, what you signed up for and the organization’s mission. As we touched on earlier, some MSPs are right fits, and some aren’t. If you determine that one is a good fit, that means you want to work with them, and you likely don’t anticipate big changes.
If you sign with an MSP and are suddenly blindsided by a change in ownership or ownership structure, that can lead to headaches and conflict.
You want what was promised, which is why we encourage these types of open and honest conversations. If your MSP owner intends to sell the company, you’d probably prefer they be transparent about it with their current and potential clients. If you follow our blog, you know we regularly talk about leadership and accountability in addition to technology, and this falls right in line with that.
Now, let’s get into how these types of MSPs are different.
Characteristics of a Privately Held MSP
A privately held MSP (with no intention of selling) is more of an old-school definition of a local business or a “mom-and-pop” shop. Generally, one to two owners hold 100 percent of the company’s stock.
A good example of this type of MSP aims to make a healthy profit while not necessarily being money-first. Leadership decisions are made with the clients’ and employees’ best interests in mind, in addition to the bottom line. Because they have fewer stakeholders to answer to, they can generally be more flexible with their decision-making.
You might find that key stakeholders in these types of MSPs are more involved in the day-to-day business. Also, MSPs of this size can have the qualities of a large company (fully staffed help desk, 24/7 monitoring and support) while maintaining the same feel as a small one (familiar faces, responsive leadership).
Pros of a Privately Held MSP
- Consistent names, faces, leadership – Lack of turnover
- People, culture, core values above all
- Fast and agile service, decision-making
- In it for the long-haul
- Growth is organic, not forced
Cons of a Privately Held MSP
- Riskier choice than a larger company - less cash on hand to weather storms
- More discerning with clients - not for everyone
- Usually more expensive
Characteristics of an Acquired or Private Equity-Backed Local MSP
An acquired (or positioned to be acquired) MSP will have a different look and feel than the one mentioned above. This MSP’s decision-making can generally be traced back to the bottom line. It is either owned by a private equity group or an owner who’s on the way out. Whoever acquires this MSP usually does so for the sole purpose of making more money.
These MSPs usually see higher turnover to maintain payroll and eliminate redundant positions after acquisition or merger. You might not be dealing with the same people consistently, whether it’s leadership, account management or service. An example of this is an MSP being acquired and merged with another, leading to a lot of new faces on the help desk due to consolidation and the elimination of redundant positions.
These MSP offerings will probably be more standardized, with less room for customization when installing or configuring things. This allows them to be less discerning about who they work with, giving them a better path to hitting the financial targets of their stakeholders.
Pros of an Acquired MSP
- Standard IT help – keeps you up and running
- Less risk - Will likely always be there
Cons of an Acquired MSP
- Profit-first, not people-first
- Higher turnover rate
- Part of a larger company where leadership is more difficult to reach
Privately Held vs. Private Equity Pricing Differences
When it comes to pricing, you might find that many privately held MSPs cost more to work with than private equity-backed ones. This generally has to do with the latter lowering its initial pricing to drive new business and sustain its necessary growth. However, they can increase pricing later once they get clients in the door.
This isn’t to say that the privately held MSP will always be more expensive, or vice versa, but usually, for better or for worse, you do get what you pay for. Be sure to read our article on understanding MSP invoices, and talk with your current or potential IT partner about pricing if you have any questions.
Which MSP is right for my business?
Open and honest dialogue is essential when deciding which MSP to use. Decisions are much easier to make when both sides are clear about what they want from the partnership.
If your business is very people-oriented and understands the value of investing in technology, then you’ll probably lean toward the privately held MSP. If you just need an IT company and your budget is constrained, or if you’re not too worried about the people side of technology and just want your computers to work, then the acquired MSP should be a perfectly fine option for you.
Again, we say all this with the caveat that you’re dealing with good examples of each MSP. Which ones fall under those “good” and “bad” labels will reveal themselves through your vetting process and ultimately come down to what you feel works best for your business.
Next time you meet with a new MSP, ask them if they plan to sell anytime soon. An accountable and transparent leader should be willing to give you an idea of what they think their future holds. You want to know what your business is signing up for. If a member of MSP leadership is entirely unwilling to talk with you about this, it might be a sign that they weren’t a good fit to begin with. We believe that any good technology conversation is also a business conversation.
Deciding on Your MSP
At the end of the day, you know your business better than anyone, and this decision is ultimately yours. One parting piece of advice we’ll leave for anyone reading this is that technology isn’t going anywhere. It’s ever-changing and, quite frankly, confusing. You want a trusted partner who will guide you down the right path for your business to succeed.
