with Excellent managed service provider in Overland Park, Kansas · Excellent managed service provider in Overland Park, Kansas
LenderHawk analysis. Not affiliated with or endorsed by Acquisitions Anonymous.
Shop multiple lenders before signing an LOI because the same deal can be financeable at one bank and rejected at another.
A business can be 'recurring revenue' without having software-like durability; one-year MSP contracts still carry meaningful renewal risk.
For small businesses, SDE can overstate value because the owner's salary is not truly an add-back if the buyer must replace that labor.
MSPs that are too generic have weak moats, so niche focus matters for both growth and retention.
In service businesses, employee relationships can matter more than the brand, which makes technician retention a core diligence item.
A buyer should meet key employees before closing when the business depends on long-tenured staff and customer relationships.
Seller retirement often really means burnout or founder fatigue in MSPs, not necessarily old age.
Bank appetite shifts quickly, so financing strategy should be updated continuously rather than treated as a one-time check.
Lenders are not interchangeable commodity providers; individual bank history, prior losses, and current balance-sheet needs shape whether they will want a deal.
When to use: Use this when choosing which lenders to approach for a specific acquisition or refinance.
Run a broad lender process because one bank's rejection says little about the broader market's view of the credit.
When to use: Use this before submitting an LOI or when a deal has unusual features that some banks may dislike.
Heather said a good MSP often has roughly 50% to 60% contract revenue, while this listing showed about 75% contractually recurring revenue.
Used to compare the listing against her benchmark for a strong MSP.
The listing asked $728,000 on about $242,000 of cash flow, which the hosts described as roughly 3.0x cash flow.
Bill reverse-engineered the multiple from the teaser numbers.
The seller reported about $1.0 million of revenue, $120,000 of EBITDA, and $242,000 of cash flow.
The hosts used these figures to debate whether the asking price was justified.
The business had been operating since 2008, making it roughly 15 years old at the time of the episode.
The hosts treated age as a signal of maturity and possible seller burnout.
The company had only four employees, including three IT support technicians and one service coordinator.
Used to assess key-person and customer-relationship risk.
The listing said 98% of revenue came from commercial clients.
The hosts noted this as a useful positioning detail, though they still worried about lack of differentiation.
Get financing feedback before signing an LOI.
Why: Banks differ materially in what they will support, and an unfinanceable offer can put the buyer in a bad position with the seller.
Call more than one lender and compare reactions to the same deal.
Why: One bank's enthusiasm or rejection may reflect its current book, prior losses, or internal appetite rather than deal quality.
Ask who owns the customer relationship in any service business.
Why: If employees own the relationships, those customers can leave with the staff after closing.
Meet key employees before closing if the business depends on them.
Why: Long-tenured staff may hold the real customer goodwill, and their retention becomes the main transition risk.
Do not price a small service business as if SDE were a clean add-back.
Why: The buyer must replace the owner's role, so the salary component is real economic cost, not free cash flow.
Heather described how a lender's prior losses can make it reject a new credit that looks superficially similar, even when the underlying business is different. The same facts can produce opposite responses at different banks because memory and book-level exposure matter.
Lesson: Credit sourcing is partly about matching the deal to the right lender's current appetite.
Heather recalled a deal that fell apart after close when competitors hired the employees and those employees took the customers with them. The seller had relied on the wrong source of loyalty, and the buyer paid for it.
Lesson: In people-driven services, customer ownership must be validated before closing.