Secure your future: Achieving business value and success for long-time TSP owners ready to transition

Posted:
04/14/2023
| By: Arlin Sorensen

One of the most frustrating calls we receive is from long-time business owners who have poured the last 25-30 years into their company and now want to transition. It often goes like this:

I’m trying to sell my business, but no one will pay me what it is worth.”

I’ve given up holidays, birthdays, ball games, and family time for decades, but no one appreciates the sacrifices I’ve made.”
(Cue Cat’s in the Cradle by Harry Chapin)

I’m being taken advantage of by these potential buyers. Can you help?”

This call comes far too often from IT solution provider (TSP) owners that have worked tirelessly to serve their customers and employees over many years. They have delivered great service, an excellent work environment, and been able to care for their family and provide for their needs. But now, as they are ready to move to their next chapter in life, they face the reality that the business they have built and poured their blood, sweat, and tears into for many years won’t generate the money needed to secure their future. And this discovery is too often before multiple shareholders, taxes, and other fees reduce their amount.

They want a quick fix. Unfortunately, that doesn’t exist. There is no silver bullet to creating business value. That gets created over time by making the right choices along the journey. You can’t snap your fingers and correct this problem. Sure, you can run lean or cut expenses in the short term—such as not hiring that engineer you need leading up to your exit— but your three-year financials will show reality and risk burning out your team.

Unfortunately, many small businesses in the United States fall into this situation. The overwhelming majority never reach ten employees with $1 million in revenue. Data is hard to nail down, but some sources say less than 10% of companies achieve those targets.

In our IT Nation Evolve peer groups, we see the 80/20 rule play out. A number of those in our peer groups (which we benchmark financially every quarter) achieve their targets and can have a successful transition that provides the foundation for their desired future. It’s important to note that those participating in a peer group are already in a different class of self-selected companies focused on growing and achieving their goals. In the general small business population, 20% would be far too high.

So, what separates those owners that achieve their target from those who don’t?

Before diving in, let me tell you what it is not. It’s not just working hard. The TSP business is challenging, and no one makes it for the long haul without a lot of hard work. But that alone doesn’t mean success. Hard work (and the assumption of long hours) does not equate to business value.

3 ways long-time TSP owners achieve a successful exit

Here are the key success drivers we see in those businesses that achieve their target:

1. They know who they are and what they are trying to build

We call this “Modes Theory,” which captures a business owner's relationship with growth. Believe it or not, many business owners have never really stopped to think about what they are working toward. They just wake up, go to work, and assume everything will work out in the end. And tomorrow, they do it all over again. The data says that assumption isn’t usually the result that happens.

What can you do to change this? To increase the odds for achieving your target, you need to answer three important questions that define your relationship with growth and business value:

  • What is your destination? What are you trying to build?
  • How will you get there? What does your journey look like?
  • When is your timeline? How long do you have?

The Modes Theory™ Assessments help you and your leadership team see growth through the same lens and align on your future together. We frequently see multiple owners and leadership team members self-assess differently across the four Modes (Startup, Balance Builder, Value Builder, and Empire Builder). As of today, our data shows any single Modes Mindset™ is below 60% of the ConnectWise partner base, leaving the opportunity to understand how each partner intentionally thinks about growth.

These answers flow into your planning and allow you to create a roadmap that can lead to success. We have many resources to help you along this journey, but it starts with knowing what you are building. Modes Theory is a free toolset that can help you define your destination. You can take the assessment at connectwise.com/modes.

2. They keep score (aka benchmark)

We call this benchmarking, and the best tool in the marketplace for TSPs is the Service Leadership Index® (S-L Index™) which allows a business to understand “what good looks like.” Moving the needle on your business operations is extremely difficult without knowing what is possible or what you should prioritize. The S-L Index benchmark defines Best-in-Class (BIC) and enables you to manage against clearly defined targets and allow you to achieve success.

Another part of keeping score is the S-L Index methodology called Operational Maturity Level™ (OML™). OML is a scale from 1-5 which measures a business and its operational maturity across a wide range of traits. It provides a way to measure a company's performance and what areas need attention.



But keeping score without a roadmap to improvement creates frustration. Service Leadership offers SLIQ™, a tool that provides that roadmap and drives profit, thus value creation. It allows an organization to assess its current situation and provides detailed steps of how to improve.

Keeping score shows you what areas need improvement and identifies the levers you can pull to help you improve. The right tools help you make effective improvements efficiently.

3. They leverage the right tools and people to help them achieve their targets.

We call this process “matchmaking.” Depending on your Mode and the OML of your business, the right software, services, and community you need will vary. There is no one-size-fits-all solution for a successful TSP. The answer is always, “It depends.”

There are many options available to enable your success. The key is to make sure you match your desired outcome with the resources you will use to help you get there. There is no standard answer. ConnectWise has a suite of products and services that can adapt to your needs. And the IT Nation Evolve peer groups provide foundational components around planning and accountability that can help move you toward achieving your target.

Conclusion

I encourage you to know yourself, know where you are, and know who you’ll surround yourself with to march toward your target. The combination of Modes, maturity, and matchmaking will give you a great start toward achieving the target for a successful transition.

The journey of a long-time TSP owner seeking a successful business transition is not without its challenges. However, following key success drivers can substantially increase the likelihood of achieving your target. By understanding your relationship with growth through Modes Theory, benchmarking and tracking progress with tools such as the Service-Leadership Index and OML, and leveraging the right tools and people for their specific needs, you can build lasting business value.

ConnectWise offers a range of resources to support this journey, and the IT Nation Evolve peer groups provide a strong foundation for planning and accountability. By taking these steps and engaging with experienced resources, TSP owners can secure their desired future and enjoy the rewards of their hard work and dedication.

Following these success drivers and assembling the right team to support your journey is key to your success. It’s never too late to begin creating the business value you desire for your transition.