He Sold His MSP to Private Equity. In 18 Months, Most Clients Left.
with Shawn Walsh, CEO, Encore Strategic, Bedford, New Hampshire. Runs peer groups and coaching for managed service provider (MSP) owners; built and sold Paradigm Computer Consulting
Shawn Walsh built his managed service provider (MSP) in the basement of his house, grew it to locations in four states with six acquisitions, and sold it to private equity. Within 18 months the buyer had lost most of the clients and almost all of the employees. His diagnosis takes one sentence: they thought they had bought a technology company, and what they had actually bought was a relationship company.
Before the MSP, Shawn ran a detective division and taught computer forensics at the New Hampshire Police Academy, until the consulting he did on his days off paid more than the day job. Now he coaches MSP owners at Encore Strategic, and this episode is his playbook: hire for character and teach the skills, follow your own process every time, know your end game before you sell, and understand why a specialist commands a far higher price than a generalist when the business goes to market.
What we cover
- What private equity gets wrong when it buys an MSP
- The greatest lie when private equity acquires you: nothing is going to change
- Hungry, humble and smart, and why the technical skills can be taught
- The first question he asks every owner: what is the end game?
- The owner demoted to a lower peer group who then doubled his company and tripled his profitability
- A $12 million nanny payroll company that financial buyers valued at 10 to 12 million and a strategic buyer bought for $55 million
- Gross profit as the first number he checks, and why 55 to 65% is the healthy range
- About half his MSPs already sell artificial intelligence (AI), and the smart ones build guard rails first
Chapters
- 00:00 Cold open and intro
- 01:08 How permanent capital buys differently
- 01:52 A technology company or a relationship company
- 03:06 The lie that nothing changes
- 04:30 Buyers who leave the leadership in charge
- 06:01 From detective to MSP founder
- 07:25 Starting in the basement
- 07:43 Four states, six acquisitions
- 08:00 The 2017 private equity approach
- 08:34 Encore Strategic begins
- 09:33 Hiring for culture fit
- 10:01 Profiling and emotional intelligence
- 12:25 Follow your process
- 13:08 Interviewing for core values
- 15:09 The cost of bad hiring
- 16:08 Peer groups and coaching
- 18:39 Start with the end game
- 19:58 Set the financial target
- 21:10 A little rudder far from the rocks
- 22:46 Maturity as well as revenue
- 23:55 Peer groups that promote and demote
- 24:53 Demoted, then doubled the company
- 25:54 A fast-growing vertical that hid bad processes
- 26:35 Revenue is not everything
- 26:58 Vertical specialists earn premiums
- 28:20 The nanny payroll company
- 30:14 A $12 million company, a $55 million sale
- 30:39 The Pumpkin Plan and an 18X hedge fund MSP
- 31:53 Strategic buyers need imagination
- 33:25 Gross profit tells the story
- 35:35 Fully burdened gross profit
- 35:49 55 to 65%, the healthy range
- 36:43 Flat rate and optimization
- 37:32 How many MSPs already sell AI
- 38:59 Consolidation raises the bar
- 39:38 Lifestyle MSPs go away
- 40:21 Where to find Shawn
The guest
Apply the ideas to your MSP.
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