An MSP owner had the deal essentially done — a strong multiplier, terms in hand — built on the pitch a lot of owners are proud of: no client contracts, just genuinely great service and relationships that had lasted five or six years. Then the buyer’s PE firm fired the CEO who’d agreed to those terms. The new CEO opened the file, saw there were no customer agreements anywhere, and redid the whole deal — worse than before. One condition: go back to the top 20 clients and get them on three-year contracts. The seller couldn’t do it. Ask twenty loyal clients to suddenly sign a contract right before a sale, and they’ll figure out exactly why you’re asking.
This episode of Cogent Conversations, recorded live at IT Nation Connect with Joey Pinz, gets at why that story isn’t rare. Rick Murphy explains why “exit strategy” is the wrong question for almost every MSP owner, why most buyers actually want the owner to stay rather than leave, and why the “we don’t believe in contracts, we run on referrals” pitch — the one so many owners say with real pride — is quietly one of the most expensive things they can tell a buyer.
Watch the episode and be sure to subscribe: https://www.youtube.com/watch?v=OqNcgQrgRfY
Key takeaways from this episode
- “Exit strategy” is the wrong question. Rick’s reframe: your company is going to trade no matter what — either you sell it while you’re alive, or your family sells or winds it down after you’re gone. The real question isn’t whether you’re leaving. It’s when you go liquid on the investment your business represents.
- Most buyers want you to stay, not go. The old-school image of a buyout — new owners walk in and clear out the founder — doesn’t match how most IT services acquisitions actually work. In this space, an acquisition is fundamentally a talent acquisition. The owner and the team are usually the asset, not just the client list.
- “No contracts, just great relationships” sounds confident. To a buyer, it reads as risk. A business with no customer agreements has no protection if a key employee leaves and takes those relationships along. Rick’s blunt version: that pitch almost always travels with a second one — “we get all our business from referrals” — and together they signal a company that doesn’t fully believe in selling, or in documenting what it’s actually built.
- That belief costs real money, not just peace of mind. A business without customer agreements isn’t worthless to a buyer, but it won’t command the same purchase price as a comparable business that has them — full stop, before multiples even enter the conversation. Risk gets priced in.
- Non-solicits do more real work than broad non-competes. Rick’s actual standard for a departing seller: he doesn’t care where you go to work next. Don’t take the customers you sold him, don’t take the employees, and don’t badmouth him to vendors. Play fair, and nobody has a problem.
- Waiting until the deal is signed to fix this is already too late. The MSP in this story found out the hard way — asking loyal clients to suddenly sign three-year contracts right before a sale doesn’t read as routine. It reads as a tell.
The through-line across this conversation is one Rick keeps coming back to on this show: run the business like you’re going to sell it tomorrow, even if you have no plans to sell it for another twenty years. Customer agreements, sensible non-solicits, and a team a buyer could actually keep — none of that is exit planning. It’s just running a business well, and it happens to be the same thing that keeps the most money on your side of the table whenever liquidity actually arrives.
If you’re not sure whether your own contracts, team structure, or growth story would hold up under that kind of scrutiny, we’re happy to take a look before a buyer does.
