People do not buy features, they buy benefits… many MSP’s know this but very few actually live it in their marketing, here’s how to change that. Also this week, is your MSP’s expertise hiding in plain sight? And how much is your MSP really worth?

Welcome to Episode 328 of the MSP Marketing Podcast with me, Paul Green, powered by the MSP Marketing Edge.

The most common MSP marketing mistake

There’s a basic marketing mistake that the vast majority of MSPs make. In fact, once you know what it is, you’re going to see it everywhere. It’s going to drive you crazy, you’ll see it on your website, on your LinkedIn, on your other marketing channels. But the good news is I can help you to spot it and fix it in the next five minutes.

We are diving into one of the most fundamental principles in all of marketing. People do not buy features, they buy benefits. Now, every MSP has heard this, but very few actually live it in their marketing. And the reason this matters so much is because features and benefits land completely differently in our brains.

A feature is normally processed logically, it engages the analytical part of the mind that loves detail but really doesn’t like to make decisions. Whereas a benefit is processed emotionally and hits the part of our heart and also the brain that drives action, that imagines outcomes, that feels relief, confidence and safety. And here’s the uncomfortable truth…

All buying decisions made by ordinary business owners and managers start emotionally. People only use logic afterwards to justify what they already wanted.

So features live in the logical world. Benefits live in the emotional world. When you talk about features, you are speaking to the wrong part of the brain… you’re speaking to the part of the brain that doesn’t buy. But when you talk about benefits, you’re speaking directly to the part of the brain that says yes. And this is why when MSPs proudly list their features – 24/7 monitoring, remote support, patching, ticket automation, all of that stuff – prospects kind of nod politely, but they’re kind of glazing over and they feel nothing. It’s like listing ingredients instead of actually showing the finished meal, it’s like describing the different parts of the engine rather than describing the feeling of driving the car.

So benefits create pictures in people’s minds and they let the prospect imagine what life will be like when they’re working with you. And you do know that imagination is one of the strongest decision-making tools that humans possess, right? Let’s make this real. When you say “24/7 monitoring”, that’s just a mechanism, it doesn’t actually mean anything to a normal business owner. But if you say to them, Hey, we spot problems early which means fewer business disruptions, then suddenly that becomes something tangible that they can feel.

They can imagine a calmer working day, systems just running and fewer surprises, and that is a benefit. When you say “remote support”, again, that’s just a mechanism. But if you say, Hey, we can fix issues really quickly without downtime and you don’t even need to wait for us to arrive, that becomes a benefit because that sends a message of speed and convenience and continuity. When you say “regular patching and updates”, they’re yawning because you’re naming a process. But if you say, Hey, look, so your security stays strong with zero effort from your team, you guys don’t have to do anything, that’s a benefit and it speaks of safety and ease and peace of mind.

So features describe what something is, whereas benefits describe what something does. That’s the big difference between the two. Features force the prospect to translate what you’ve said in their brain into some kind of emotional meaning, whereas benefits you’ve already done the translation for them. Awesome, right? And that makes all the difference because prospects are not thinking, Oh yes, how does patching work? They don’t think that at all. They’re thinking, Oh, what does this mean? Am I going to get hacked? Are my staff going to be able to just work? Is this going to be a smart financial decision? Will this decision make me look good or will it make me look stupid? Will things just run smoothly? That’s all the stuff they’re thinking, but with benefits, we’re speaking to their emotional outcomes, the things that matter to them.

So here’s the psychological shortcut for this. Features require effort, benefits create clarity. Features are cold, benefits are warm. Features are about you, benefits are about them, and as we know, we are more influenced by what something means to us than by what we think about it. So to help you do this automatically, here’s a simple formula that I want you to burn into your brain. In fact, you can have it tattooed on your hand. Please don’t do that…don’t write in if you do that. Whenever you hear yourself say a feature, just add the words, which means that, So I call this the “which means that” formula obviously, and it forces your brain to move from mechanism to meaning.

• Remote support, which means that issues get fixed quickly without downtime.
• Patching and updates, which means that your security stays tight without your team having to do anything.
• Backups and disaster recovery, which means that even if the worst happens, your business keeps running. MFA, which means that stolen passwords no longer equal compromised accounts.
• Proactive maintenance, which means that things stop breaking all the time and your staff stop moaning about IT.

This beautifully simple phrase, which means that, it turns every feature in your MSP into a compelling benefit that actually influences buying decisions. And the more you practice it, the more natural it becomes.

Is your MSP’s expertise hiding in plain sight?

Are you seen as the true expert by your MSP’s leads and prospects? Or do you secretly worry that from the outside you look just like every other IT company in your town? The thing about perceived expertise is that it isn’t random and it isn’t about who’s the best engineer. It’s something you can build deliberately with a few simple habits. Right now, I’m going to give you a whole stack of practical ways to dramatically increase the authority you project every time someone encounters your business.

Let’s talk about perceived expertise, because in marketing, it is absolutely everything. Prospects very rarely choose the most technically competent MSP. They choose the MSP that feels safest. The one who sounds like they know what they’re talking about, who shows up consistently with ideas and insights and clarity.

Expertise in the mind of the buyer is 90% perception and only 10% reality, and that’s wonderful news for you because it means that you can turn the dial up as much as you want.

Now in a Facebook post that I shared recently in my MSP marketing Facebook group, I shared seven ways that MSPs can grow their perceived expertise, and I want to expand on each of these and then stack a load more on top.

The first was publishing a weekly blog or video and then emailing that to your email list. Weekly is key for this, by the way, because it creates a reliable rhythm. Your prospects start to kind of expect to hear from you, and they build a habit around hearing from you. And the more often you show up with helpful insights, the more they’ll file you mentally under trustworthy expert who knows my world.

Next is posting daily on LinkedIn and doing a weekly LinkedIn newsletter. This isn’t about chasing likes, it’s about being present. When your name pops up in someone’s feed, often every day, maybe in a non-salesy helpful way, you just become familiar to them and familiarity is a huge psychological lever. People trust what becomes familiar.

Third, speak at local business events. Even tiny local events give you a huge authority boost because when you stand on a stage or even just at the front of a room with a microphone or even no microphone, you are instantly perceived as the person who knows what they’re talking about. In fact, this is borrowed authority from the room itself.

Fourth is writing an IT services buyer’s guide. Books, guides, frameworks, white papers… call them what you like, these things elevate you into the position of educator and advisor. And people love buying from someone who literally wrote the guide on how to choose an MSP because it feels safer to do that.

Fifth publishing case studies. Now, these aren’t optional. Case studies are the most important form of social proof. They tell stories, they let prospects imagine themselves getting the same outcomes, so that makes you real.

Sixth, create checklists and create cheat sheets. These tiny assets are incredibly powerful because they signal that you have systems, structure and repeatability.

And seventh, build a knowledge hub on your website. A single destination full of blogs, videos, guides, reports, checklists, FAQs, all of the stuff that we’ve just been talking about. And when prospects land on that page, they instantly think, wow, these people really know their stuff. And no, they’re not going to read it all and they don’t have to read it all, it’s the impact and the perceived expertise that’s most important from a knowledge base like that or a knowledge hub.

Now, let’s expand on this list because perceived expertise is a momentum game. The more you add, the stronger your authority becomes. So host regular webinars, they don’t need to be complicated or perfect, even a simple 20 or 30 minute session once a month positions you as the person who teaches, not the person who chases.

In fact, let’s take that a step further, run lunch and learns. They’re informal, low pressure and brilliant for demonstrating your personality as well as your knowledge.

You could interview other experts. They could be software vendors, accountants/CPAs, cyber professionals, business coaches, could be local marketing people. When you sit opposite another expert and you ask them good questions, you actually inherit some of their credibility. So you could do this on videos for LinkedIn or for your YouTube channel. You could even start a limited edition podcast. Why not?

Next, what about creating some templated tools that your prospects can download. These could be password policies, device checklists, incident response steps, onboarding templates. Tools equals structure, and structure equals competence, and competence of course equals trust.

The other thing you could do is publish your own research or surveys. Even if you only survey your own clients or just some local businesses, the fact that you are presenting data makes you look analytical and authoritative.

Get quoted in local media about cyber security or phishing trends. Journalists love experts who can give simple soundbites and being quoted just once makes you look like the go-to voice in your area.

You could start a podcast and it doesn’t need to be big or go on forever. You don’t need to do it all the time and every week like I have, I’m currently on episode 328, which is a lot of work, but just the act of having a podcast and showing up weekly, even if you did it for just like 10 weeks as a limited edition. Showing up weekly with ideas, that sends a signal that you take communication and leadership seriously. So you could just do that as a limited edition run to put it on your website and think of the podcast as a positioning tool rather than a way of actually reaching people. People are impressed if you are an MSP who’s done a 10 week podcast series, and that works especially well by the way, if you’re in a vertical.

Now, if you do do a podcast or any of this stuff, why not share some behind the scenes processes. When people see that you have documented workflows, that you have onboarding systems, that you’ve got ticket triage, logic, security frameworks, all of that stuff, and you show them you creating that in your team using that stuff, it reassures them that your business is disciplined and predictable.

Now, here’s one that may not be quite for you. How about you surprise people by publishing strong opinions, not controversial stuff, just very firm confident statements. Something simple like, “Every business should have MFA, no exceptions.” Or you could even take that further if your personality fits with that and say, “Any business leader who doesn’t use MFA is unnecessarily putting themselves at risk or putting their staff at risk.” You could even maybe say, this is risky, but you could say, “Any business leader that doesn’t use MFA is an idiot.” As I say, that’s got to fit with your personality. Personally, I wouldn’t call my audience an idiot, but if you wanted to go that far, go that far, and you’re going to get some extreme reactions to that. But people are going to love you or hate you, and that’s a good thing. People love experts with clear positions and clear opinions.

And my final idea for you is just to be consistent. Nothing builds expertise more than just showing up again and again and again, with value. Authority is cumulative. The more you teach, the more expert you seem and the more visible you are, the more trusted you become.

How much is your MSP REALLY worth?

Featured guest: Earl Foote has led Nexus IT with a clear purpose for nearly three decades – building a company where people and partnerships grow stronger together.

What began as a small start-up has become one of the nation’s fastest-growing MSP/MSSPs, recognised by Inc. 5000, CRN, and Utah Fast 50 for its innovation and Integrity.

Earl’s leadership combines operational discipline with a deep commitment to trust, collaboration, and shared success – values that define how Nexus works with both its team and its partners. 

If you’ve ever wondered what your MSP would actually be worth if you decided to sell it, you’re about to get a very clear answer. My special guest today doesn’t just talk about valuations, he buys MSPs for a living. He’s in the market every day analysing real deals, real financials and real operational structures. And he’s going to explain exactly how MSP valuations work, what buyers really look for, and what makes your number go up or down.

Hey everybody, Earl Foote here. I am founder, CEO of Nexus IT.

It’s so cool to have you on the podcast because you and I met for the first time at the backend of last year at ScaleCon. I was actually moderating a panel that you were on, and it was about M&A (mergers and acquisitions) and very much the subject of today’s conversation, which is how much is my MSP worth? And it was so cool to meet you there. And then we bumped into each other at MSP Global, which was in Barcelona a month later. It’s so cool to actually get you on the show, Earl, thank you so much.

And that is the topic that we’re talking about is how much is my MSP worth? And one of the things that struck me about that panel was that you have some very, very clear opinions backed up with evidence of what an MSP is worth and what affects that valuation. And I’m sure it’s the number one question that you get, it’s certainly a question that comes up for me as well. So before we dive into that, let’s just have a little bit about your background. So tell us how you got into this and how you started acquiring MSPs in the first place.

Yeah, so I’m 27 years into my journey of building my MSP Paul. It’s been nearly three decades, quite some time. I started acquiring about 13 years ago. We’ve acquired today eight MSPs that we fully integrated into Nexus IT at this point. We’re one of the very few founder led, founder owned M&A platforms in the United States. In other words, we’re not PE owned, we’re not family office owned, we’re an independent organisation. And the reality is, the first three transactions that came our way were opportunistic. They were local MSPs that either wanted to get out of the business or were moving out of state, and they wanted a good safe landing spot for their people and their clients. And so it wasn’t something I was really planning at the time, just opportunities came to me and we were able to structure deals with those organisations. After we did a few of them, we made it part of the strategy. We were like, okay, this is something we know how to do, we can do it. It’s a way that we can accelerate our growth and create better value for everybody that’s part of this process. The clients, the people, the founder owners. So here we are now having raised a significant quantity of capital, kind of like a mini fund for us to execute and buy three to six MSPs per year right now. That’s kind of the game plan.

But it’s quite a jump to go from buying two or three local competitors to actually raising a ton of cash, which I’m guessing there’s an element of risk, of personal risk and I guess business risk in that as well. And to go on such a very fast and almost aggressive, if you don’t mind me using that word, aggressive acquisition journey. What was the thing that made you say, screw it, I’m going to do it.

Yeah, you’re entirely accurate, Paul. There is definitely risk to this. I have big dreams, big vision, and I believe in myself, I believe in our team, I believe in what we’re building and the value that it brings to our people and to our clients. And I wasn’t really happy or content to have a run of the mill MSP, and I don’t say that in a derogatory manner, but an average MSP of 3 million a year in revenue or 5 million a year in revenue and growing at 10% per year, which is a pretty standard MSP. In fact, a lot of MSPs don’t break a million a year or 2 million a year. I’m more ambitious than that and that’s kind of boring to me. So you’re right, I put a lot on the line here for what we’re doing. I could have taken liquidity events prior or exits prior and hedged my future with that, but I’m looking to build a brighter future for myself and for everybody else involved. Today, including myself, there are 10 total shareholders in the organisation, and of course, beyond creating a world-class experience for our people and our clients, we are focused on creating significant financial outcomes for the shareholders.

Yeah, absolutely. So it’s everyone wins kind of scenario, and I guess if you haven’t got that private equity or that family office, so if there isn’t someone else’s money sat there, then you don’t have the pressures towards that group as well, which makes perfect sense. So there’s a small diversion I want to take in terms of subject before we get onto the main subject. So the main subject is how much is my MSP worth? And that’s coming up in a second. The small diversion I want to take is, let’s say there’s an MSP listening to this podcast or watching this on YouTube and they’re thinking, I’d like to buy a local competitor or I’d like to buy another MSP. And actually I’m sure you have that conversation all the time, because I have that conversation all the time, and mostly those people never actually take action on it for whatever reason. But for someone in that scenario that’s just having that thought, what would you say is a good first step to start to explore it, see if it’s the right thing for them?

Yeah, I think most definitely find advisors or consultants that can really educate you about the process and what’s involved and the things that are going to happen in the business or can happen.

You really do have to be prepared for M&A. It’s not something that you can just do as a random act without preparing and making sure that your business is in a place where you can do this.

So it’s not easy to take your focus off of the day-to-day operations of the business to go look for other MSPs to buy, to work through the process of buying them and then integrating them. And so from the time you start looking for an MSP to the time you contract an MSP to buy it or actually execute the purchase, it’s easily oftentimes 6 to 12 months and then you’re going to take 6 to 12 months for integration as well.

And so you and your team need to be able to take focus off of day-to-day operations. You need to make sure you have the bandwidth, the cycles, you have the team, you have the expertise. Granted, you’re going to learn through the process, but having advisors around you that can really help educate you about the process and how to get your business ready for this is very important because it’s not too uncommon for founders to think that they’re ready to acquire another business to do so and to really cause some significant problems in their business and the business they’re requiring because they’re not ready for it.

Yeah, that makes perfect sense. And I would imagine the first acquisition is the hardest one because it is a complete distraction, especially if you’re buying people as well. We all read about the culture clashes. In fact, you read a very, very big mergers, don’t you, of companies where they can never quite get the two cultures and they end up splitting that out.

Okay, let’s get back onto the main subject then. What are the things that affect the valuation of an MSP? So I’m a business owner, you’re a business owner, to be fair you are much more highly educated in what a business is worth than I am, but we all have an idea of what our business is worth. And I sold my first business back in 2016, and luckily the broker that I picked is very respectable and expensive broker here in the UK, and the first thing they did was downplay my expectations. They said, this is your revenue, this is your profit, your business is worth X. Other brokers who want a bigger fee upfront and less of a fee at the backend will tell you it’s worth this much higher so that you sign up with them. So that was really, and I’m led to believe that’s quite a unique thing that actually brokers are really bad at overvaluing businesses. So when you are looking at an MSP or advising an MSP on what it’s worth and what money they might make, what are the factors that you typically look at?

There’s a lot involved in this really, Paul, and it really does depend on the acquirer, the buyer. So you might have financial buyers, for example, like a PE firm or a family office. You might have a strategic play for example, and they’re going to look at these things a little bit different. And then you’ve got buyers like us, founder owned, founder led, M&A platform. So really we kind of acquire as a strategic buyer.

From a financial buyer standpoint, certainly they’re going to look at your revenue and your EBITDA. They want to look at your growth in recent years. They want to look at things like the quality of the client book, the quality of the talent within your organisation, how long are your contracts, how much of your revenue is recurring revenue versus one-time revenue non-recurring? How profitable are your gross margins across your products and services? And then how that gross margin translates into EBITDA, and are you achieving a world-class EBITDA or a higher end EBITDA?

On the lower side, a buyer probably isn’t really going to entertain a business until they’re about 15% EBITDA, certainly want to look for world-class, more of a 20 to 25. And those that really are excelling are 30% EBITDA in the MSP space, that’s not easy to get to, some I’ve seen as high as 35%. If they really figure out how to fine tune their operations and deliver very specialised models, 30 to 35% sometimes is achievable. Your top line revenue and your EBITDA do play a huge role. A strategic buyer like myself, we do want to look at things like what industries are you serving? Are you specialised? For example, we focus in healthcare and financial services. We want to look at do you have good cyber and compliance capabilities within the organisation and good talent on that front. What’s your client retention rate? Are you retaining 95% of your clients and your existing revenue every year or are you retaining 60%? Because if you’re retaining 60%, that’s a big problem. Are you retaining your talent? That’s another thing for us as strategic buyers. We’re going to look at leadership philosophical ideas around how you manage and what your culture looks like because we want to bring the two organisations together into one team, and we need to make sure that we can mesh those. A financial buyer may not be quite as concerned about that sometimes. So in terms of what the valuation really comes to, it does depend on that top line revenue and on that EBITDA, and then those other kind of considerations can influence, particularly like if you’re growing. Average growth rate of an MSP in United States is about 10%, so if you’re growing at 40%, 50% per year or higher than that, it can help boost your valuation up a bit. An MSP that’s somewhere in the range of 300,000 to maybe 750,000 in EBITDA, depending upon how they’re strategically positioned and the quality of the operations, the quality of the team, the client book, the revenue, it’s probably worth something around two to maybe on the high side, five x EBITDA. Once you’re reaching around a million to 2 million in EBITDA, a million a year EBITDA business on the low sides, probably very lowest, 3 x, but often worth 5 to 6 sometimes even 7 if they’re very well positioned and they’ve got a really good thriving business. A 2 million EBITDA business is going to trade for something more like 4 to 10 x, 10 x on the really high side if they’re really well positioned and have a great operation. And then the multiples start to go up, 5 million, 5 to 10 million, you could be talking about an organisation that’s worth something like 8 to 12 x EBITDA we’re seeing, for example, in recent transactions, and by the way, I’m talking in terms of United States market transactions that are happening here. I don’t pretend to know what the transactions look like in the UK or Australia or places like that, but I expect that they’re similar. Once you start getting to a business that’s something like 10 to 12 million EBITDA or some of those that have traded recently that are more like 15 to 18 million in EBITDA, that business can be worth 12 up to maybe about 18 x. We have in recent years, seen a few trade that were very hyper specialised. We’ve seen a few trade in the 20 to 22 X that were around 20 million in EBITDA. So there’s a wide range here, Paul.

Absolutely. And let me just jump in. There’s so much value there and so many figures there, I was getting a bit lost in like, wow, so much valuation. So that’s the beauty of a podcast and a transcription on our website is if you were listening to Earl there and thinking, I just got lost, you can just go back and look in the transcriptions, look at what your EBITDA is and plug into Earl’s suggestion there. And Earl, I lost track. Did you explain what EBITDA is?

I didn’t – earnings before interest, taxes, depreciation and amortisation. So it’s essentially kind of a net profit number. So your accountant or if you have a CFO or a controller within your organisation, they should know how to calculate that for you. And yeah, it’s not your net profit, but it’s usually a little bit more than that because you’re adding back in any interest, taxes, depreciation and amortisation in that.

The M&A world loves jargon, doesn’t it? Loves its acronyms. I mean, we thought the MSP world was full of acronyms and jargon, but the M&A world is a whole new step up. And EBITDA is what you learn on hour one of day one. That’s really helpful, Earl, and let’s just sort of bring this back for the average listener to this podcast or people who watch my videos who are typically somewhere between thinking of starting up and around about that 2, 3 million mark. Obviously we have all sorts of different people that consume our content, but that’s typically who we are looking at.

So for those people, and obviously you’ve given loads of ideas of where to start, as you said, the most important thing is top line revenue and bottom line, what’s at the top of the sheet and what’s at the bottom of the sheet. That’s going to have the biggest impact. So if you were an MSP and you were thinking, right, I do want out. I’ve had my time, or I’ve built it up, or I’m ill or a partner’s ill or one of the many reasons that people sell their businesses, how far out would you recommend starting to think about that and what would you recommend as an action plan to actually start getting that business into shape to start having conversations with people like yourself or the other buyers out there?

I would say start preparing three to five years before your planned exit because there’s a lot you want to do to be able to position your business so that it’s very marketable when you take it to market to sell it. To start, I would make sure either you build a leadership team that has been through this before, maybe it’s not in managed services, but in something similar tech enabled services of some type or some sort of tech services. And put together a game plan. Study what really influences the EBITDA multiple in your type or category of MSP or MSSP, and then strategically work on building your business towards those valuation triggers that optimise your exit. Some of those things might be things like industry focus. Focus on a specific industry vertical where you can really solve specific problems.

Focus on growing, organic growth rate, focus on client retention, focus on your operational metrics, focus on employee retention and not just client retention, but client satisfaction. NPS scores, focus on getting your gross margins into a really good place. Say, well, performing MSPs are usually going to have gross margins on their managed services of around 45 to maybe on the high end, 55% if you’re talking about cyber services, 50 to maybe 60 or 65% in cyber and compliance services. Those are pretty common call investing class gross margins there on the types of services that we all sell. And so if you’re not there, which is really common in a build stage MSP, you might be more like 25, 30, 35% gross margins, and you’re going to want to move your business towards delivering more effectively financially for your clients while not sacrificing the service. So the real thing is either find advisors or build a team that knows what you’re doing and then have a specific game plan and execute that game plan so that you can optimise the valuation of your business when it’s time to sell.

Yeah. Okay. Earl, we could talk about this for hours and in fact, having sat on stage with you, I know you could definitely talk about this for hours and you give so much value with every answer, so thank you for that. Let’s get you back on the show, it’s going to be next year, it sounds crazy at this stage of 2026 to be talking about 2027, but let’s get you back on the show in the future and we’ll explore this in more detail. For now, just tell us very briefly what exactly is Nexus IT looking for? So for MSPs listening to this or watching who are thinking, it might be worth me having a conversation with this guy. Give us an idea of what kind of MSP looks good for you and what’s the best way to get in touch with you?

Best way to get in touch, just hit me up on LinkedIn or Instagram, Earl Foote or Bass Slappin’ CEO. You can look me up by that too. Let’s see. What was the second part of that question? I totally just drew blank.

What kind of MSP are you looking for? What’s the ideal acquisition for you? Who do you want to talk to?

We’re usually looking for an MSP that’s somewhere in the range of 2 to about 8 million in revenue right now. Usually 1 million to maybe three or 4 million in EBITDA. We are looking for those that are strategically positioned in cyber and compliance, generally working in regulated industry like we do, like healthcare and finance, and certainly that have built a well-respected, well operating organisation. That’s the profile of what we’re looking for throughout the United States right now, we don’t have plans to try to go global in any way whatsoever, but throughout the United States, we’re looking for awesome MSPs and founders that either want to join and build with us, or they’re looking to transition their organisation onto somebody else and want to find a good home for their clients and their people. Once again, I am Earl Foote. Find me on LinkedIn or Instagram or Bass Slappin’ CEO.

Mentioned links

• This podcast is in conjunction with the MSP Marketing Edge, the world’s leading white label content marketing and growth training subscription.
• Join me in MSP Marketing Facebook group.
• Connect with me on LinkedIn.
• Connect with my guest, Earl Foote, on LinkedIn, and visit his Nexus IT website.
• Got a question about your MSP’s marketing? Let me know.