MSP Mastery: Ctrl-Alt-Deliver
Welcome to Ctrl-Alt-Deliver: MSP Mastery — the podcast for IT leaders, MSP owners, and service delivery professionals who want to elevate performance, improve processes, and stay ahead in the fast-changing managed services landscape.
MSP Mastery: Ctrl-Alt-Deliver
The Second Deal Trap and the Six Month Slump with Ryan Fuzzy Spillane
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Welcome to MSP Mastery, the podcast for MSP owners and leaders who want to build a better MSP; one that actually works for them.
I’m Jeni Clift, joined by my husband and long time business partner, Nick Clift. Together, we’ve spent decades building, scaling, and eventually exiting our own MSP business.
In this episode, we sit down with Ryan Fuzzy Spillane, CEO of 360 Consulting and a long time MSP operator turned trusted adviser. Ryan has been on both sides of the table, completing multiple acquisitions and then living through the integration journey after a major exit.
Ryan shares the hard truths MSP owners need to hear about acquisitions, valuation, and what really happens after the deal is signed, including the moment many owners do not expect: the six month mark can be the lowest point when you still carry responsibility but no longer have control.
Here’s what we covered together:
✅ Why your second acquisition is often your most dangerous
✅ Why product revenue adds little to business value, and why recurring revenue changes the valuation conversation
✅ Why you cannot acquire when your leadership team is already at full capacity
✅ What sellers need to tighten up before an exit, including agreements, financial clarity, and documentation
✅ The post sale reality and how to prepare for what comes next
We created this podcast to share the real conversations and lessons we wish we’d had more of while running our own MSP, practical insights from people who understand the challenges, pressures, and opportunities in this industry.
👉 Connect with Ryan on LinkedIn: Ryan Fuzzy Spillane
🎧 Listen to other MSP Mastery Podcast episodes here: mspmastery.blog
📸 Follow on Instagram: instagram.com/mspmastery
▶️ Subscribe on YouTube: youtube.com/@mspmastery
Your second acquisition is your most dangerous because you feel like you know what you're doing because you've done the first one. You learned a bunch of mistakes and you learned a bunch of things and you think you know what you're doing.
SPEAKER_02Every dollar of product I sell adds zero dollars to the value of my business. Every dollar of recurring revenue I sell adds$12 value to my business because it's going to be around for 12 months.
SPEAKER_03You can't go and buy another business when you're already sitting at 98 or 100% capacity at the leadership team. You need to actually make capacity in there. Again, running delegate and elevate from an EOS perspective and actually get the team to be doing more of those things and freeing up capacity.
SPEAKER_00Welcome to MSP Mastery, the podcast for MSP owners and leaders who want to build a better MSP, one that actually works for them. I'm Jenny Clift, and alongside my longtime business and life partner Nick, we unpack what's really working in thriving MSPs, including insights from the trusted partners who support them. Between us, we've clocked up more than 60 years in the MSP industry, long enough to have tried all the shiny new tools and the latest game-changing SaaS product that promises the world. This is MSP Mastery. Here's Nick, myself, and today's special guest. Today we're joined by Ryan, or as most people know him, Fuzzy Spillane. Fuzzy's a longtime MSP operator turned trusted advisor. He spent more than 25 years running a mid-sized MSP, but these days he's helping MSPs and TSPs get sharper on profitability, business maturity, and the real-world ins and outs of MA. Fuzzy has been on both sides of the table, completing multiple acquisitions as managing director of correct solutions, and then going through the roll-up and integration journey when the business was sold into the Oro group. Now, as CEO of 360 Consulting, Buzzy brings a ton of practical, been there, done that experience, and he's passionate about helping MSP owners build a better business, not just a bigger one. Busy, welcome to MSP Mastery.
SPEAKER_02Thanks for having me. Good to see you again, mate. Indeed. We don't see you as much these days since we moved to Bali last time. I believe you were in Bali and I was back in bloody Adelaide or something like that.
SPEAKER_04Well, that was the funny thing. Yeah, I was up in Bali last month and you guys were in Adelaide and I was in Bali. So we just want places.
SPEAKER_02It happens all the time. Yeah, Scott, Scott Atkinson from Drive Tech. He messaged me and said, Oh, I'm coming to Bali next week. And I go, damn, I'll be in Melbourne that week. So, you know, even though we live here, we still travel around a lot. But yeah, generally we spend three, two months here and a month traveling.
SPEAKER_03Well, as I say, have passport will travel.
SPEAKER_02Absolutely.
SPEAKER_00We're off to Lombok today, so still need a passport for ID, but we're heading to Lombok to explore our 13th island of the 17,000 Indonesian islands. So we're chipping them away one at a time. Okay, so as an EOS implementer, I always start our meetings with the same thing. So please share your personal and professional bests from the last six months.
SPEAKER_03Yeah, good interesting question. Probably personal. Let's say my youngest daughter started high school, so both daughters are in the same high school again. So we have both the girls in the one high school. So that's probably the best one, and she's enjoying it, which is great. Professional. I know there's so many different things I do every day and every week. I'd say, look, probably again getting a bunch of MAs across the line and a bunch of deals. Joined a board for a not-for-profit and also joined an advisory board for a company in the industry, and have been actually being asked to join a couple of other boards as well. So it's probably something on the professional side is starting to move a little bit more into the board work as well. Nice. Yeah, that's good.
SPEAKER_00It's interesting getting to sit at that table. Yeah.
SPEAKER_03It is. And it's interesting some of the differences of data and information that comes up to the board versus what may be at the at the lower levels.
SPEAKER_02Yeah, I've had a couple of been on a couple of advisory boards and had an advisory board ourselves, and it is it is different being on an external one to kind of running your own. And really interesting in for between the not-for-profits and commercial, what they what they do and don't. So yeah. That'll be exciting, yeah. All adds to the experience, mate.
SPEAKER_00You're very well known around the traps, but I will get you to introduce yourself, share a little about you, your professional journey, how you ended up here.
SPEAKER_03Yeah, okay. Ryan Spillane or nicknamed Fuzzy as as a lot of people know it as and whatnot. And some people only know me as that. It's probably getting less of that nowadays. I kind of know me from both names now, which is good. Look, I started an IT company at the end of 97, coming out of school, and officially more of it started in 2008 when I was old enough to have a company. But yeah, from there kind of started building up the an IT business, the imports company and whatnot. The family business was importing glass from China. And then when we along the way, we did stainless steel and timber and a bunch of other products as well. So I actually ended up running one of my own of those as well in conjunction with some family stuff. And then, yeah, what's his name from there? Kind of built up a small team of people, started working a kind of a nine-day fortnight. I started actually having a bit of time off in my mid-20s and wanting to not not work every day, which is nice. And then what's his name? Got a phone call from Correct Solutions saying, hey, let's have a chat, because they knew me from the industry and Wayne knew me from the industry as such. So ended up having a chat about whether to to kind of join in or take a section of that company. And and then uh he then asked me. We were negotiated that, and I was coming in to run two days a week with Incorrect. And I was still going to run my own IT business at the time. I think I had plenty of time to do it. And I probably would have made it work. But again, he actually asked the question. We just happened to go out and grab a subway and go to the ma go to the post office. And he said, Why don't you just why don't you merge your company in? And so that's where the first first kind of MA started. We also brought in another another company, lady named Mary Ann, who who sold CRM and accounting systems, and we brought three companies into what was then Correct. So that's that started the journey in Correct Solutions for me in 2005. And then 17 years later, we then sold and exited Correct Solutions. So we did 10 MAs along that path. Mostly successful, some are not. We can talk about some of those throughout our call. But yes, through that, that was kind of how we brought Correct together. Run a couple of other companies and other industries along that time. My exec team knew and senior leadership team knew not to let me get too bored because I'd go and buy, or we'd go and buy another business, or I'd go and start another business.
SPEAKER_00It's very dangerous, a bored visionary.
SPEAKER_03Very much so. And considering we both talk a lot of AOS language, I could actually sit in both the actual visionary and the integrator seats, and I didn't deliberately incorrect, but a lot of times I sit in both and can sit in both. So I have the big ideas, but I can then back it up with the detail when needed.
SPEAKER_00So which is a bit of a unicorn. There's not too many people that can do that. Most people are clearly one or the other.
SPEAKER_03That's right. I still like the detail. I like the big picture. I want to see the big picture, but I want to see the detail of how it's going to get there too. Otherwise, I want I'm not going to believe the big picture.
SPEAKER_02Yeah, well, as long as when you're having those visionary integrator one-on-one meetings that between yourself and yourself, that you actually come to a conclusion.
SPEAKER_00Well, that's where something like Streti or 90 come into play where you can actually, you know, give yourself to-dos.
SPEAKER_03Correct. I refer a lot of people onto Stretti, and it's a fantastic product. We'll come to it again. Absolutely. Um, so yes, that was that was kind of the the initial process and the initial piece within Correct. And then 2018 we acquired 360 consulting and absolutely loved the name. And then those clients went into correct solutions, loved the underlying name, and thought, well, we can use that for almost anything in the future. We had a plan of how to deal with it and utilize it in the tech space specifically, and didn't end up executing that as the way we wanted because we're obviously exited correct instead into that roll-up that is Auro nowadays. So yeah, we were part of that Auro roll-up and yeah, got to stay obviously it's continued on from there, obviously under that brand. And then I realized I had to do 12 months of handover with them. I was meant to do some MA for them, which didn't end up eventuating, but it helped try and do some of the integration work. And then yeah, look when I knew that mutually that they didn't want, didn't need my services anymore, which I was okay with because that was part of our agreement. Once his name I then decided, okay, what was I going to do next? And I'd already knew that I'd already started building 360 behind that scenes, behind the scenes, sorry, and through that process. Fortunately, a couple of days before I finished on Correct's 25th birthday, so the 14th of February 2022 was Correct's 25th birthday, and that happened to be my last day. It was actually my last day was meant to be a few days before that, but I got approval to stay on a couple of days, and yes, so my f the final birthday farewell of Correct was my It's good, good that that happened. Yes. So it kind of worked well from that perspective. So but yes, unfortunately, about three days before then, my father passed away. So instead of me meant to be spending time with family and and some of the reasons of slowing down and selling the business, didn't happen to eventuate. I I had played in my mind that I was actually going to retire as such from Correct and send out the the post and whatnot, uh that I was going to joke about eight hours later, say, yeah, I've had enough time off. I've I've bold now and I'm starting 360. Unfortunately, I was reading I was writing a eulogy instead. So I did I did still launch 360 properly. Went back and took the family to the UK and took some of my father's ashes back to Ireland. So some family property back there, and then getting phone calls while I was away, and then pretty much within four to six weeks of returning, I was already back at kind of a five, six-day work week. And my idea was actually only to get to, I heard an analogy about 15, 18 years ago in the US, that I wanted to work 24-7, and that was 24 hours a week, seven months of the year. So ideally I wanted to work about three days a week. And if there was a great project I was passionate about, I'd do four or five days or six days or seven if needed. But if things were a bit quiet, then yeah, no problems. I'll I'll work a day a week or whatnot. So, but yes, within about six weeks of that, I was literally back at full-time. And and now I've got a full-time financial analyst working in the business. I'm probably looking for potentially another person. But yes, we have a nice big backlog, or not really backlog, but we have a good pipeline of work sitting there with years of work sitting in front of us. So, yes, that's kind of a longer version of the background. It probably gives you a bit more detail, a bit more context of why what's there and why it matters.
SPEAKER_00Are you going to share where you got the nickname?
SPEAKER_03No, actually, interestingly, I was on another podcast, what's his name, last week, and he was trying to get that out of me, and his thin's try to try to get AI and everything to try and work it out. There's there's only about I think 20 people alive still that might know, and I think they all know that they're they're all destined for a shallow grave if they do ever let it out. It's funny because it's this small thing that's just grown so much out of proportion from 20 years or whatever, however many years ago it was that it came. But yeah, so it's it's this nothing that's just it's it's got its own story, that's own life now.
SPEAKER_00So we could make up something, put it, put that in, you know.
SPEAKER_04Most people do.
SPEAKER_02I just figured it was because you always had a beard and you're always fuzzy, because like I've never never seen you without one.
SPEAKER_00We might just leave that alone then. Let's move on.
SPEAKER_02Uh yeah, yeah, but there's there is a there is a hint in this story because I just found out you have Irish background, so there you go. So it's going to be connected into that somehow. Yeah, but look, like I can relate to I can relate a bit to that. But thanks for sharing, mate, because uh look it made me think of a few things we did in the early days that I hadn't really shared before either, because we we started off in corporate, went to a our own company, TriTech, back in 96, I think it was.
SPEAKER_0096, yeah.
SPEAKER_02And then during that process, we had an accounting firm through some partners in the Sydney, and we ended up buying a business down in Gippsland. I had no idea, mate. I was just 30 years old. I I was an engineer, I knew how to run a service business, that's what I was doing. And these guys said, Oh, this is a good this is a good deal. So I think we paid 50 grand for a list of clients. And the guy basically, as he handed over the keys to the office, said he looked at me and said, Are you sure you want to do this? And I'm going, I have no idea, mate. I'm just doing what the bean can has told me. And it was a I mean, I think we got we got one staff, and I think we got one client out of their actual clients, but what we did get was a relationship with the software vendor that was the other half of that business that why they sold it. And that then that was local government software, and that then took us on a journey of being really prominent in the local government support area. So yeah, funny, funny how things come around and and yeah, little little and we did another one where it was like a little hardly any money, but we took over a complete operation within four days notice because they were going under. And that was great. We got two staff, we got 30 customers, and it was amazing. Like, and we learned that, and then we obviously the big the big one with Milan Industries and became Otto and out of that. But and then rolling on a bit, yeah, when we moved to Bali, my thought was the same thing. Oh yeah, three days a week, do a bit of consulting. And that kind of worked for about a half a year, and then I end up working for one MSP for three days a week, another one for a day a week, and I thought, hang on, I've got no more time left for myself. And and then we kind of rearrange things, and now it's back to about four days a week. But two of those days are are now spent on passion projects like this podcast and some other things that we're doing in in Indonesia that are are really exciting to get your teeth into. So it's not always about making money, was my point. It's not always about building a bigger business, it's about being building a better business and being get yourself in a happy place where you are contributing and making a difference to people. And I think that's where you come in on this story on this podcast is that your ability to look at someone's business in a feather-wrapped sledgehammer and smash some reality into their head about how what they think. And I I experienced the fuzz factor, don't worry. I went away and cried for about a week. But those brutal truths of what you think you need to do. Like I ran the business based on a PL and a bank balance, and it was complete shit because I didn't understand balance sheets, I didn't understand true value of Ford values and contract values and all that kind of stuff. So and a lot of people are never taught that.
SPEAKER_03And that's that's probably the the difficult piece.
SPEAKER_01Yeah, I used to get so frustrated talking to the council, but we're making profit every single month. Like, look, look at the PL and go, yeah, but that's not what the ca that's not cash flow. That's not what do you mean it's not cash flow, that's the profit. So I was uneducated.
SPEAKER_02Yes. Thanks for educating me in your subtle way.
SPEAKER_03Well, as I I openly say on the strategy side of the of what we do and things like that, is I start with a rubber hammer, a rubber mallet first. If that doesn't work, I go to a small, small hammer, then a lump hammer, and if that doesn't work, then I get the sledgehammer.
SPEAKER_04I am polite.
SPEAKER_03I might be direct, but I am polite.
SPEAKER_02And always from a good place.
SPEAKER_03Yes, that's right. And I do this because I love it. I love that I'm passionate about this and do it because of that. I yes, the the money's a byproducts, and you get well, you get you do well in the industry, but it's not why I do it. It's it's helping people and giving people the advice that they're they're not going to either be able to afford or go and get somewhere else, or will try not to, and then end up running into problems. So perfect example of that and kind of bring it back to part of the topic for for today is while running Correct, I helped 31 other companies do some sort of MA. So that was people coming to us and saying, Oh, I've bought a business or I'm looking to sell, or what do I do, or what's this thing worth, or hey, I've just bought this and don't know how to integrate it, or it's all gone to crap, what do I do? So, because people knew that we'd done a number of them. Again, eight of those, 10 I'd say were successful, two were not, and we demerged them back out. So there's stories about those, but yes, we we openly, and that's the thing. I back then I was openly talking about what worked and what didn't work. And I think that's possibly what set me up well for this, and uh and the knowledge and whatnot is the fact I was open about it. It's like not all of them are successful, and that's the biggest problem. Too many people just want to tell you about, and that's the the social media side of it and all of the life nowadays, it's all the great things. It's like, but that's not reality. Yeah, it's businesses are messy, people are messy, and this is this is what it is. And you're bringing two cultures together, you bring all of these types of pieces together into a single entity. There's going to be some shells broken, there's going to be some people with their noses out of joint, and there's going to be some things that don't work. You've just got to work through those pieces. 100%.
SPEAKER_00Okay. So on that note, let's get into our first actual question. So I want to talk sort of reality check. So you've done those 10 acquisitions, you've done that major exit. What do you think the single biggest or ugliest mistake you see MSP owners make when they first dive into mergers and acquisitions?
SPEAKER_03Yeah, there's probably a number of answers to that. But I think the I think the if you're saying the ugliest piece is that they think that their business is better than most or that they're they've got it all, everything dialed in and whatnot. Unfortunately, part of my role of both being on either side of the transaction is I'm the one that has to say that sometimes your baby is ugly and what you need to do to fix it. So, and I'm the one that takes the brunt of if I'm helping someone sell that the buyer's telling me that, and then I've got to politely and gently let the seller know that what the buyer thought of their business. So, yeah, look, I think I think it depends on the buyer side or sell side. So I'll give you probably rather than just one particular ad so I'll give you probably a couple that are relevant. From a buyer's side, I would suggest your your biggest mistake is often on your second acquisition. It's the first, you learn a lot from it, you understand you're going in and you're learning from it. But I think there's someone else, Ross from First Focus, I'm just calling him out on this one. He, and I totally agree with it to be clear, that's why I mention it, that the the second, your second acquisition is your most dangerous because you feel like you know what you're doing because you've done the first one, you've learned from that, you learned a bunch of mistakes, and you learnt a bunch of things, and you think you know what you're doing, and yeah, your second is your most dangerous. So I 100% agree with that, especially when doing it yourself. From a seller's perspective, it's again not having your again, just having a good P ⁇ L and maybe a good balance sheet, but not preparing the business for sale over a period of time of six months to two years before then, of making sure clients are under the underright agreements that can be innovated or can be assigned, can be and all of the key pieces, and there's a checklist and there's pieces we can talk about on those areas, but it yeah, it really comes down to having the business ready. Now, everyone says have it run your business as if it's sale ready. Now, I'll openly admit we didn't do that incorrect. We always ran a very good business, to be clear. But even when we actually started negotiations for sale, we weren't, it was just out of the blue. We were not prepared to do it at that point in time. So we didn't we didn't basically get every single dollar we could from it, but we were running a very good business. All of the agreements were had the right clauses in them. We had, again, 90-day get outs and all of these pieces. Look, you don't have to have clients under five-year contracts. Like, don't mean wrong, contracts do make things more sticky and it gives the buyer time, and that's why they want it. But we showed that we had customers that were with us for 15, 18 years that were all on initially on 30-day get outs and then towards the end at 90-day get outs. But the customers had stayed because we were providing a good offering and a good solution, and we didn't have a big churn or a big turnover of clients. So that showed value in the in another way. So I don't think there's a specific single ugliest mistake. I think there's a little bit of complacency on on either side through that process. People go and do it themselves. I'm not a I'm not saying you have to use someone. But there are reasons why I and plenty of others have jobs and companies out there because it's not again, you use a real estate agent, whether you like them or not, to sell your house. And that's because you don't do it every day. You don't sell your own business every day either. So use someone or speak to someone and get advice. It's a massive amount of instruction.
SPEAKER_02I remember I was one of those 31 businesses that you helped during your time, Fuzzy. And the the number one thing I learned I'm pretty sure it was during that discussion or around that time was definitely influenced it. Was that we sold a lot of product and a lot of professional services and it was worth nothing. Yeah, effectively. I think you devalued the whole little yeah, like it was like two million dollars a year of revenue. Said, oh yeah, but we're only gonna count 10% of that. So my takeaway was every dollar of product I sell adds zero dollars to the value of my business. Every dollar of recurring revenue I sell adds$12 value to my business. Because it's gonna be around for 12 months. And I just took that mantra on board myself and we work really, really hard to migrate more and more stuff to recurring. So is that is that's is that still a fair statement? Is that still kind of what you're seeing out in the market today?
SPEAKER_03That the Yeah, if you if we if we value, and I do appraisals, valuations as well, but if you appraise based off revenue structure and revenue breakdown, then yes, your product revenue, uh procurement revenue or whatnot is still probably 10 or 12 cents in the dollar. So it doesn't provide a huge amount of value versus a reoccurring, a reoccurring agreement that it's non-labour, like so a voice data, those types of pieces, versus a again a traditional managed services or a TSP or a support agreement that's a labor based agreement. Again, that's worth a dollar,$1.30,$1.60 for every dollar. So you can see that alone. There's a 15, 16 times difference of in value just on the on the classification of the revenue. So there is a big reason why you want a recurring revenue. And let's be honest about it, revenue recurring revenue. Revenue is sticky. As long as you keep turning up, as long as you do what the client needs, and you don't screw things up often. Most of that's going to keep just going. It's going to keep happening. So yes, I think that there is a big difference.
SPEAKER_02I met an MSP recently, he's actually living in Jakarta now, so he'll be able to join the dots. His MSP, we were having a good chat over a couple of beers, and he basically tries to avoid project work and product sales at all costs. Which is really interesting for me because I was a hardware sales guy. I would sell my servers and my storage and be making like 20-30% net margin on that. I was addicted to that.
SPEAKER_04Back in the day.
SPEAKER_02Back in the day, but yeah, back in the 2000s, back in the naughs. Where 30 and 50% margin was doable back then. And and his thing is, well, we just don't do it. Like we if we have to procure something, we have a relationship with the Disty. They give us the machine, whatever the hash codes are, or whatever. We chuck it into Intune, we drop ship to the client, and it's all we just don't go on site. Like very, very, very rarely would we go on site. But he's got a very specific niche for his clients. No enterprise on-prem equipment, like no servers, no backup, all that stuff. It's just your modern workplace. Yeah. So you can do it, but it's a it it's he's done it very strategically and done it very successfully. So it's interesting the different models there are today. And and the question often comes up, I don't know if it's gonna come up today, but I'll ask it anyway, that if you were gonna start an MSP today, what would you focus on? It's an interesting question. I don't we don't need to answer it, but just for the listeners out there, just think about it. If you're starting, you were gonna start from scratch again today, what would you do different with your business? And sometimes in the OS journey, we ask the business owners that question. Especially when you're redesigning your accountability chart, you say, well, forget about the past. We're talking about building something for the future. Start again from scratch. What would you change? What would you do different?
SPEAKER_03So yeah. Well, even on that factor, too many people just try and build roles around the people on the accountability chart rather than just saying, let's get rid of all of the heads and don't think about the people to start with. What roles does the business actually need? Let's build that to the accountability chart there, and then let's see which which people can actually fill which roles. That's the right way of doing it. But a lot of people won't do it that way.
SPEAKER_00Structure first, people second. Yeah.
SPEAKER_03That's right. I do have an answer to that, but I I think that's that would take us for another 45 minutes or an hour.
SPEAKER_00Yeah, we can do another podcast just on that.
SPEAKER_03I do like the idea. I do like the idea, and you do have to consider because the industry does change. It does evolve and whatnot. And you've got to consider what's right for the industry and what's right for what you need to be delivering every couple of years, and that's well worth looking at.
SPEAKER_00I think that's a great topic for a future one of, you know, the future MSP. But let's stick to my screen. So, question number two, and we're well into our time. The magic numbers. If an owner's looking to sell in the next 18 months, what are the three critical financial metrics they need to start obsessing over now to actually be exit ready?
SPEAKER_03I saw that question. It's like it's really hard, and I've thought about it for the last day or so. And I don't know if there's just three, but I will start with three. Look, obviously, the reoccurring revenue percentage in the business is going to be one of the bigger ones. The profitability and the EBITDA, or really it should be the normalized or adjusted EBITDA of the business. So if you consider what the profit is of the business and then how much salary as the owner is taking out, and how does that salary or their benefits and everything else they run through their business, which again, as I openly say, I'm not the ATO, but I need to know what you're running through the business for those normalizations. And how would that compare to a professional manager? A lot of people, again, you can have two businesses with the same numbers and the same revenue, the same profitability. And one owner could be taking$100,000 out as a salary, and the other could be taking$250,000 out in salary. And on paper, initially, you'd think they're worth the same amount until you know, well, hang on, that company, both companies are still making the same amount of bottom line, but there's a$150,000 difference in this owner's salary. That actual second business is actually a lot more efficient. It's actually making more margin, it's making more GP, gross margin, everything all the way through. And it's probably a much leaner and a better run business. So that business is actually worth quite a bit more than the first. But on paper, you'd a paper without knowing what those salary differences were, you'd think they're worth the same thing. So a big part of doing anything on the MA front and even appraising MSPs and TSPs is that, yeah, you need to understand what the owner benefits and are. And then if you remove that owner out of the business and put the put a proper full-time commercial person into that role, no matter which, again, where they're located, what type of role, there are different values for that in different states, different cities are different, whether you're in a city location in Sydney, Melbourne versus something like Brisbane and Perth, or versus regional, like a regional state or a regional location. So you need to know what those numbers look like. So I'd definitely say that would be a magic number if you wanted to call it that. But yes, that normalized EBITDA is a big piece because that's what you're going to get paid on. That's how you, when you exit your business, you're going to be paid in a smaller end of house, so sub$20 million transactions, you're going to be paid on a multiple of that normalized EBITDA. So again, good consistent good if you can show growth. So even it doesn't have to be 25% or 30% growth, but if you can show that you've been growing revenue each year, if you can show a good recurring revenue percentage, and again, good normalized EBITDA, they're kind of you three, and I'm gonna throw extras in because I just do anyway, and I don't care what you say.
SPEAKER_00You're the numbers guy, and you can't even follow That's right.
SPEAKER_03Would be customer satisfaction and and retention. So if you're growing at 20% at the top line, but then losing 10% out the bottom each year, you're only growing at 10%. But that's actually a that's quite a bit of a churn factor there, and that doesn't bode like again, you will sell the business, but you probably won't get the highest amount of money for the business because of that churn rate. Because someone's look, someone coming in is going to see it as great. You're having churn, I'm gonna devalue the business a bit, and then I'm gonna fix the churn, which is gonna help increase the value very quickly. So I'm only giving you four there, but there are a pile more that I could easily say. I like it. I like it.
SPEAKER_00And I think for me, being not a numbers person, I clearly admit that when people start getting out spreadsheets and talk about numbers, I start thinking about shoes. But in my role as a trainer, as an EOS implementer and doing consulting work, coaching work, it's the big thing is know your numbers. I think there are still a lot of people around that just don't know the numbers. And if you're getting ready, you know, styling the business ready to sell, you just gotta know those numbers.
SPEAKER_03Yeah, someone buying you is going to will know their numbers because that's what their role is. So you need to at least know enough to hold your own and be good enough. Otherwise, yeah, you're gonna have a bit of a bit of a problem.
SPEAKER_02Pretty standard process would be Brian, if on Breck, if you you'd sign an NDA, you'd give the prospective purchaser access to zero or a version or a dump of it or something, and they're gonna go through it with their financial people, whether it's you or somebody else, and they're gonna pull it to bits, come back with a bucket load of questions so that the neater you can make it and the cleaner you've got it organized, and just take one of the models that are out there, whether it's the the SLIQ method or it's the evolve method or it's the true methods method, have your PL structured in some way that is aligned with some form of industry best practice. And I'm sure if you're working with with any of us, we're all gonna say fix your PL so we can read it properly.
SPEAKER_03Get your financials right, and I see it's uh it's less I'm seeing it less nowadays, but then it without saying who or what. I got one earlier uh this year where they actually had three line items for revenue. Like they were doing three and a half, nearly four million dollars worth of revenue, and their actual PL had three line items for the revenue side of the business. And it was like there's just not enough detail here. I can't categorize. It was an appraisal, I wasn't selling them, but it was uh it was like they needed a price for for uh buying out a shareholder in the business. And it's like, well, I can just do it straight off the multiple of the Ebiter and whatnot, but that's the only thing I can do. But there was no, there was no information down like what type of each the revenue was, like whether it's a managed services agreement versus a a regular Microsoft Office licensing or Azure because it only has a certain amount of margin versus recurring cloud data, voice, anything like that. None of that was broken up. So I couldn't actually do like a cross cross-valuation in there as well to say, well, hang on, based off these revenue categories and application of formulas to each of those categories, here's what the value would be as well. And that's generally how I'd value you, I value business multiple ways, actually, about four different ways, and then bring them together into a single valuation. But I couldn't do that in this instance, and it's been it's been actually quite a few years since I I've had that type of issue. And I know partly I've been on stage for the last three or four years talking about you if if your PL fits on one page, there's not enough detail. Like you it doesn't have to be 20 pages, but if you if your PL fits on one page, you don't have enough detail. So and then it takes time to build it.
SPEAKER_04Hey, mine used to be six to seven. That's and then when I show people, they think that might be might be a bit too much detail, but then and then I've also got a bit of an accounting and finance background as well as a technical background. So yes. So I did have detail in what we had.
SPEAKER_02Well, I remember working with a local government, I can't remember which one it was, but we were doing helping the software vendor do a data migration from their old legacy mainframe system into their modern system. And their PL, which was not zero, it was some other legacy system, I think it had 60,000 lines because every Capital Works project and every piece of road maintenance was a separate general ledger entry. So it's literally 60,000 lines. So that was a lot of pages. And the nightmare was I remember what one of our techs was working with the software engineer saying we can't fit that into the new PL. Like we've got to we've got to figure out how to how to merge all this and that. Yep. But yeah, so there's one extreme to the other. So yeah, yeah, don't try to hide things, yeah.
SPEAKER_00Yeah, absolutely. Okay, so let's keep moving. So being a self-professed people person, I always like to talk about culture. So let's go culture versus cash. So when you are doing those appraisals, you're looking at these businesses, you're looking at the multiples, the A beta. But I wanted to talk about the people. So at what point during that process do you stop looking at the spreadsheets and actually start looking at the people and the culture within the business?
SPEAKER_03It's one of the hardest pieces, to be honest with you. It's when you're looking at doing a merge versus an acquire sell, it is a little a little different, but it's actually quite difficult. A lot of times you actually work through the numbers first and get to the point where the numbers make sense and then you transition to the people. Because if the numbers don't make sense, you're never going to get to the people component anyway. So a lot of times through due diligence and whatnot, they'll say, okay, let's complete all the financial and legal diligence first, and then we start the people piece. Because a seller isn't going to want to tell their staff they're selling, because their staff will then get fearful of, oh, what happens to our jobs, this, that, and the other. So, and they could start leaving even if the sale doesn't go through. And a lot of sales don't go through. There's plenty of times where you start negotiations and they fall over, or something happens, or it gets delayed by six, 12 months, or even two years, and it doesn't happen that often, but it does happen. But yeah, there's plenty of deals that do fall over. So a lot of times you don't, you might talk about the people, but you don't necessarily talk to the people, which is it's hard. Initially, again, as I said, you'd get through the financial and legal diligence, and then you might then start talking to senior management or key people, key engineers or whatnot. And that's often the biggest and scariest thing, and I get it, and it was, and I had to go through it for the sale is actually telling your own staff that you're actually you've made done a transaction, or even pre-transaction, as in hey, we're talking to someone about buying us. We don't yet have a contract in place. We've got an indicative offer, a non-binding indicative offer, or a letter of intent, or there's a few different pieces for the same thing that starts off with. But until you actually have that final contract signed and the money in the bank, the people can walk away and crash the deals. So there's a lot of hesitance and and trepidation about actually speaking to their team. And but at some point you have to. A lot of times it's only to the couple of key people, and there are still plenty of deals done where, again, and you've you've spoken maybe to the leadership team, and that's it. The idea is again, if you can visit the office, if you can visit under under other pretenses or whatnot, it's good to you get a bit of a feel for it. But it is one of the biggest challenges. The culture, the culture component is the biggest piece because each business has its own culture, each office. I know we had three offices in Sydney, incorrect, and each office had a slightly different culture, and they're all in the same city. And that was always that was always hard to work with. It's like you you wanted to try and make them similar, but they are different. But it's no different than once you go into state and things like that. Like you you don't mind that each state's going to have a slightly different culture as long as the core values and all that are still there and aligned, each one will have a slight variation of the culture. But when you're yeah, when you're 30 minutes away from two offices, it's like you wouldn't think there is, but that there openly is. And it's one of the hardest pieces. How do you quantify culture? How can you document culture on a piece of paper? And it's the it's you have to at some level, but it's not that oh, we have fun or we have pizza days and we play games and things like that, or they get their tickets done and things like that. It's like, how do you quantify it? And it's the hardest piece. And a lot of times you can't. It's through hours of conversation with an owner and hopefully with a key person or someone else there, you start really understanding. You just ask questions and have have a longer conversation and you pick up on pieces. But it is the biggest thing about whether something's successful or not is aligning and getting those cultures together around the successful outcome.
SPEAKER_00Yeah, absolutely. And we've been through that ourselves, yeah.
SPEAKER_02Yeah, I was just thinking one of the things I would look at was the leave balances. Like if there's people with zero leave balances or they're negative, that's a bit of a flag. And also people that have like six months of leave and never taken leave, never got long service leave, all that kind of stuff, that's a bit of a red flag too. And you're trying to dig into that. So as long as there's only a couple of people in each boat, I wouldn't be too concerned. But if half the team are not taking holidays for some reason, fear of losing their job, they're not allowed to take holidays, that that would be a red flag to me. And I was just thinking back through our journey, Jen, and we we probably got serious about I would say three mergers. And how my my methodology was to engage in joint project work with the potential partner. So we got to learn about the technical skills, we got we dealt with them as a contractor, kind of got to know the people, and at the owner's level we were having different discussions, but the teams they got to know each other because they were working together. So is is that a common thing you see in is it people are doing deals with businesses they know, or it's completely old?
SPEAKER_03Yeah, so they're doing pe both, to be honest with you. Ideally, the smaller transactions are often with people they know, and we did a bunch of those types of things. But a lot of times now the bigger ones and even smaller transactions, but the actual bigger companies know it's literally paperwork and the way you go and start the process. I want that business in that industry in that location. Possibly, or I'm just looking for extra for growth, and if if it's in any of the places we have another office, we'll look at taking it on. So I did something a bit with 360 because I was uh an evolve or HCG, an evolve facilitator of peer groups and whatnot. I actually was able to go into 360 through that process and spend time inside the business. Spend time with their leadership and their team leads and the business for a couple of months before we actually did the acquisition. So it was it was again the the seller had me involved in there. And officially my title was CEO. He was the MD, but he actually officially gave me the title of CEO in the business as such, and it was not the that wasn't what the staff saw to start with, but in in time that's what the what people saw, because it wasn't I wasn't a director or whatnot, but it I was coming in, giving advice and and understanding the and giving how to improve the business. All of that was also like ultimately just deeper due diligence, and ideally, as I openly said, we were just trying to bring the business together where we could just basically clip them together. And that was the idea of what we did. So yes, it's a rare, doesn't often happen that way. Not perfectly unique, but I think I've actually I've got a f a good unique option in that case. Because I'm an industry consultant and not just MA and helping people improve their businesses. I can actually go in under the guise of doing that. So sometimes I'll actually go in and do a bit of that diligence and go and actually interview and speak to staff on how to improve things, or go and I can go and say I'm doing an engagement to speak to the end customers of the person selling and saying, hey, I've go and look me, look me up. I I've I've done this for 30 years or whatever now, 28 years, whatever it happens to be. Like I've got some experience in doing this. So people will often talk to you because they're they don't think you're necessarily coming in from an MA. Some do, and it's like, no, I'm I'm actually here for a consulting engagement. So yes, it's uh and whatnot. So that does work.
SPEAKER_02We Yeah, like the undercover boss or the secret shopper. Yeah, try before you buy. And I always I always do that. Like I always even the clients I engage with now, I always buy something from that business just to experience. Surprising how many times the experience is not what the owner thinks it is. But I told them how to do that, and they go, Well, yeah, well, this is what actually happened. Oh, okay.
SPEAKER_04Is there a process and procedure for that that people are following?
SPEAKER_00Yeah, that people are actually following.
SPEAKER_04That's right. The old FBA in the EOS are followed by all one of the hardest things. That's right.
SPEAKER_00Okay, let's dig into what I've called or titled the post-sale truth. So, Fuzzy, you've lived through the transition from being the boss to being part of a larger machine at Oro. What's the one thing that nobody told you about life the day after the deal is signed?
SPEAKER_03I knew what was coming because of the amount of transactions we had done. I knew what was coming, and I had previous business owners and whatnot speak to new people that were acquiring and whatnot. So I knew what was coming from that perspective. But until you go through it yourself, you're there's still an element of you don't know. But I openly say, and this is part of when I'm preparing a business for sale or preparing an owner for sale, because there's a psychology component of it too, is the fact of it's exciting that they've got you've got a bunch of money in the bank account, and tomorrow you still get up and the world keeps turning and the emails keep coming in, and nothing really changes as such. The difference is though, you don't make the decisions anymore. While you don't have the pressure, the necessarily oh you're now responsible, or you're still responsible for payroll and the bank account and things like that. A lot of times you're in an earnout or you have to stay there for a period of time where you are still responsible for a lot of those things, but you don't actually have the control anymore. And that's probably the hardest point in that people as as changes start happening, staff and your old staff look to you about hang on, is this right? Are you happy with this? Are you not happy? Or they're not happy, so they want to come and and talk to you and and have a have a little whinge or have a little discussion or any of those things. And the catch is in the past, they were used to you being able to fix it. Now you can't. Now you don't have the control to fix it. The best you can just relay that up to the appropriate people, but you're not not necessarily the one to fix that anymore. So the I actually I I actually, as part of when I do a sell for someone, I actually touch base with them for multiple times after the sale. And I know through so many people that have done it, about six months later is the actual the lowest point. So I'm always talking to people and touching base with ex uh like sellers. They're still working in the business potentially. So there's very few that get to actually exit on day one or exit three months later. Some of those deals happen, but most of time you're there for one to two years after the exit. And yeah, about six-month mark is kind of almost about the lowest of the of the period. So I actually touch base on it. It's not part of my engagement. It's just more making sure that people are okay. And that's yeah, the lowest point because it's really they they really know they have no control, they have no no decision in the direction anymore, and they just people bring them problems that they can't do anything about. So that's kind of the lowest point. So I'd say that's probably your the biggest truth there. And again, I openly talk about that on stage and and talk people through that. I ask people to start building or having a purpose or having a hobby while they're trying to clean up the business before sale, and they're like, oh yeah, but that's I don't have time for that. I want to I want to focus on just getting everything right for the business. It's like I get that, and I'm helping I'm helping you do that. But I also know, and I've be I've walked that path, and I've had plenty of other people walk that path, that you need to have something else to put again. It's what's your next symphony, what's your purpose, or what's what's there other than that business. Because for a lot of people, they've spent more time in that business than with their family. Family, it's like another child or their first child, all of those things. And it's yeah, it's it's no longer their baby. They don't have control of it anymore. And it could be renamed, it could be, it could be disappeared, it could be whatever. So, yes, it is it can be rough, and you've got to have a good network of people to talk to about it post-sale.
SPEAKER_02We definitely went through a lot of those emotions.
SPEAKER_00We we had a conversation with somebody who wanted to sell his business to us, and basically sort of it stalled when he came back and said so he wanted a 12-month earnout, but he wanted everything to stay the same in his business during that time, including he had control, but he wanted the money on day one and then retained control for the 12 months. So I think we politely declined that offer. And he was one who referred to us as you people, which was one of the nicer things he said when we came back with a bit sort of assessment of what his business was worth, which was I think about 10% of what he wanted, because it was just an absolute basket case. But yeah, it was interesting that he thought that that would be an appropriate deal that he retained control during that that 12 months.
SPEAKER_03It's an interest in negotiation problem because people want that control, especially if there's an earnout, but there's a the the new owner wants to be able to start making changes, but you've got to make sure those changes are not necessarily impacting to an earnout. Well, it's it's a it's a fine line and it's an art. There's no no direct answer and there's no straight line to that. It's a it's a line with many curves and and big corners and bumps along the road, yep.
SPEAKER_00Yeah, absolutely. So let's go to our I guess our wrap-up question and a final takeaway. If someone is looking to buy or sell in the next 12 months, what are the three things? Again, I don't know why I've gone with the numbers thing, must be because you're the numbers guy. I was about to ask. Yeah, don't normally do this. It's just you're the numbers guy. You just brought that out in me. What are the three things? You can go to four if they if you feel the urge. MSP owners should do right now to improve their business and be ready for that next big move.
SPEAKER_03Yeah, so I think from a sell perspective, because buy is different. So let's answer this from the sell side. Oh, actually, no, I'll just I'll answer the buy. The buy is really quick and simple. Just make sure you have enough capacity and time in you and your leadership team. You can't go and buy another business when you're already sitting at 98 or 100% capacity at the leadership team. You need to actually make capacity in there. Again, running delegate and elevate from an EOS perspective and actually get the team to be doing more of those things and freeing up capacity. That's what you need to do on the buy side because it takes a lot of brain cycles and a lot of effort.
SPEAKER_00And I think the the accountability chart comes in there as well. This is something that I do around time management from an EOS client perspective is look at it and you know, if you're visionary ahead of sales, you're on the sales team, and each of those is a full-time job, you're actually at 300%.
SPEAKER_03Yeah, that's right. And then add an MA in there for another couple hundred percent. That's right. You you have a problem. So the sales side is probably where the the biggest benefit, biggest piece and the biggest answer to this. And it's, I don't know how many I'm gonna come up with, but it's definitely gonna be more than three. But it's the big pieces are get your financials right and make sure that they're broken out and there's enough detail in there. You have to go back a little bit. Sometimes, if you're gonna sell in two years' time, then you probably don't necessarily need to go back and break it all out, but you need to have the detail moving forward. If you are selling in six months' time, then no, you probably need at least one to two years of detail. So you're either going to go and break that out and make that happen, or you need to delay your exit if you want the best out of it. Make sure your clients are on up-to-date agreements and they have all the right assignment rights, innovation rights, etc., all of those types of pieces. That's important. Understanding, again, your big one is how much you're taking out of the business and what those normalizations look like. And the other one, which we haven't spoken about here as yet, would be have great documentation, is document the process and procedures that the business uses, the the way you go about things, because that actually it's easy to say you do something, but it's a lot harder. And and you'll get tested on it through the diligence process is actually how do you go and do it? Show us how that actually gets done. And if you've got a process that you can follow, bring up on the screen and say, here, here's 17 versions and it's been versioned and whatnot, it's like we we went through diligence with KPMG, and on the finance side, it's like, oh, how do you do this? How do you do that? And we just literally just share the screen and went straight into our confluence. And it's like, okay, tell us which bits you want. Okay, that one, here's the written procedure, here's how it looks in MIB. And they were like, ah, okay. So these calls, which would normally be three-hour calls, were offered getting completed in less than an hour because we actually, oh, can you send us a copy of that? Yeah, no problems. Export PDF send, done. It's like they we actually had the written process and procedure that we were running the business that made all of those things really simple and really easy.
SPEAKER_00And there's some good AI tools. We were we were playing around with one yesterday. Yeah, that makes it pretty damn easy.
SPEAKER_03Yes. But that's just that's the documentation slide, but it's then actually following it. Yeah.
SPEAKER_02You got the evidence that you're following it, yeah. Correct. That's right. And the good thing about that is even if you're not selling, you should do that as good practice, best practice anyway. That's right.
SPEAKER_03And probably the last one, if I if I throw a bonus one after the event is don't be the bottleneck. Most business owners are are the bottleneck in their business because they've not empowered their their leadership team or their team to actually make decisions. And that's probably the best thing you can do, is and where you should be spending your time regardless, is enabling and developing those those people around you and under you to to make informed decisions so it doesn't all have to come to you. I've said for many, many years, small business defies gravity, shit rolls uphill. And the idea is you should actually try and prevent that by again people being able to make decisions around you.
SPEAKER_00I think that's going to be the title of this episode.
SPEAKER_02Shit rolls uphill.
SPEAKER_00And it's interesting. I wonder how many people go through this process, and it's a bit like selling your house, and you know, you get it painted and you fix up all the things and you, you know, get rid of that pile of rubbish out the back that's been driving you crazy for four years. And then you look at it and go, Do I keep it? I want to keep it now. So you go through and, you know, even like for us, we implemented EOS when before the merger with Milan Industries, we got them to do the same. And then you sort of sit back and go, why why am I selling? You know, it's it's actually running without.
SPEAKER_04Some of the reasons are the bits you don't like it, it now actually works. Yeah, and that's it.
SPEAKER_00Nick and I went to Europe for five weeks. Geographically, I'm a little challenged because we had a conference, what's Canales in Hong Kong, and I said to Nick, we're halfway to Europe. Although, you know, thereabouts. So we left the first week in December and came back in January. And you know, previously we'd been, you know, we could get away for a week, but it was pretty traumatic for everybody involved. We went away for five weeks and came back, and everybody kind of looked up and went, Oh, you're back. Good ho, how was your trip? Good, and just back to work. And part of us was like, Woohoo, they didn't miss us, and the other half was like, Oh shit, they don't need us anymore.
SPEAKER_02And that's when you start going looking for a merger to do or or an acquisition because you got the capacity. Yeah, exactly.
SPEAKER_00A board visionary.
SPEAKER_02Awesome.
SPEAKER_00That's right. Dangerous. Absolutely. Okay, so we are at time. Lots more we could talk about, but I will call it for now. Buzzy, thank you so much for your time. Really appreciate you giving us your time today.
SPEAKER_02No, thank you for having me. Yeah, thanks, mate. It was good catching up, and I think we're gonna be catching up in Sydney at a conference on June the third.
SPEAKER_00Okay. We'll see you there.
SPEAKER_04Okay.
SPEAKER_00Cool. Thanks again to Ryan, and as always, thanks to Nick. If this conversation hit home for you or got you thinking, head to mspmastery.blog and keep the conversation going. You'll find all our episodes there and more wisdom from the peers and partners who are shaping the future of our industry. And make sure you subscribe so you don't miss future episodes. We've got plenty more great guests and stories coming your way. Until next time, this is MSP Mastery.