Multiply Your Company's Worth 8x? How Does that Sound?

**Editor’s Note: Register now for Channel Partners Evolution, Sept. 25-28, in Austin, Texas.**

What managed service provider (MSP) isn’t interested in increasing their company’s worth? The question is — do you know how to do that? What do you know about business valuation? And, what do customer-acquisition costs have to do with it?

Pax8’s Ryan Walsh

Ryan Walsh, senior vice president of partner solutions with cloud distributor Pax8, can help MSPs understand how to increase their business worth. In fact, Walsh is leading a Business Education Track session – “3 Ways to Multiply Your Company’s Worth by 8X” – at the upcoming Channel Partners Evolution, Sept. 25-28, in Austin, Texas.

We caught up with Walsh to discuss the challenge for MSPs when it comes to increasing business valuation, what to do about it, and how to lift revenue.

Channel Partners: What’s going on with MSPs today and why are they having a problem growing their businesses?

Ryan Walsh: What we’ve found in our many interactions with MSPs is that cloud concepts are poorly understood, and for MSPs, not knowing that will definitely impact their business.

So this requires some education … the benefit of that education can result in increasing the value of a MSP’s business. We’re finding that many are very interested in knowing exactly how that works.

When you couple this problem with the opportunity, then it gets really exciting. IDC predicts that public cloud spending will top $200 billion by 2020. We track this a lot – how big is it and how much is it growing – and when you look at a number like $200 billion by 2020 – a number that was estimated to be $122 billion in 2017 (that’s a 21 percent compound annual growth rate) – the point is that for MSPs and cloud service providers (CSPs), there is money to be made.

CP: What do you mean when you say, cloud concepts are poorly understood?

RW: One of the most powerful forces on the planet – I’m exaggerating a little bit but not that much – is recurring revenue, and this is something that’s associated with cloud business. It’s moving from a one-time purchase opportunity to a recurring revenue stream, and this is specifically what I’m talking about.

To understand it and understand how it works, by tapping into that understanding, you can really take advantage of it. I’ll elaborate during the presentation around the specifics of that, what does it mean, how is it calculated — and then we’ll go into more specific concepts, such as key financial performance indicators [like] customer acquisition cost.

I spend a lot of time leaning into customer-acquisition costs because this is one that’s not well understood but it’s power in terms of affecting the value of an MSP.

CP: Are there other issues that MSPs still need to grasp?

RW: Yes. We’ll be breaking down in a tangible way is understanding the nature of recurring revenue and how that affects valuation as well as the efficiency of the revenue that’s generated. And by understanding that, we will reveal …

… how efficient recurring revenue will help an MSP sell for as much as 12 times the traditional reseller and yield an [estimated] eight-times cash generated from the business.

CP: So, what can attendees of the education session you’ll be presenting at Channel Partners Evolution expect to walk away with?

RW: Attendees will walk away with tangible tips on how to raise the value of their businesses while understanding and lowering customer-acquisition costs. What goes along with those two things is truly understanding, tapping into and taking advantage of the power of recurring revenue.

CP: Even after so many years of hearing about recurring revenue, partners don’t understand it?

RW: Absolutely. We as a company live in this cloud transition so we spend a lot of time talking to partners and MSPs and where they are in that transition — and many of them dip their toe in the water, but they’re busy, they have a day job, [and] they may not have time to really focus on moving into the cloud so we talk a lot about it, and through those discussions, what’s revealed is that recurring revenue is poorly understood.