Small Business Defies Gravity: The M&A Truths MSP Owners Need to Hear
After 30 years building and scaling MSPs across Australia, Nick and I have seen every flavour of merger and acquisition deal imaginable. We've lived through the wins, the losses, and the messy middle ground where most MSP owners find themselves when they first consider buying or selling a business. What we've learned is this: the numbers matter, but they're only half the story. The other half is written in culture, capacity, and the brutal honesty required to admit when your baby might not be as beautiful as you think. In this episode of MSP Mastery: Ctrl Alt Deliver, we sat down with Ryan Fuzzy Spillane, a longtime MSP operator turned trusted advisor who spent more than 25 years running Correct Solutions before exiting into the Oro rollup. Fuzzy completed 10 acquisitions during his tenure and helped 31 other companies navigate their own M&A journeys. His experience validates what we've been teaching MSP owners for years: preparation, not optimism, determines your exit value.
MSP Mastery
5/19/20268 min read
Small Business Defies Gravity: The M&A Truths MSP Owners Need to Hear
After 30 years building and scaling MSPs across Australia, Nick and I have seen every flavour of merger and acquisition deal imaginable. We've lived through the wins, the losses, and the messy middle ground where most MSP owners find themselves when they first consider buying or selling a business. What we've learned is this: the numbers matter, but they're only half the story. The other half is written in culture, capacity, and the brutal honesty required to admit when your baby might not be as beautiful as you think.
In this episode of MSP Mastery: Ctrl Alt Deliver, we sat down with Ryan Fuzzy Spillane, a longtime MSP operator turned trusted advisor who spent more than 25 years running Correct Solutions before exiting into the Oro rollup. Fuzzy completed 10 acquisitions during his tenure and helped 31 other companies navigate their own M&A journeys. His experience validates what we've been teaching MSP owners for years: preparation, not optimism, determines your exit value.
The Ugly Truth About Your First Two Acquisitions
We've always told MSP owners that their first acquisition is a learning experience. You're going to make mistakes. You're going to overpay or underestimate integration challenges. That's expected. But it's the second acquisition that will test whether you've actually learned anything.
Fuzzy reinforced this principle beautifully when he shared his own journey. After completing his first acquisition, he felt confident. He understood the process. He knew what to look for. And that confidence nearly became his downfall. As he put it, your second acquisition is your most dangerous because you think you know what you're doing. You've ticked the boxes once, so surely you can do it again. But every business is different. Every culture clash is unique. And overconfidence blinds you to the variables you didn't encounter the first time around.
This is why we emphasise building systems and frameworks before you scale through acquisition. If you don't have a repeatable process for onboarding clients, managing service delivery, and integrating new teams, your second acquisition will expose every gap in your operational maturity. Fuzzy's story proves that even experienced operators can stumble when they assume past success guarantees future results.
The Financial Metrics That Actually Determine Your Exit Value
Nick learned this lesson the hard way. For years, he ran our business based on a profit and loss statement and a bank balance. We thought we were doing well because the P&L showed profit every month. But when we started preparing for a potential exit, Fuzzy and others like him made it clear: we didn't understand our true value. We didn't grasp balance sheets, forward contract values, or the difference between revenue types. It was a wake up call.
Fuzzy's approach to valuation is methodical and unforgiving. He doesn't just look at top line revenue. He dissects it. Product sales and procurement revenue are worth roughly 10 cents on the dollar. They generate cash flow, but they don't create enterprise value. Recurring revenue, on the other hand, especially non labour intensive agreements like voice, data, and cloud services, can be worth 15 to 16 times more per dollar than product sales.
This is the reality check every MSP owner needs. If you're generating $2 million in product revenue annually, a buyer might value that at $200,000. But if you're generating $2 million in recurring managed services revenue, that same revenue stream could be valued at $2 to $3 million or more, depending on your EBITDA and growth trajectory. The lesson is simple: every dollar of product you sell adds almost nothing to your business value. Every dollar of recurring revenue you sell adds exponential value.
We took this lesson to heart and shifted our focus aggressively toward recurring revenue models. It wasn't easy. It required rethinking our service offerings, our pricing structures, and our sales approach. But it fundamentally changed the trajectory of our business and positioned us for a far stronger exit than we would have achieved otherwise.
Normalised EBITDA: The Number That Defines Your Worth
One of the most misunderstood aspects of business valuation is normalised EBITDA. Fuzzy explained this concept with clarity that every MSP owner should internalise. Two businesses can have identical revenue and identical bottom line profit, but vastly different valuations. The difference comes down to owner salary and benefits.
If one owner is taking $100,000 in salary and another is taking $250,000, the second business is actually more efficient and more profitable, even if the net profit appears the same on paper. When you remove the owner and replace them with a professional manager at market rate, the second business has $150,000 more in true profitability. That difference translates directly into a higher valuation multiple.
This is why Fuzzy insists on understanding what owners are running through their businesses. It's not about tax avoidance. It's about understanding the true operational efficiency of the company. Buyers will normalise your EBITDA during due diligence. If you haven't done it yourself, you're walking into negotiations blind.
We've seen this play out repeatedly with MSP owners who think their business is worth more than it is because they're conflating personal expenses with business profitability. The market doesn't care about your lifestyle. It cares about sustainable, transferable profit.
Culture Is the Hardest Variable to Quantify
Nick and I have always believed that culture eats strategy for breakfast. But when it comes to M&A, culture is also the hardest variable to quantify on a spreadsheet. Fuzzy's experience mirrors our own. He ran three offices in Sydney, all part of the same company, and each had a slightly different culture. That's the reality of scaling. You can align on core values, but you can't force identical cultures across locations or teams.
The challenge in M&A is that you often can't assess culture until late in the process. Sellers don't want to tell their staff they're selling because it creates fear and uncertainty. Staff might leave, even if the deal falls through. So buyers are forced to make decisions based on financial and legal due diligence first, and only later do they get to meet the people who actually deliver the service.
Fuzzy shared a strategy we've used ourselves: joint project work. Before committing to a merger or acquisition, we would engage the target company as a contractor on a joint project. This gave our teams a chance to work together, assess technical skills, and get a feel for cultural fit without the pressure of a formal transaction. It's not always possible, but when it is, it's invaluable.
We also learned to look at indirect cultural indicators during due diligence. Leave balances, for example, can tell you a lot. If half the team has zero leave or negative balances, that's a red flag. If people are hoarding six months of leave and never taking time off, that's also a red flag. Healthy businesses have healthy leave patterns. It's a small detail, but it reveals a lot about how people feel about their work environment.
The Post Sale Reality Nobody Talks About
One of the most valuable insights Fuzzy shared was about life after the sale. He's lived it. He's also counselled dozens of other MSP owners through it. And the truth is, the day after the deal closes, the world keeps turning. The emails keep coming. The problems keep arriving. But you no longer have control.
This is the psychological shift that catches most sellers off guard. You're still responsible for outcomes, especially if you're in an earnout period. But you can't make the decisions anymore. Your team still looks to you for answers, but you can't fix their problems the way you used to. Fuzzy described the six month mark as the lowest point for most sellers. That's when the reality fully sets in. You've lost control, but you're still accountable.
We experienced this ourselves during our transition. It's disorienting. It's frustrating. And if you haven't prepared for it mentally, it can be devastating. This is why Fuzzy now insists that sellers start building their next purpose before they exit. You need something else to focus on. You need a reason to get up in the morning that isn't tied to the business you just sold.
For us, that next chapter has been consulting, podcasting, and building new ventures in Indonesia. For others, it might be board work, advisory roles, or completely unrelated passions. The point is, you can't wait until after the sale to figure it out. By then, it's too late.
The Three Things Every Seller Must Do Right Now
If you're planning to sell in the next 12 to 18 months, Fuzzy's advice is clear and actionable. First, get your financials in order. If your P&L fits on one page, you don't have enough detail. Break out your revenue by type. Show recurring versus non recurring. Show labour versus non labour. Show product versus services. Buyers will demand this level of detail during due diligence. If you don't have it, you'll either delay your exit or leave money on the table.
Second, make sure your client agreements are up to date and include the right assignment and innovation clauses. Buyers need to know they can transfer those agreements without renegotiating every contract. If your clients are on outdated agreements or handshake deals, you've got work to do.
Third, document your processes and procedures. Fuzzy's team at Correct Solutions used Confluence to document everything. When KPMG came in for due diligence, they could pull up any process on demand. Calls that should have taken three hours were done in under an hour because the documentation was that good. This isn't just about selling. It's about running a mature, scalable business. But when it comes time to sell, it's the difference between a smooth transaction and a painful one.
And here's the bonus fourth item: stop being the bottleneck. If every decision has to go through you, your business isn't sellable. Empower your leadership team. Delegate and elevate. Build capacity in your organisation so that it can run without you. Because if it can't, no buyer will pay top dollar for it.
Small Business Defies Gravity
Fuzzy has a saying that perfectly captures the challenge of scaling an MSP: small business defies gravity. Shit rolls uphill. In most organisations, problems escalate up the chain. But in small businesses, especially MSPs, everything lands on the owner's desk. The only way to break that cycle is to build systems, empower people, and create a culture where decisions can be made at every level.
This is the work of building a better MSP, not just a bigger one. It's the work that prepares you for an exit, even if you never sell. And it's the work that separates mature, valuable businesses from lifestyle operations that will never scale.
Fuzzy's journey from MSP operator to trusted advisor validates everything we've been teaching for 30 years. The numbers matter. The culture matters. The preparation matters. And the brutal honesty required to admit when your business isn't as ready as you think it is, that matters most of all.
If you're thinking about buying or selling, don't go it alone. Get advice. Build capacity. Know your numbers. And remember, the best time to prepare for an exit is years before you plan to do it.
Let's Keep the Conversation Going
If this episode resonated with you, or if you're facing your own M&A journey and need a sounding board, reach out. Nick and I have been where you are. We've made the mistakes, learned the lessons, and built the frameworks that work. And we're here to help you build a better MSP, one that works for you, not the other way around.
