Shawn Walsh sold his managed service provider to private equity, and the buyer lost most of the clients within 18 months. What he now teaches owners about hiring, process, niches and the exit.
Show Notes
Shawn Walsh built his managed service provider (MSP) in the basement of his house, grew it to locations in four states with six acquisitions, and sold it to private equity. Within 18 months the buyer had lost most of the clients and almost all of the employees. His diagnosis takes one sentence: they thought they had bought a technology company, and what they had actually bought was a relationship company.
Before the MSP, Shawn ran a detective division and taught computer forensics at the New Hampshire Police Academy, until the consulting he did on his days off paid more than the day job. Now he coaches MSP owners at Encore Strategic, and this episode is his playbook: hire for character and teach the skills, follow your own process every time, know your end game before you sell, and understand why a specialist commands a far higher price than a generalist when the business goes to market.
What we cover:
- What private equity gets wrong when it buys an MSP
- The greatest lie when private equity acquires you: nothing is going to change
- Quote turnaround going from 48 hours to over three weeks after the sale
- Why the buyers who get it leave the leadership team in charge: if the recipe works, why change it?
- From head of a detective division to an MSP in the basement
- Lawyers, medical practices and banks: clients with security and compliance obligations
- Six acquisitions, four states, and an approach six years into a 10 year exit plan
- Hiring for culture fit, personality profiling and emotional intelligence
- Hungry, humble and smart, and why the technical skills can be taught
- Why skipping his own hiring process cost him every single time
- Peer groups, direct coaching and a deep dive on the finances
- The first question he asks every owner: what is the end game?
- Profit Grow Exit, his new book, and its first chapter, Begin with the End in Mind
- A little rudder far from the rocks, a lesson from the Coast Guard
- Assessing maturity as well as revenue
- The owner demoted to a lower peer group who then doubled his company and tripled his profitability
- Why specialists charge a premium and attract strategic buyers
- A $12 million nanny payroll company that financial buyers valued at 10 to 12 million and a strategic buyer bought for $55 million
- The Pumpkin Plan for Managed Service Providers, and a hedge-fund-only MSP that drew an 18X offer
- Gross profit as the first number he checks, and why 55 to 65% is the healthy range
- About half his MSPs already sell artificial intelligence (AI), and the smart ones build guard rails first
- Consolidation, $100 million MSPs, and why he thinks lifestyle MSPs will disappear
Shawn Walsh: https://www.linkedin.com/in/encorestrategic
Encore Strategic: https://encorestrategic.io
What is Play It Smart?
Play It Smart is the show where Alexej Pikovsky sits down with MSP operators and business owners and takes apart how they actually do it: winning clients, pricing, staying lean, using AI, and building toward an exit worth having. Season 2 is dedicated to MSP operators. Past guests include Rand Fishkin of Moz and SparkToro and the founders of Chili Piper, Flowchat and 3DLOOK.