Scaling Your Business for Growth & Exit
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Let’s talk scaling and exits (use this link or click the image below)!:
I don’t think it’s any secret that many startups in the IT channel space begin with the goal of some kind of exit in mind—whether that means selling their startup to another company as part of a roll-up, recapping or selling to private equity, or taking it public.
This, of course, isn’t to say that planning for an exit becomes your only focus as a business owner.
You still care about providing a great product, providing the best channel enablement possible to support your channel, creating a great place to work for your employees, etc.
It simply means that you also need to be thinking about how you structure and scale your business to meet that desired outcome.
And you’re in luck because Jamie, Marc, and Jim all have great experience growing and successfully funding and/or exiting businesses in the IT channel space.
Over the last two years or so, we’ve seen more institutional investors and private equity groups show a marked interest in channel-specific investments.
Even with the backdrop of a cooling of the global economy and a rise in interest rates, this acceleration of money flowing into the industry is great news for the industry as a whole.
Marc, whose company Compliancy Group received a $75 million investment from Aldrich Capital Partners, suggested that the changing nature of vendor products and services themselves is enticing more investments to the channel.
More IT vendors today focus on SaaS models and operate on a recurring revenue basis.
This “intellectual property SaaS play,” as Marc refers to it, is a smart move for vendors and was the model used at five previous startups he worked for.
And private equity groups have been long focused on SaaS-based recurring revenue models and are now even more bullish on the growth of SaaS in the channel.
Small- to mid-sized businesses are realizing they need MSPs to help them integrate and bring all their platforms together, and that’s driving investments to IT vendors and the channel as a whole.
“I think we’re going to continue to see it no matter what happens with the market,” Marc said. “I think you’ll continue to see the money pouring in.”
In fact, the subscription model might be one of the most critical pieces of scaling both MSP and vendor businesses today.
Jamie, who is experienced in both running an MSP company and a high-velocity vendor platform, said he thinks the major thing that’s changed in the channel allowing more vendors (and MSPs) to succeed is the business model itself.
Specifically, the move to subscriptions and the SaaS model.
“That’s what’s really underpinning the whole market,” Jamie said. “That’s why private equity and VCs are getting involved because essentially it’s a very reliable annuity-stream, revenue-type business when you go to that stage.”
Likewise, Jim, whose company Blumira raised $10.3 million in funding last August, highlighted how it’s not just the best product that will be highly successful but the best product with access to the market.
Although it’s perceived as a risky move to many, Blumira grabbed its portion of the market by implementing a freemium pricing model that allowed users to try the product before they committed to subscribing.
Not only did this allow Jim’s company to land and expand in the market, but it provided the same for MSPs trialing Blumira, too.
Ultimately, many channel vendors today are in a much better position to scale and exit their companies successfully relative to even a few years ago.
The success of the channel rolls uphill in this case. As the number of businesses relying on MSPs grows, so too do the vendors that have committed to fully supporting their channel.
Bottomline from this episode: create a winning subscription-based pricing model and support the heck out of the channel partners. Their success is your success, and that’s a winning formula in the subscription business, especially if you have an exit in mind.
To listen to our full discussion and hear more about what these CEOs had to say on scaling, growth, and exits, watch the video above.
And, if you’re a channel CEO, let me know if you want to be interviewed next!
Let’s do this.
And don’t forget to check out my recent posts to add my upcoming Channel CEO livestreams to your calendar!