Established Texas MSP, 25-Year IT Managed Services Provider

$2.4M

Revenue

$800K

SDE

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Full Editorial Writeup

This is a 25-year-old managed service provider (MSP) based in Texas delivering IT operations, cybersecurity, and infrastructure services to a loyal regional client base. The core revenue comes from monthly MSP agreements and subscription offerings spanning managed detection and response (MXDR), backup and disaster recovery (BCDR), endpoint detection (EDR), and VPN. On roughly $2.4M in revenue, the business throws off $800K in cash flow, a healthy 33 percent margin that reflects the operating leverage of a mature recurring-revenue MSP.

What stands out is durability. Client relationships average more than a decade, revenue is year-round with no seasonality, and the offering sits squarely in the essential-IT category that businesses do not cut in a downturn. The company runs out of a modest 1,700 square foot leased office at $2,500 per month, and is staffed by an experienced technical team, so the model is scalable without heavy fixed-cost drag.

The seller is retiring and explicitly willing to exit for a reasonable multiple of SDE, which signals a motivated, price-flexible transaction. For a buyer who understands MSP economics, this is a textbook boring-but-durable cash flow business with contracted recurring revenue and a clean bolt-on or platform profile in a fragmented, consolidating market.

Why we like it

Earnings quality is strong: $800K of cash flow on $2.4M revenue is a 33 percent margin, and the bulk sits in contracted monthly MSP and subscription agreements rather than project work. Recurring, contracted revenue at this margin is the exact earnings profile that survives due diligence and finances cleanly.
The moat is real customer stickiness. Client relationships averaging over a decade in an MSP context means high switching costs, deep infrastructure integration, and low churn, which is why 25-year-old MSPs command premiums over greenfield competitors. New entrants come and go, but embedded relationships are hard to dislodge.
Market tailwinds are durable and structural. Demand for managed IT, cybersecurity (MXDR, EDR, BCDR), and cloud modernization keeps expanding as small and mid-sized businesses outsource security they cannot staff internally. This is essential B2B infrastructure spend that grows through cycles rather than getting cut.
Operator advantage is clear for a strategic or first-time platform buyer. The recurring base gives you a stable floor to layer price increases, cross-sell security modules, and bolt on adjacent MSPs in the same region. A retiring seller willing to exit at a reasonable SDE multiple sets up an attractive entry basis.

How to improve it

Audit and reprice the contract base in the first 90 days. Long-tenured MSP clients are frequently under-priced relative to current security and compliance value, so a disciplined 5 to 10 percent price adjustment across the book can drop straight to cash flow with minimal churn risk.
Standardize and formalize the recurring stack. Package MXDR, BCDR, EDR, and VPN into tiered per-seat bundles so pricing is transparent, upsells are systematic, and gross margin per client is measurable rather than negotiated case by case.
Build a real cross-sell motion into the existing base. Many long-term clients likely buy only a slice of the available services, so mapping each account and pushing the full security stack raises revenue per client without acquisition cost.
De-risk the technical team before close. With only a small experienced workforce carrying deep client knowledge, put retention agreements, documentation, and cross-training in place so the value does not walk out the door alongside the retiring owner.
Add a structured lead engine. A 25-year MSP often runs on referrals alone, so a modest investment in outbound, partner referrals, and local vertical marketing in a high-growth Texas region can convert the stable base into a growth story.
Pursue regional bolt-on acquisitions. The MSP market is fragmented with many aging owner-operators, so this business can serve as a platform to acquire smaller local MSPs, migrate their clients onto your stack, and capture cost synergies.
Tighten reporting and MRR visibility. Instrument monthly recurring revenue, net revenue retention, and churn cohorts so you can prove the durability of the base and support a higher exit multiple when you eventually sell.

Diligence notes

Verify the recurring revenue mix precisely. Confirm what percentage of the $2.4M is contracted monthly MSP and subscription revenue versus one-time projects, hardware resale, or break-fix work, because the multiple you pay should track the truly recurring portion.
Pull the contracts and churn history. Review actual MSP agreement terms, lengths, auto-renewal clauses, and cancellation rights, and reconcile the claim of decade-long relationships against a real client-by-client tenure and churn analysis.
Assess client concentration. A small-office MSP can carry meaningful revenue concentration in a few anchor accounts, so identify the top 10 clients as a share of revenue and understand the risk if one or two leave post-transition.
Validate the SDE and the owner add-backs. Confirm the $800K cash flow figure, scrutinize add-backs, and quantify what it costs to replace the owner's technical and sales role given the lean team and no disclosed second-in-command.
Evaluate team dependency and vendor stack. Identify which technicians hold the key client relationships and certifications, and map the software and security vendor contracts (MXDR, EDR, BCDR providers) for cost, renewal terms, and assignability on a sale.

Source

Originally listed on BizBuySell. View original listing →