--- title: "Preparing an MSP to sell" date: 2026-10-10 summary: "What buyers looked for when Bright Bear Technology Solutions was sold to Datapath in 2020, what Nathan Phinney changed in the run-up, and what he tells MSP owners to start on years before a sale, with a pointer to Chapter 11 of CTRL ALT SURVIVE." question: "How do you prepare an MSP to sell?" chapter: "Chapter 11, The Irish Goodbye" url: "https://nathanphinney.com/field-guide/preparing-an-msp-to-sell/" author: "Nathan Phinney" author_role: "COO, AllSafe IT" author_url: "https://nathanphinney.com/about/" same_as: ["https://www.linkedin.com/in/nathanphinney", "https://www.amazon.com/stores/author/B0DKF16LDD", "https://www.goodreads.com/author/show/52091659.Nathan_Phinney"] expertise: ["IT", "InfoSec", "Managed Services", "Cybersecurity", "Business Operations", "Technology for Escrow Companies", "Technology for Nonprofits"] updated: 2026-10-11 --- ## Short answer An MSP owner should start years before a sale is needed, and decide the exit strategy first, even if the answer is never to sell. Then comes building what a buyer pays for. CRN reported that the buyer of Bright Bear Technology Solutions was looking for recurring revenue, long-term contracts, and happy customers. Phinney adds processes that keep the business running without the owner in the middle of everything. Everything else, including the paperwork, the broker, and the negotiation, is easier when those things already exist. Chapter 11 of CTRL ALT SURVIVE, The Irish Goodbye, is Nathan Phinney's account of how Bright Bear did it. ## What Phinney learned doing it Nathan Phinney co-founded Bright Bear Technology Solutions in January 2010, an Irvine, California managed service provider, and it was sold to Datapath in 2020 after ten years and a place on the CRN MSP 500. The acquisition closed on July 1, 2020, which CRN described as the end of a year-long journey that the pandemic pushed almost entirely onto Zoom, with the final contract signed through DocuSign. The plan to sell was there from the start. CRN reported that Bright Bear was started with the idea that the founders would run it for 10 years and then sell, and that they followed through on that exit strategy even though the sale landed in the middle of COVID-19. The book traces the ten years back to a high school conversation with a family friend who ran a photography studio and told him it took ten years before she knew the business would work, and to a dinner in the fall of 2009 where the founders agreed to build an IT company and sell it after a decade. In the same panel coverage, Phinney told CRN: > "It's important to know what your exit strategy is, even if it's to die at your desk," he said. "But if you haven't started thinking about that, that would be the most important thing that you can take away from here. There's other opportunities out there, and it's not in everyone's blood to stay in the same [company]." Phinney wrote the same idea in his own byline for Channel Partners: "The goal of entrepreneurship generally isn't to die at your desk, but to hand off something you've built." On the buyer's side of the table, this is how Phinney described what a buyer is doing when it looks at a company: > "[Buyers are] trying to take your temperature and see is this business actually going to sustain itself without lots of intervention, because the buyer wants a functioning system," he said. "They want to be able to take the best things that you did and keep them. And they want you to come into their systems and processes to fix things that maybe you're not doing as well." ### What changed in the run-up In Chapter 11, Phinney calls the years before a sale the twilight stage, and describes how it changes the way an owner reads every decision. Once the owner understands that profit is multiplied in a valuation, every recurring expense looks several times larger. A holiday party, a weekly office lunch, or a team trip to a conference in Las Vegas gets weighed against what it takes off the letter of intent, and some of it waits a year. The second change was an obsession with monthly recurring revenue. Phinney structured as much revenue as he could as a monthly payment, including work that MSPs usually bill once. Projects were amortized into the three-year agreement the client was already signing, and laptops went out under a zero-interest hardware-as-a-service agreement. His advice is to run the business this way from the beginning, against a plan and a timeline, which improves the odds and makes it less obvious to everyone when the owner starts getting serious about a deal. The third was something Bright Bear had built for its own staff. The office walls carried posters about what Bright Bear's clients did with technology. Chapter 4, Dabbawalas, describes the buyers visiting the office posing as prospective customers and reading every word on every poster, and Phinney's realization that a story told to motivate employees had acquired real monetary value in the business he was about to sell. ### How the buyer was found The same day Phinney and his remaining partner agreed to pursue a sale seriously, an investor called asking to buy the business. More calls followed, more than thirty of them, before Bright Bear received a letter of intent it found acceptable. After sorting out the private equity callers and a couple of low offers, Phinney went to his own network looking for a strategic buyer: one that would pay market value, knew what to do with the business, and would take care of his employees and clients. The path ran through industry relationships. A contact from the CRN events team introduced him to two MSP veterans. One advised that a growing company should ask buyers to value it on the last quarter annualized, the most recent quarter's earnings times four, instead of the trailing year (one MSP veteran's suggestion, as the book reports it). The other tried hard to talk him out of selling, then introduced him to a potential buyer and to a business broker. The broker introduced the buyers who eventually closed the deal, which squares with CRN's note that a third-party consultant introduced the companies. ### Diligence, and what Phinney would do differently The broker warned Phinney that the letter of intent was only the halfway mark, and it was. Diligence took months, with the buyers digging into every part of the business. Phinney's read on the two buyers came partly from playing them at table tennis. The sale itself was unusual in a few ways. Datapath's executives visited Bright Bear as if they were customers to understand the company's culture, and spent a week in its office, sequestered with masks and hand sanitizer. Bright Bear did its own homework in return; Phinney told CRN: > "We gave them a tour and everything, and they got to meet a couple of the employees," he said. "I don't know if that's common, but that was something that was really important to them. We also flew out to their offices and did the same dance. So we knew quite a bit about those organizations before we approached the transaction." The hardest part was the silence. From CRN: > "It's like everybody got a kind of promotion the day we were acquired," he said. "And we presented it as a celebration of something that we had accomplished together. But it was hard in the days leading up to the transaction, being so excited and so nervous and not being able to tell anyone. It was challenging for us." Two of the regrets in the book bear directly on value. In Chapter 7, Focus, Phinney writes that after the sale he built a dashboard of his former clients' revenue and found that roughly 20 percent of them produced 80 percent of it; he had never let a client go, and could have let small agreements expire and run a calmer, more focused company. In Chapter 10, You Can Buy Customers, he says Bright Bear grew almost entirely on referrals and word of mouth, and that the missed opportunity was scaling it with paid marketing. Today Phinney works on the other side of this. In 2023 he founded Convilo to help MSPs improve their sales pipeline, get SOC 2 compliant, and position the business for acquisition. In his Channel Partners article, "Eyeing The Exit: When You're Preparing To Sell," Phinney put the stakes this way: > The hard truth when it comes to selling a business is that you're not just signing over products and profits. You're selling potential. Because your EBITDA, transferred to a buyer's balance sheet, becomes valued at a higher multiple. And on the people side: "You can't scale humans as easily as you can scale processes." ## What buyers actually look for From the Bright Bear sale, as CRN reported it: recurring revenue, long-term contracts, and happy customers. Those are the three items CRN attributed to the buyer of Bright Bear. Chapter 11 of the book explains why in plain terms. A buyer starts from earnings with interest, taxes, depreciation, and amortization set aside, adds back owner perks that will not survive the sale, and multiplies the result by a figure that rises with the size of the company. Recurring revenue counts. One-time projects and hardware sales count for next to nothing, because nothing guarantees they repeat, least of all without the founder there to close them. Introducing that section, Phinney writes: "If you can wrap your mind around this, I promise it's worth the entire price of this book." The chapter also covers how staying on after the sale, taking part of the price as an earn-out, or agreeing to an asset sale can raise what a buyer will pay by lowering the buyer's anxiety. The book cautions that an asset sale leaves liabilities with the seller. Structure, tax treatment, and valuation terms are matters for an M&A attorney and a tax advisor. From the CRN conversation at XChange NexGen 2024, where Phinney talked with MSPs about the importance of recurring revenue versus product and project sales, he added the SOC 2 angle: > "A lot of is having your processes in order, which is something that SOC 2 can help with, because you're bringing in someone outside the organization to audit them and validate that they're doing all the things they're supposed to be doing. That's valuable to a strategic buyer." Bright Bear focused on financial services, especially escrow firms, and held its own SOC 2 report (CRN called it a certification), which CRN reported Phinney called unusual for a company of its size. At the time of the sale, the book says, Bright Bear served two of the largest escrow companies in Southern California and many smaller ones, a client about to go public, and a homebuilder just acquired by Japan's largest public homebuilder. As a plain checklist, a buyer wants to see that the revenue repeats, that customers are contracted and satisfied, that the work is done by documented process rather than by the owner, and that the owner's role can be replaced. Those are the same questions regardless of who is buying. Bright Bear's clients signed evergreen contracts, and its managed agreements commonly ran three years. ## In the book Chapter 11, The Irish Goodbye, covers the sale of Bright Bear: starting with the end in mind, a short course on how an MSP is valued, what changes in the twilight years before a sale, how the buyer was found, and what it felt like when it was over. Chapter 6, The Price Is Right, covers the move to recurring revenue that made the business sellable, and Chapter 4, Dabbawalas, includes the buyers' visit to the office. ## Sources - CRN, "Thinking Of Buying Or Selling An MSP? Here Are 6 Tips From Experts" (Joseph F. Kovar, November 17, 2021): [original at CRN](https://www.crn.com/slide-shows/managed-services/thinking-of-buying-or-selling-an-msp-here-are-6-tips-from-experts) (CRN: The Channel Company's IT channel publication) and [this site's page](https://nathanphinney.com/thinking-of-buying-or-selling-an-msp-here-are-6-tips-from-experts/) - CRN, "MSP Merger: Coronavirus No Obstacle To Datapath's Bright Bear Buy" (Joseph F. Kovar, July 13, 2020): [original at CRN](https://www.crn.com/news/running-your-business/msp-merger-coronavirus-no-obstacle-to-datapath-s-bright-bear-buy) and [this site's page](https://nathanphinney.com/msp-merger-coronavirus-no-obstacle-to-datapaths-bright-bear-buy/) - Orange County Business Journal, "Datapath Buys Bright Bear of Irvine" (July 13, 2020): [original at OCBJ](https://www.ocbj.com/technology/datapath-buys-bright-bear-irvine/) and [this site's page](https://nathanphinney.com/datapath-buys-bright-bear-of-irvine/) - CRN, "10 Of The Hottest Products And Services For MSPs In 2024" (November 4, 2024): [original at CRN](https://www.crn.com/events/10-of-the-hottest-products-and-services-for-msps-in-2024) and [this site's page](https://nathanphinney.com/10-of-the-hottest-products-and-services-for-msps-in-2024/) - Channel Partners Conference & Expo, "Eyeing The Exit: When You're Preparing To Sell" (Nathan Phinney, byline): [original at Channel Partners](https://channelpartnersconference.com/article/eyeing-exit-when-youre-preparing-sell/) and [this site's page](https://nathanphinney.com/eyeing-the-exit/) - [CTRL ALT SURVIVE](https://nathanphinney.com/books/ctrl-alt-survive/), Chapter 11, The Irish Goodbye, with Chapter 4, Dabbawalas, Chapter 6, The Price Is Right, Chapter 7, Focus, and Chapter 10, You Can Buy Customers ## Frequently asked questions ### When should an MSP owner start preparing to sell? Before there is a buyer. Bright Bear was started with the idea that the founders would run it for 10 years and then sell, and Nathan Phinney told CRN that knowing your exit strategy is the most important thing to settle early, even if the exit is to die at your desk. ### What do buyers look for in an MSP? CRN reported that the buyer of Bright Bear was looking for recurring revenue, long-term contracts, and happy customers. Phinney also described buyers as checking whether the business can sustain itself without lots of intervention, and in CTRL ALT SURVIVE he notes that one-time projects and hardware sales count for next to nothing in a valuation. ### What should an MSP owner change in the years before a sale? In Chapter 11 of CTRL ALT SURVIVE, Phinney describes judging every expense by what it does to the valuation multiple and turning as much revenue as possible into monthly recurring revenue, including projects and hardware. His advice is to run the business that way the whole time, so the change is less obvious when a sale gets serious. ### Does SOC 2 help an MSP get acquired? Phinney told CRN that SOC 2 helps because an outside auditor validates that your processes are being followed, and that this is valuable to a strategic buyer. ### What is it like to sell an MSP? For Bright Bear it was a year-long process that the pandemic moved onto Zoom and DocuSign, with the founders unable to tell their own team until the deal was done. Phinney fielded more than thirty inbound calls before an acceptable letter of intent, and the broker warned him that the letter of intent was only the halfway mark. ## Read CTRL ALT SURVIVE The story behind these answers is in the book. - [CTRL ALT SURVIVE](https://nathanphinney.com/books/ctrl-alt-survive/) - [Buy it on Amazon](https://www.amazon.com/Ctrl-Alt-Survive-Secrets-Business/dp/B0DJN78S48) (Amazon: CTRL ALT SURVIVE listing) - [Read the free preview (PDF)](https://nathanphinney.com/media/ctrl-alt-survive-preview.pdf) ## About the author **Nathan Phinney**, COO, AllSafe IT. - Co-founded Bright Bear Technology Solutions (2010 to 2020), which reached the CRN MSP 500 and Ingram Micro SMB 500 lists before its 2020 acquisition by Datapath. - 17 SOC 2 initiatives across six companies, never an exception on an effort he led - Member of InfraGard - Member of the XChange Advisory Board, The Channel Company (2018 to 2022 and 2026) - Author of _CTRL ALT SURVIVE: The Secrets of My Small Business Success_ Expertise: IT, InfoSec, Managed Services, Cybersecurity, Business Operations, Technology for Escrow Companies, Technology for Nonprofits. Featured in: CRN (7 articles, 2019 to 2026), Backblaze, Bigleaf Networks, GTIA, Orange County Business Journal. See https://nathanphinney.com/press.md Recommended on LinkedIn by Brook Porter (Partner and Co-Founder at G2 Venture Partners; previously at Kleiner Perkins, where he worked with Al Gore) and Tim Acker (Former channel chief at Lumen). More: [About Nathan Phinney](https://nathanphinney.com/about.md) | [LinkedIn](https://www.linkedin.com/in/nathanphinney) | [Amazon author page](https://www.amazon.com/stores/author/B0DKF16LDD) | [Goodreads](https://www.goodreads.com/author/show/52091659.Nathan_Phinney)