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The Financial Stability of Your MSP & How it Affects Your Construction Company

Pro Tip: Financial stability matters when handing the keys to your organization over to an MSP

Could your business keep running if your MSP suddenly went under or failed to deliver value?

You met with the owner of the MSP, who seems trustworthy, and the company website looks very professional — but did you determine their financial stability?

When bringing on an MSP as a strategic partner you are handing them the keys to your organization. The MSP becomes a dependency for your network, security, assets, and technology. The relationship and experience with your MSP impacts employee morale and productivity.  

As my grandma used to tell me, “Trust but verify.”  

Here a few scenarios to consider when financially vetting an MSP to partner with your construction company:

MSPs who offer Low-ball pricing: An MSP has a significantly lower price point than other proposals you have reviewed yet seems to be offering the same services. This could be an indicator that the MSP is financially strapped and desperate to bring in new business. This can also indicate employee retention issues resulting in outsourcing & offshoring, less expensive or sub-par talent. Unfortunately, some construction companies burned by a low-price service provider discovered quickly the MSP could not adequately execute an incident response plan after a cyber-attack or meet service level agreements. In the long run, going with the cheapest MSP may not create a secure environment conducive to growth and future opportunities.  In fact, it may increase your risks and stifle growth.  

Ask questions! Where are your offices and full-time employees located? Are eyes on glass, hands on keyboards, and data in the U.S. mainland?  Where does my onsite technician live and do they actually work for you?

Crowdfunded MSPs: It may be risky to hand the keys to your organization over to an MSP that needs to raise capital through small amounts of funds from a large group of people.  First, this may indicate the MSP is a start-up with minimal experience. Crowdfunding campaigns have a low success rate, with false positives, and often result in high pressure to deliver results. An MSP may have also attempted equity crowdfunding to remove debt.  If a start-up MSP signed you on as a new client, then lost its largest client, could it stay in business and deliver value? Did you sign up to be a case study for a crowdfunded MSP or do you just need reliable IT?

Private Equity & Acquired MSPs: Technology companies are attractive to private equity firms. They buy two MSPs, smash them together, and expect all the strengths. But there is pain through attrition and lost client relationships during acquisitions. MSPs are people companies, and it is a service industry, whereas private equity firms are focused on profits before people. It can be challenging for acquired MSPs to stay true to their core principles and service promises when they become acquired by a private equity firm with stress to deliver financial results. 

Venture Capital funded MSPs: These types of unsecured loans are provided to start-up companies and businesses that typically can’t get traditional loans. The ownership stake for the founder is reduced and the business is expected to grow rapidly. This can result in low-ball pricing and under performers can lose their business completely. To minimize risks to your construction firm, confirm the financial stability of your MSP partner and verify the ownership structure of the MSP and investors involved.

There are over 35,000 MSPs in North America and nearly 95% generate less than $1M million in revenue per year.  Why is this important to know? You strategic partnerships should be financially sound and have reserves to stay in business during a down market. A financially sound partner can whether the storms.

Financial stability matters when handing the keys to your organization over to an MSP. Do your homework. Make sure to evaluate financials as well as the type of ownership structure you are getting into business with. It is essential for your business continuity and growth.

For 17 years Straight Edge Technologyhas operated without any outside investors or debt, and has a proven record of financial stability, profitability, continued growth, and uncompromised support of our customers at the highest level. 

Coming to your inbox next week: Improving Cybersecurity Best Practices

Missed Last Week’s Blog? Dealing with Diminished Internal Productivity 

Need MSP help now? Reach out to us at (210) 904-9177 or [email protected]

At Straight Edge Technology, we offer flat-rate pricing along with personalized IT solutions tailored to your business needs. With our experienced team and comprehensive services, we’re here to support your IT infrastructure and help your business thrive. Contact us today to discuss how we can assist you with your IT needs.