If you’re running a Managed Service Provider (MSP) or cybersecurity firm, you already know the industry is moving at breakneck speed. With private equity firms circling like hawks and larger players gobbling up smaller ones, the M&A scene is hotter than ever. Whether you’re looking to cash out or merge with a bigger name, the biggest deal-breaker isn’t your tech—it’s your books.

As a CPA and Profit First Professional who’s seen deals soar and crash, I can tell you one thing: If your financials are a mess, your dream exit could turn into a nightmare. So, let’s talk about how to get your financial house in order before you even think about selling your MSP or cybersecurity business.

1. Know Your Numbers—Really Know Them

Buyers want clean financials. Period. If your revenue is unpredictable, expenses are unclear, and contracts aren’t properly accounted for, you’re in trouble. Here’s what you need to focus on:

• Recurring Revenue vs. One-Time Sales – Buyers love Monthly Recurring Revenue (MRR). If most of your business comes from project-based work, expect a valuation hit.
• EBITDA Matters More Than You Think – Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is the magic number in M&A. Run a profitability analysis and normalize expenses so your EBITDA is crystal clear.
• Deferred Revenue Accounting – Cybersecurity and MSP firms often bill in advance for services. If you’re not handling deferred revenue correctly, you could be overstating your earnings—something that can kill a deal in due diligence.

2. Clean Up Your Books Before Buyers Do

Your books should be as sharp as your security protocols. Sloppy financials scream risk, and buyers will use that to lower their offer—or walk away entirely.

• Separate Business & Personal Expenses – It sounds basic, but you’d be surprised how many owners mix personal and business transactions. Clean it up.
• Fix Your Chart of Accounts – If your financial statements look like a maze, simplify them. Create clear categories for revenue, expenses, and liabilities.
• Ensure GAAP Compliance – Generally Accepted Accounting Principles (GAAP) matter in the M&A world. If you’ve been using cash accounting, consider switching to accrual to better reflect your business’s financial health.

3. Get Your Contracts in Order

MSPs and cybersecurity firms rely on service contracts, but many sellers don’t realize how much these agreements impact valuation. Buyers want clarity and security, not surprises.

• Ensure Contracts Are Assignable – If your customer contracts don’t have an assignment clause, transferring them to a new owner could be legally complicated.
• Standardize Terms & Pricing – If you have different pricing models across clients, that’s a red flag. Buyers want predictable revenue streams, not chaos.
• Lock in Multi-Year Agreements – The longer your contracts, the better your valuation. If you’re month-to-month with most clients, start pushing for at least 12- to 24-month agreements.

4. Work with the Right M&A Team

Even the cleanest books won’t sell your business for you. You need an A-team to get the best deal.

• Hire a CPA Who Knows M&A – Not all accountants understand how to structure a business for sale. Find one who does.
• Work with an M&A Advisor – These pros help negotiate the best deal and navigate the process.
• Legal Expertise is a Must – Cybersecurity M&A deals often involve complex liability issues. A lawyer specializing in tech acquisitions can save you from hidden pitfalls.

5. Have a Post-Sale Plan

Congrats, you closed the deal! Now what? Some buyers want founders to stick around for a transition period, while others prefer a clean break.

• Earn-Outs vs. Lump Sums – Some deals include earn-outs, where you get paid based on future performance. Know the risks before agreeing.
• Non-Compete Agreements – Many buyers will want a non-compete clause. Make sure it’s fair and doesn’t box you out of your next venture.
• Tax Planning – A big payout sounds great—until the tax bill hits. Work with a CPA to minimize capital gains taxes and maximize your net earnings.

Final Thoughts

Selling your MSP or cybersecurity business is a high-stakes game, and getting your financials right is the key to a successful exit. Treat your books like you treat your clients’ networks—secure, organized, and bulletproof. With clean financials, solid contracts, and the right team by your side, you won’t just sell your business—you’ll maximize its value.

So, before you start entertaining offers, ask yourself: Are my books deal-ready? If the answer isn’t a resounding “yes,” it’s time to clean up before the buyers come knocking.