MSPX: Simplifying M&A for MSPs (EP 868)

Hello friends, welcome to a special episode of the IT Business Podcast. This is the beginning of our 2025 Pitch It series that we are doing in coordination with ConnectWise and IT Nation. I've already had my video with Sean Lardo describing the Pitch It competition for this year. 

It is going to be exciting. And our goal here is to interview all of the contestants and give you a little deeper perspective on who they are and what they're trying to do to solve the biggest issue in our industry. So starting us off is going to be MSPX and Matt Yesbeck is who will be answering the question. 

He is a veteran in our channel with over 25 years and it has been in the managed service provider space folks. So it's not like he's coming in fresh off the farm or anything like that. He is the founder of YesTech IT Services and co-founder of MSPX. 

So let's get to it and say hello to Matt. Matt, welcome to the show. Hello, hello everybody. 

Thank you Marvin for having me on the show. I appreciate it. Very excited to be the first one on the platform here to talk about my company.

All right. And let me go ahead and get this super hard question out of the way. What is it like to not only work with but co-found a company with your son? Yeah, you know, we have a really good father-son relationship. 

He's just a really sharp young man and it's an honor and a privilege to be able to do that with really my only son. I mean, I have two children. He's the first, my son, and then we have our daughter two and a half years after him. 

So for someone who didn't have a large family to be able to go into business with your son is certainly a privilege. Okay. Now I've not interviewed you on the show before with your YesTech IT business. 

So did he work with you there? Yeah. So really the way all this came about was that we were both in corporate America. I was working in an enterprise level MSP and he was working for a local MSP.

And that's when the whole genesis for MSPX came about. And so that actually started before YesTech. So it kind of preceded our own MSP by about six months. 

And then we decided to go into business together and open up our own local MSP. So yeah, so we actually do own YesTech, our local MSP and MSPX, which hopes to be a flourishing marketplace for the MSP industry. All right. 

Any tips you want to give others out there for working with family directly in a business? Yeah. Well, you know, I mean, obviously you've got to live with them, right? So there needs to be some grace. There's obviously going to be some more intense discussions, we'll say, because you are family. 

And so you don't necessarily have that wall that you might have from someone who isn't. But at the end of the day, again, I mean, they're your family. So it's nice to know that you've got that forgiveness at the end of the day and hopefully just a little added compassion for the fact that you're related, right? Yeah. 

Yeah. Yeah. I get that. 

Work with the wife. So I understand. All right. 

Let's get into the crux of why we're here. So MSPX, as I understand it, acts as a marketplace where MSPs can list and purchase service contracts. That's right.

Is it really that simple? It absolutely can be. You know, the whole idea behind MSPX came about just again, my son in fresh out of college, off of a full ride basketball scholarship was looking around to say, OK, how do I want to leverage my business degree? And he, to my surprise, wanted to go into my line of work. So but long story short, within about four years, he had been promoted to MSP director from his own, the MSP that had hired him right out of college.

And one of his first tasks was to identify, look at their portfolio and identify contracts that were just low fit and maybe not going in the same direction that their own business was. And so the genesis of it really was is so he identifies those contracts. He goes to the Internet to surely there's got to be a platform where something like this exists so that you can monetize those contracts in a structured way and then get those clients transition to another vetted MSP safely. 

Right. So you're not fearing any bad word of mouth or the customer feeling left out in the cold. But I mean, we were a dozen pages deep into a Google search and couldn't find a unified platform for doing this. 

So, you know, we thought, why isn't there a place for being able to trade MSP contracts? And that's really the aha moment that we had. We said, well, you know, one doesn't exist. Let's build it. 

And so really, that's how MSPX was born. OK, so normally I'm asking, you know, vendors, what is the solution that or what is the problem that you're trying to solve? And to me, there's I understand why you're doing it. But I also am asking the question because most MSPs don't want to refer business to other clients.

They just want to either say yes or no and then leave the customer to go find that other provider themselves. So was this really a problem that we were looking to solve? Yeah, I mean, I feel again, I mean, in the scenario of the small MSP example I gave you, you just think about any MSP that's been in business for three, four or five years. You know, we all know that when we start our business and we know this firsthand because our MSP is just now a year old this month, you know, you have your ideals. 

We don't want any customers less than, you know, 10 seats or 15 seats, whatever that may be. But especially in the beginning, I mean, you're definitely willing to take on a three or five or seven seat contract because, hey, it's money and it pays the bills. Right. 

And you're not necessarily vertically focused. Maybe that comes later down the road with a little more structure and organization. You decide maybe your business; your customers start to pile up in one vertical and then you really start to focus on that. 

So you get four or five years down the road and you've got these smaller customers that are still kind of coming along for the ride and maybe they're in verticals that you no longer want. So MSPX, again, it just gives you a way to be able to divest those contracts on a marketplace that has a worldwide audience. And in an era where we are living in a distributed workforce, your client doesn't need to be in your backyard.

They can be. And of course, depending on the terms of the MSA, they may have to be. But that's not always the case. 

So this is just allowing you to use these commitments, we call contracts and turn them into currency on the marketplace so that you'll have the ability to divest those customers for liquidity, to reinvest. If you want to try to get into another geographic location, you can kind of move into that area through strategic contract purchases. You can use it for just simply realigning, getting rid of the customers that aren't in the verticals you want to focus on, or simply just to retire. 

If you're in a small MSP and you're ready to leave, but you're not really attractive enough to go through an M&A process and get bought up by a larger MSP, there's a three to one ratio of MSPs that just end up shutting their doors because they just can't find any interest. Well, MSPX gives you the ability to divest your entire book of business on the marketplace and actually walk away with some money. And to say all that, too, I mean, I've talked to many M&A brokers that come into situations where they're representing a seller and they find a buyer and the buyer loves the portfolio of the seller, except they don't want those 15 VOIP contracts because that's just not the business that they're in. 

And so that presents a problem, certainly for the broker, to go back to the seller and say, I've got a buyer for you, but you're going to lose out on this segment of your revenue, or we can just hold up the deal and we'll just keep searching and try to find you another buyer. And this way that the M&A broker has a way to bundle those contracts and sell them on the marketplace to an MSP that may only do VOIP or may focus heavily on VOIP. So it really is, it's unifying a very fractured process. 

This exists. We've watched MSP, well, we've talked to a few MSPs that have actually made some local relationships with other MSPs in their community to be able to say, hey, we're getting ready to let go of this customer and we're going to refer them to you. If they decide to use you, then you'll give us a kickback every month for a year, whatever that case may be. 

And then we've seen M&A brokers that will actually try to go divest contracts on the seller or buyer's behalf on their own. So we know that there's a need here and just by the demand that we see on our signup sheet off our landing page on a weekly basis, that continues to reinforce the fact that there is certainly a demand. Right. 

So you've mentioned the people coming to the website, clicking on the page there, but what is the actual feedback that you've received from MSPs that you've talked to? Yeah. So, I mean, at this point, we're not live yet with the new revamped website. So our MVP that had been out for about a year, of course, the feedback was, this is going to be a game changer for us. 

It'll allow us to grow in a certain way. It allows us to have more flexibility within our business. And MSPX isn't designed to replace a well-oiled and functioning sales engine. 

It is designed as a second avenue for revenue. But what it does is it really collapses that sales cycle from, you know, six, 12 months down into days and weeks instead of the much longer period. So it really can be looked at as a very effective growth engine. 

Right. And so those are the feedback that we're getting. But again, version 2.0, that's going to be going live at the end of August, early September, that really is going to be the full vision of what we had for the marketplace when we put out the MVP to try to really more of a proof of concept. 

So it was a very bare bones thing offering. And what's coming out here in the next eight weeks is really going to be the full embodiment of the best of the best. And so with that and hopefully certainly post revenue, there'll be a lot of feedback, a lot of feedback, a lot of stories and things that we can use to continue to refine and tweak the marketplace. 

All right. So I probably should ask one question about the portal itself in terms of, you know, how can an MSP that wants to put, you know, some contracts up there, you know, where does trust and security come in that somebody's not going to come in and sabotage a contract or something like that? Yeah. So given that, a lot of thought ourselves in terms of when you hit the landing page and you decide you want to subscribe, there's two tiers there. 

You have your general access tier and your first look tier. And really the first look tier is going to give the subscribers in that category a 36 hour first look. So any contracts that are listed or ingested into the marketplace, they will get an email with a buy now link, essentially, that will give them a 36 hour period to look at that contract or bundled of contract bundled contracts before it gets released to the general marketplace. 

So you pick one of your two subscriptions. Now you're into the marketplace and you're browsing. You decide as a seller; you want to list a contract. 

We have an extensive intake form that we use very targeted questions to help us generate a valuation for that contract, as well as a risk score for that contract. And let me back up actually prior to that. So you choose your subscription. 

There is a comprehensive, I would say, onboarding and vetting process for the MSP that is signing up. So we're asking for things like Google Business. We're asking for EIN. 

We're asking for Dun & Bradstreet if you have it. So as well as obviously making sure that your email and your domain and all that match up. So we want to use as many free vetting capabilities as we can right now to make sure that only actual legitimate MSPs are getting into the marketplace. 

And once you have created that profile, the questions that you answered will determine what your initial reputation score is. So if you gave us an EIN, a Google Business page and a Dun & Bradstreet, it's going to start you off at a higher reputation score than if you didn't give us any of that. And now there will be requirements. 

EIN, especially for the U.S., is going to be required. But if you're forthcoming with all of the other optional data, that's going to help influence your reputation score. And then as you start to conduct business and surveys go out after the sale and the transition of the client, that will start to help to build that reputation and confidence score as well. 

So we're going to have good vetting coming in. We're going to have reputation scores that are pretty much compiled amongst the peers in the marketplace by their interactions and their impressions with each other. And then, of course, when a contract transaction is initiated, then the funds from the buyer go into escrow and funds are held in escrow until the transition period is over.

And so when that happens, at the point of a contract being bought, a transition kit will go out to both the buyer and the seller. And then they will have a dashboard within the marketplace that will have milestones and checkpoints to help guide through the process of transition. What we're trying to do here is minimize attrition, right? Because we know at the end of the day, these contracts lead back to a customer and that customer has an opinion. 

We found largely that customers where IT isn't their business, right? Most of the SMBs that we all have as customers, they do other things and they focus on their bottom line. They just want to know if their IT is taken care of. So from what we see, there's not a large pushback to want to take a heavy-handed role in determining their next MSP. 

They do want to know that they're taken care of and that they've been handed off to a vetted counterpart, right? And so messaging makes all the difference and the timing of the transition. And that's really what we're trying to dial in just through reaching out to other partners, talking to others in the industry to see how can we really tighten this up to ensure that this transition process can be as smooth as possible. And at the same time, instilling confidence and trust in both the buyer and the seller, because at the end of the day, I think that's why a platform like this hasn't existed. 

And so we need to take all of the hesitancies and build them out of the marketplace. And again, we're eating our own cooking. I mean, we're speaking from being an MSP ourselves and truly understanding the challenge of growing, the challenge of pruning, and the challenge of trust within an industry. 

And so that's what we're hoping to do as we develop and continue to move forward with the launch of version 2.0. All right. Let me ask one question, and then I'll need to get you to do a quick wrap-up here. When a company wants to put a listing up, how much information are we putting up there in terms of contract? Are we putting up number of endpoints? Are we actually putting up what we are currently charging? How much that contract is worth? What details go into that? Yeah. 

So it is a lengthy intake form. And again, because there's algorithms behind those, the answers to those questions that help to drive what that valuation and risk score is going to be. And yes, I mean, you're not divulging, obviously, client information. 

But what you are doing is you're giving us enough information to make an educated valuation. So yes. I mean, what is the term? What's the contract length? What's the MRR? What's the vertical? What's the tech stack currently? All the things that a buying MSP would be interested in. 

Because I know that if I'm looking for a contract, hey, if the customer already has my RMM or EDR solution, then that may be an easier transition because they're already familiar with it, right? I mean, so there are things like that that will go into accounts, again, region. And all of these things will become filters that a buyer can choose to filter by when they're searching for contracts on the marketplace as well. So I do have an entire document that lists out about, well, it doesn't list out every single question, but that would be too lengthy for the purpose of this podcast. 

But yeah, just rest assured that there are many, many pointed questions that really help to give us and drive an accurate valuation and churn risk score. All right, Matt, you've got a product that's going to be hard to encapsulate into a short little pitch it thing. And I know that they've give you limited time when you do your stuff here. 

So I'm going to have us close out here with a minute or two. What would be that real high level, high impact pitch that you want people to have on the way out of this show here? Yeah, I would just say that the boldest promise that MSPX makes is simple. We've created the first marketplace where MSPs can buy, sell, and value managed services contracts, like financial assets. 

And whether you're looking to buy for growth, sell for liquidity, or exit entirely, MSPX makes that possible in a marketplace that provides efficiency, transparency, and security. So I would just say that MSPX gives MSPs two huge levers to pull for revenue, and that would be to monetize low-fit contracts for liquidity without having to fire them entirely, or to acquire warm reoccurring revenue at a fraction of traditional M&A complexity. And so really, at the end of the day, one of our clever little taglines is contracts aren't just commitments, they're currency, and MSPX is the platform where that currency finally moves.

All right, Matt, thank you very much. I wish you the best of luck in PitchIT, and we'll be chatting again soon, I hope. And ladies and gentlemen, there is your first IT Nation PitchIT vendor profile, Matt Yesbeck and MSPX.

That'll do it for this one. We'll be back with more, and until then, holla.