COO Josh Kotler Offers A Firsthand Look Into Successfully Selling Your MSP

  • Company: CompassMSP
  • Founded: 2017 (Western Digitech was founded in 1994)
  • Headquartered: Jacksonville, FL
  • Geographic Market: New York and the tri-state region
  • Top Growth Indicator: Acquisitions and organic growth
  • YoY % Of Growth: Approximately 60%
  • CEO & Founder: A group of investors

Josh Kotler is the former owner of Western Digitech, which was founded by John Davis. Kotler joined Davis in 1998, and Western Digitech acquired by CompassMSP in December 2019. Kotler now serves as COO of CompassMSP.

What Are The Top Three Metrics You Use To Measure Your Business And Why?

  • All-in-Seat Price: This is our primary source of revenue, and understanding this metric shows us what we are offering our clients. If we can get between our projected high-end of the scale, then I know we’re on the fairway.
  • Average MMR or Deal Size: We want to sell our products to the right-sized clients. It’s hard to sell high profitability and management to a firm that has fewer than 20 users.
  • Reactive Hours Per End Point Per User Per Month (REM):
    This metric tells us whether our proactive teams are being effective. If that number is driven down, then we aren’t doing something right.

Each metric is valuable on its own, but when we contextualize them together, we find greater value. From a customer acquisition standpoint, month over month revenue (MMR) and all-in-seat price provides us with the best snapshot of the high-value service we can offer. That’s how we ensure we have a very low client churn. The REM metric ties in because without the right pricing and offers, you cannot be proactive. Each metric helps us determine what we can deliver.

What’s The Top Lesson You Had To Learn That Allowed You To Kick-Start Your Business Growth?

Selling your company is a good thing. That might sound flippant, but for me, selling Western Digitech to CompassMSP and joining this team has been the right move to push our momentum forward. For our clients — and for my team — this was a move that allowed us to grow in ways we couldn’t before. And, on a personal note, selling the company reduced my own risk.

What Would You Say Has Been The Single Secret To Your Success In The Past Year?

If you take care of your team, everything tends to turn out just fine. This starts in the hiring process. You need to have the right team supporting you on the front lines, and when you take care of them, give them objectives, and offer support, they will, in turn, push your MSP into greater success.

Getting acquired by another company can certainly affect this. The first thing you need to look for during an acquisition or sale is the culture and attitude of the acquiring company. It’s not always about how much you can earn on the sale or how this could position your company. You have to consider the culture within that company and how your MSP will fit into it.

Since being acquired by CompassMSP, my team and I have been very happy with the culture we have been adopted into. We all understand the mission, help each other, and support our continued growth together.

So, it’s simple: Just take care of one another.

What Was The Biggest Challenge You Had To Overcome This Past Year Related To Your Growth Or As A Result Of Growth?

I just mentioned how valuable culture is to acquisitions and merging with another company, but that can also be one of the biggest challenges in this process. Combine that with COVID-19, and it’s safe to say this hasn’t been an easy transition across the board. It’s difficult to navigate this remotely. But our goal has always been to ensure our clients don’t see that struggle, even as our integration schedule has slipped.

While it hasn’t been easy to combine cultures, time-off policies, bill formats, and other platforms, that’s a natural part of the acquisition. As long as your team is prepared to muddle through the mess, your workplaces will begin to align.

Who Would You Say Is The Most Impactful Business Leader Or Thought-Leader Whose Techniques Or Leadership Style You Try To Emulate Or Are Influenced By? Who Has Helped You On This Journey? Why?

The most influential person I’ve ever met is Gary Pica through TruMethods. I’ve been fortunate enough to work closely with Gary since 2014, and he’s since become a friend of mine. He has a unique understanding of the business and develops a framework that proves he really does care about the businesses he’s influencing. He has a great way of understanding people and moving them forward.

In addition, my peer group, TruMethods, has been the most valuable relationship I’ve had throughout this journey. Gary has been influential in my career, but TruMethods has served as my own personal board of directors. They help me build the best-in-class MSP. I owe them a debt of gratitude, and some of my greatest friendships in this business have come from this group.

I would encourage other MSP leaders to find a peer group of their own. If you want to do something special in this field and in your business, you need to find a peer group. These groups allow you to benchmark yourself against other companies while offering that noncompetitive collaboration that helps you understand the landscape of your business and beyond.

What Book Would You Recommend That Other MSPs Trying To Grow Their Business Should Read?

It’s not much of a page-turner, but I believe “The Intelligent Investor: The Definitive Book on Value Investing” by Benjamin Graham — a friend of Warren Buffett — is the gold standard in personal investing. Your financial house must be in order before you can comfortably make decisions about your business. You have to be in a place where the money you take out of the business at any given time isn’t costing you. Living below your means, developing a plan, and building some wealth outside of the business are valuable as you begin to take more chances.

Read that book, save some money, and protect yourself from the tyranny of now.

In Closing, Are There Any Words Of Wisdom That You Would Give To Other MSPs Looking To Grow Or Build A Successful Exit For Their Business?

As you think about an exit, continue to run your business as if you’re not going to exit. If you focus on the exit options, it will ruin you and what you choose to execute.

Then, get your financials in order, chart your accounts, and consider offloading your heavy financial lifting to a CPA. This way, you’ll be in a better position for a larger MSP. You should also consider removing your unnecessary expenses, like team members who don’t pull their weight or expenses that are negatively impacting every dollar you bring in.

Finally, go through the selling process with a buyer at least once before committing to the sale. You need to get a feel for the environment of a sale and the process before deciding on what you want.

I’d be remiss if I didn’t shamelessly plug CompassMSP for acquisitions. We are very inquisitive about doing anywhere from 3–4 acquisitions in the next year or in the next few years. We’d love to talk if you’re interested.