The MSP Valuation Series | Part 2: Tactical Strategies to Grow and Strengthen Your Business
Based on insights from the MSP Valuation Scorecard workshop series hosted by Kevin Clune of MSP Growth Hacks, featuring Hannah Paige, Director at Worklyn Partners and CFO at Harbor IT.
In Part 1 of our MSP Valuation Series, we broke down the key drivers that determine your MSP’s value. Understanding where you stand is the foundation. Now, in Part 2, we turn our focus to what matters most: how to grow that value through intentional action.
This article lays out practical strategies that owners can use to increase revenue, improve profitability, and strengthen the qualitative factors that influence valuation. Whether you are planning for a future exit or simply focused on building a stronger, more resilient business, these strategies are designed to drive real, measurable progress.
At Worklyn Partners, we invest exclusively in cybersecurity and IT services companies. Since our founding in 2021, we have evaluated thousands of MSPs and MSSPs and have invested in six across the United States. Our perspective is shaped by being both investors and active operators. We have seen firsthand that treating valuation as a continuous discipline, not a one-time event, leads to sharper decision-making and better outcomes over the long term.
As Hannah Paige, CFO of Harbor IT and Director at Worklyn, puts it, the key to growing valuation is setting clear, achievable targets. "When setting goals, I typically err on the side of realistic plus," Paige says. "You want it to be achievable, but you also want it to require effort."
Paige frames valuation growth through two complementary lenses. First, external strategies that deepen customer relationships and improve revenue quality. Second, internal strategies that strengthen operational efficiency and profitability. Strengthening both sides of the business not only drives stronger financial results but also creates a more resilient company that better serves its customers, empowers its team, and positions owners for success, whether that means scaling further or pursuing a future sale.
In the sections that follow, we will explore the specific levers operators can pull to build a stronger business and unlock greater long-term value.
External Strategies: Leveraging Your Customer Base
Customer Acquisition: A Tried-and-True Growth Lever
Adding new customers is the most familiar way to grow, but it is important to understand exactly how much value each new relationship actually creates. As Paige puts it, "New customers have always been the clearest path to growing your business and your valuation."
And the impact of each new customer is often more powerful than many owners realize.
Paige breaks it down by customer size. For small customers around $2,000 in monthly recurring revenue (MRR), adding one new customer per month can generate nearly $288,000 in additional annual recurring revenue. With typical MSP margins, this can contribute over $40,000 to EBITDA and increase valuation by around $250,000.
The impact scales with larger customers. Adding mid-market customers around $3,500 MRR could add over $75,000 to EBITDA and boost valuation by $450,000 or more. Enterprise customers, at $5,000+ MRR, can drive over $100,000 in EBITDA growth and increase valuation by more than $600,000.
Customer acquisition moves the needle, but as Paige emphasizes, it is just one part of a comprehensive growth strategy.
Customer Contracts: Building Predictable Revenue
Few factors impact valuation more directly than the quality of your customer contracts. According to Paige, three contract elements matter most.
First, contract length: Three-year contracts with annual price escalators are the gold standard. "As inflation grows, you want to ensure that your contract price grows as well" Paige explains.
Second, profitability. "Having a three-year contract that is not profitable is not going to get you very far," she cautions. Pricing and tracking profitability at the customer level is critical.
Third, retention. Contracts help reduce churn risk, but real retention comes from delivering excellent service. "2024 was the year of MSP customer churn," Paige notes. “Ensuring customers want to stay is just as important as locking them in contractually.”
Strong customer contracts create predictable, defensible revenue, a cornerstone of building enterprise value.
Upselling: Unlocking More Value from Existing Customers
While new logos are important, your existing customers often represent your greatest untapped opportunity for growth.
"Your existing customers already trust you and your services," Paige explains. "They know your company, your team, and how you operate. This makes them far more receptive to additional services compared to net new prospects who are still evaluating whether to work with you at all.”
To systematically capture these opportunities, Paige breaks the upselling process into four essential steps:
Identify potential needs and service gaps. Having dedicated "farmers" on your sales team allows MSPs to spot upsell opportunities through ongoing relationships.
Assess by regularly contacting customers to understand their evolving needs. Establishing your company as their trusted partner means they'll be more open to discussing new solutions.
Propose tailored solutions that address their specific needs and demonstrate clear value. This might include cybersecurity services, cloud solutions, data analytics, and various IT support.
Secure by finalizing the upsell agreement, implementing the new solution, and providing ongoing support.
"The key thing with upselling is actually understanding what your customer needs," Paige emphasizes, "not just selling them some bundle you put together that you think works well but isn't what they want."
Successful upselling can drive annual revenue growth of 20 percent or more. Paige highlights that "when you look at the customers you have today, understand their needs, and provide additional service offerings, you actually can get much more value and have happier customers that'll stick around for longer, increase your retention, and have a ripple effect throughout the entire organization."
This ripple effect makes upselling one of the most powerful and often underutilized growth strategies available to MSPs.
Internal Strategies: Optimizing Your Operations
Employee Utilization: Hitting the $200K Benchmark
One of the clearest signs of operational health in an MSP is how efficiently the services team is staffed. A key metric that investors and operators consistently use to evaluate this is services revenue per service delivery employee.
"This metric comes up time and time again in the investor world," Paige explains. "It focuses on services revenue per service delivery employee, and the magic number that somebody came up with is $200,000."
To calculate it, take your annual services revenue, revenue generated by your internal team for managed services, project work, and consulting, and divide it by the number of employees directly responsible for delivering those services. These include technicians, engineers, and help desk staff recognized under cost of goods sold, not overhead.
The $200,000 benchmark provides a quick snapshot:
If you are significantly above $200,000, your MSP may be operating too lean. Paige cautions that while this can boost short-term margins, it often leads to technician burnout, inconsistent service delivery, and higher customer churn.
If you are significantly below $200,000, you are likely overstaffed. Excess labor costs weigh down EBITDA, lower profitability, and ultimately hurt valuation.
"While nobody wants to fire anyone or get rid of staff, if you are overstaffed and your team should be operating at a higher billable utilization rate, there are ways to optimize," Paige says. "Sometimes it's about repositioning, moving a technician into account management or sales where they can help grow revenue instead of remaining underutilized." Kevin Clune adds, "It’s not always about headcount reduction. Sometimes reallocating the right people into growth-focused roles actually strengthens the business."
For owners looking to strengthen their business today and build toward a premium valuation in the future, optimizing employee utilization is one of the highest-value actions you can take.
Specialization: Differentiating to Command a Premium
Specialization is one of the clearest ways for an MSP to stand out and command a higher valuation multiple. But not all specialization is created equal.
"Specialized MSPs trade at a premium," Paige explains. "If you build a brand around a regulated vertical or become the go-to partner for a certain platform or region, you create differentiation that commands better pricing and higher valuation multiples."
Paige identifies three primary areas of specialization that buyers consistently value:
Vertical specialization, such as focusing on healthcare, financial services, or legal industries. "MSPs specialized in regulated verticals are attractive because they typically have larger IT wallet share and more complex requirements," Paige explains.
Technological specialization, such as deep Microsoft, AWS, or cybersecurity expertise. Paige adds, "Strong technical differentiation is just as important. Deep knowledge in compliance, security, or specific vendor ecosystems directly translates to enterprise value."
Geographic concentration, such as becoming the number one MSP in a given metro or region. This kind of market dominance can enhance local brand recognition, improve customer acquisition efficiency, and make you more appealing to regional roll-up buyers.
What sets high-value specialists apart is not just the focus. It is the depth. Successful specialists demonstrate process maturity, repeatability, and the ability to scale. For buyers pursuing a roll-up strategy in a particular vertical or region, this level of specialization is often what turns interest into a premium offer.
Building out a distinct capability set, whether based on industry expertise or technical depth, not only sharpens your positioning with buyers but also reinforces the strength, clarity, and competitiveness of your overall business.
Tracking Your Progress: The MSP Valuation Scorecard
To support owners in implementing these strategies, Paige and Clune developed the MSP Valuation Scorecard. The tool tracks performance across the key drivers discussed, helping owners set goals, monitor progress, and identify where to focus efforts.
"It is not just for owners planning to sell," Paige emphasizes. "Tracking valuation helps you run a better business today."
Used consistently, the scorecard builds discipline and keeps valuation growth top of mind.
A Balanced Approach to Building Long-Term Value
There is no single lever that transforms a business overnight. The most dramatic improvements come from combining multiple strategies: acquiring new customers, optimizing contracts, upselling existing customers, improving operational efficiency, and building specialization.
By focusing intentionally on these areas, owners not only increase their company’s valuation but also create stronger, more resilient businesses that deliver greater impact for their teams and customers.
What's Next in Our Series
We have now covered the fundamentals of what drives MSP valuation and the strategies that can significantly grow it. In Part 3, we will shift gears to explore the types of buyers you may encounter, deal structures, and the broader exit paths available to MSP owners. Understanding these dynamics will better prepare you for any future opportunities, whether you are thinking about selling next year or simply planning ahead.
Interested in learning more or have questions about how to apply these strategies? Let's talk. Schedule a meeting with me here.