Entrepreneurs Want Growth—That’s the Name of the Game!
By Michael Contento
Managing Partner, Business Innovation Executive at F12
In December 2021, I sold my company to F12.net. I had been building it for more than a quarter-century since I was 20 years old. The step meant giving up a brand, My Blue Umbrella, that I had developed and sweated blood to grow. It also meant surrendering the autonomy of being a founder and entrepreneur.
And it was the best decision I’ve ever made.
My company existed in the highly competitive information technology sector, as a managed services provider—an MSP. We’re entering a period when much of the MSP market has become commoditized, and growth in the sector comes from scale. In the next three to five years someone is going to unite the smaller, regional players, to create a national entity that provides managed services to clients, characterized by superior customer experience and compelling pricing models.
In my mid-40s, I began to take stock of my life. Part of that process involved getting a top-tier accounting firm to audit my company, to provide me with a valuation. What was my company worth, if I was going to sell it? In parallel with that, I began another key process with a financial planner designed to create a plan that would see me achieve my life goal. I want to spend the last 10 to 15 years of my life running a vineyard in Italy. Away from screens. Tending to living things, finishing each day with a glass of great wine, overlooking the fruits of my labour while the sun sets, my beautiful wife on my arm.
The business valuation was a fascinating and sobering experience. The number crunchers came in, asked a lot of questions and stared hard at spreadsheet after spreadsheet. I thought about the sweat and the effort and the painful nights that it took to build my company. But they didn’t care about any of that. They cared only about the EBITDA. The net profits. When the accountants told me what my company was worth, my first reaction was indignation. What are you talking about? I’m worth double that, triple that—you guys are insane!
The fact is, my numbers didn’t say that. My sweat did, my heart did, my efforts did, but my numbers didn’t and the contracts didn’t. And I came to the realization that the numbers are the numbers. I had to make a choice—stick to my pride and do what I’d been doing for the past 20 years, or listen to what the accountants were saying.
Luckily, at the same time, as I mentioned, I was undergoing a personal financial planning process. Working with a planner to determine how to get to my vineyard dream. And despite what my emotions said about it, when you did the math, the number the accountants provided for my valuation lined up with where I needed to be to achieve my vineyard dream in 15 years. It all worked out really well.
Now that I had done my diligence, I thought about my business strategy. I think an enormous opportunity exists for MSP owners in this country in the next decade or so. By uniting regional players, we can create a national entity with a presence from Newfoundland to British Columbia. I asked myself: What’s the most efficient way to create that player? I also thought about the Ingram Micro TXA tagline—Individually we’re strong, collectively we’re extraordinary.
Another company out there sensed the same opportunity that I did—F12, with origins in Alberta, already stocked with entrepreneurial IT executives seeking to create a truly national player. They had an incredible collection of talent led by their CEO, Alex Webb. I made a few phone calls, asked some questions and soon realized that arranging a share acquisition deal to sell my company to F12 represented an efficient way to take a giant step toward that vineyard dream of mine.
The deal closed on Dec. 1, 2021, and in the months that have passed since, I couldn’t be happier. In less than seven months, my team was able to grow our recurring revenue by 20% by leveraging the resources that existed within F12. We are now able to provide our company with services that would never be available from a smaller MSP. As part of a larger entity, I am able to swim in my own lane, focussing on the things that make me passionate.
I’m proud to be part of a growing entity with approximately 260 team members across Canada, and two different data centres, one in Alberta, and one in Toronto. And if I were to provide advice to other IT entrepreneurs, I would say this: Think about where you are. Think about where you want to be. Understand that the smaller MSPs will have the biggest challenges to scale. Understand that we are entering a time that is going to be extremely competitive, not just about price but about strength, agility, and who has the talent and the vision.
Being with F12 has helped us achieve the necessary scale—and we’re not done yet. Today we’re at annual sales of $47 million, and we’re looking to grow north to $100 million. And because I’ve gone through numerous acquisitions on both sides of the table, I’m looking to help other MSP companies learn from what I’ve gone through.
So I’d like to finish by extending an offer to other entrepreneurs who may find themselves in the situation I was in, a few years ago. Contact me to arrange a conversation. Contact me to better understand the steps you need to take to achieve your financial objectives. Contact me to better prepare for a potential M&A opportunity. I can help you understand the implications of your geography, sales channels, product mix, as well as standard metrics like company size, number of employees, revenue trajectory and so on.
Remember: Selling your business is not the end. It’s a new chapter. It’s embarking on a new journey. I’m excited about F12, and the opportunity to empower other MSPs out there.
In addition to his role as the company’s Business Innovation Executive, Michael Contento is on F12’s mergers and acquisitions team seeking opportunities to help the company double in size in Canada. His email is firstname.lastname@example.org.