Josh Kotler wants other MSPs to WIN by Selling Before the Bubble Bursts

Send us Fan MailIn today's episode of "What's Important Now," we had the pleasure of speaking with Josh Kotler, a seasoned investor in the managed services space and a partner at Axial Reade. Josh shared his journey from founding Western Digitech to his recent ventures, providing valuable insights into the MSP industry and the M&A process.Josh's story began in 1998 when he joined Western Digitech, a company founded by his partner in 1994. Starting as a small garage-based operation, they grew the business into a successful MSP. In 2014, Josh bought out his partner, and under his leadership, Western Digitech experienced significant growth, reaching a run rate of about $7 million upon his exit.The decision to sell Western Digitech  was not taken lightly. Initially, Josh had no intention of selling, but an unsolicited offer from a peer in early 2019 sparked the idea that it might be time to consider an exit. After weighing multiple offers and engaging in deep discussions with Compass MSP, Josh found the right strategic fit and closed the deal on December 23, 2019.Josh played a pivotal role in Compass MSP's growth, serving as COO and interim CEO, and leading several successful add-on acquisitions.Eventually, Josh decided to step back from his active role at Compass MSP, allowing him to focus on other investments and opportunities. In February 2023, he co-founded Sansom Street Capital and acquired Elevative Networks, diving back into the MSP business. Additionally, he invested in channel companies and joined Axial Reade as an operating partner, focusing on building strong MSP brands through strategic acquisitions.Josh and I discussed the challenges facing smaller MSPs, particularly those with EBITDA below $1 million. He emphasized the importance of scale in managing risk effectively and the tough decision owners face: either work hard to grow their business or roll their equity into a larger organization for better appreciation and security.We also touched on the impending "bubble" of older MSP owners looking to exit in the next few years. Josh warned that a rush to sell could depress prices due to supply and demand dynamics. He advised owners to plan ahead and consider exiting before the bubble hits or commit to a longer-term strategy to build value.As the conversation wrapped up, Josh highlighted the need for MSP owners to make a plan for their exit. With many potential sellers in the market, it's crucial not to stagnate and to take proactive steps to ensure a successful financial outcome.Josh's insights provided a wealth of knowledge for anyone in the MSP space considering their future. His experience and strategic approach to M&A offer valuable lessons on growth, risk management, and the importance of timing when it comes to selling a business. Carrie Richardson and Ian Richardson host the WIN Podcast - What's Important Now?They are the co-founders of Fox & Crow Group, a software development company building growth platforms for MSP and IT channel businesses.Learn more at:Fox & Crow Group - the MSP Sales Process platform and all-in-one CRM solution Fox & Crow Instinct - the MSP Decision Intelligence Platform for IT Channel VendorsFox & Crow Jackdaw - Competitive Intelligence Reports on Demand for MSP businesses Book time with Carrie here!Be a guest on WIN!  We host MSP channel founders, executives and sales and marketing leaders who are willing to share advice with other IT channel firms on how to build, grow or sell a business using examples from their own experience.