The AME Group is one of the U.S.\u2019s largest and most successful MSPs with locations in Tennessee, Kentucky, Louisiana, Texas, Ohio, and across Indiana. Over the past decade, the company has pursued an aggressive acquisition, but it\u2019s a strategy with a difference. All the companies acquired by The AME Group were done so on an employee-owned basis\u2014a foundational principle of The AME Group\u2014so they all share the same motivation for success and superior service.<\/p>\n
David Weeks talked to Brent Williams, president, about how the company has grown and what MSPs looking to grow their own businesses can take from The AME Group\u2019s model.<\/p>\n
Brent Williams:<\/b><\/span> The company was founded in 1985 as a break\/fix service provider. We were a little bit unique in the fact that we did fixed fee, including parts, even back then. Our ownership and acquisitions journey started in 1998 when we bought 50% of the company from our founders through an ESOP (employee stock ownership plan).<\/p>\n This started us down the path of becoming a management team, driving us to think more strategically\u2014so more like owners and not techs. For the next decade we were pretty much focused on that process. Then in 2008,<\/span> we bought the remaining 50% of the company. At this point we found ourselves thinking,<\/span> how are we going to drive value, not only for ourselves, but for our fellow owners? As part of that process,<\/span> we set out our growth strategy: 50% coming from organic growth and 50% from acquisitions.<\/p>\n This led to us also doing our first external acquisition that year. We bought a company that did pretty much what we did, offering similar services. It was a smaller company,<\/span> as we wanted to make sure we could go in and cut our teeth and hone our craft. If it had gone a little sideways it wasn’t going to create a lot of issues and problems financially for us.<\/p>\n Since 2009, we’ve done pretty much an acquisition every year, and each year they\u2019re getting a little bit bigger. The ESOP model has been fundamental to our approach throughout.<\/p>\n BW: <\/b><\/span>There was definitely a lot of maturing through that process. When we did the initial 50%, the existing founders stayed on. So from 1998 to 2008, the management team really spent a lot of time learning to think more like managers and transitioning through that process. We learned to manage debt. We got a lot more business focused\u2014so not just focusing on the technologies that were out there, but on things like understanding an income statement and where we were driving value. But the biggest shift came in 2008, when we bought the remaining 50% of the company.<\/span> At that point the founders stepped away and the realization hit that it was up to us now\u2014setting direction in what needs to happen.<\/p>\n BW:<\/b><\/span> You have to want to make that change. When I talk to the managers in the businesses we\u2019re buying,<\/span> I like to look in their offices. I want to see technical certification books on their bookshelves as well as business leadership books. Running an MSP business isn\u2019t just about Microsoft MCSE certification\u2014it requires a different mindset, a different skillset. You can provide technical leadership,<\/span> but if you\u2019re looking to grow your organization, especially if you\u2019re looking to engage in acquisitions or to be acquired,<\/span> you need to understand the business side in order to dictate what decisions need to be made. If you can educate your team and help them understand why those decisions need to be made a certain way, you’re also going to build the effectiveness of your team. To be successful, you need to bring up the business competency of your entire management team.<\/p>\n BW: <\/b><\/span>Definitely.<\/span> Over the years we\u2019ve built a team of individuals that thrive on acquisitions. These are the folks who, when we complete acquisitions, become the leaders that are going to step out of their day–<\/span>to–<\/span>day and help push these new businesses forwards. We have someone who focuses on the operations aspect. We have somebody who focuses on the sales aspect. We have someone who focuses on the back–<\/span>office tool sets,<\/span> and migrations,<\/span> and bringing everything together. These are the people you need to drive successful acquisitions.<\/p>\n BW: <\/b><\/span>It’s always more of a challenge when you can’t get the group together in one place. You have to start managing a lot more remotely. As we’ve gotten more divisions and acquired more areas, taking the time to develop the management teams has become critical. You have to be much more focused on the company message and ensuring it gets communicated across the business. When you do acquisitions, you have to have programs and you have to have a defined way to strengthen your culture and get these new companies to buy into what you\u2019re doing and the way you work. This is true at all levels, but especially when you’re doing as many acquisitions as we are.<\/p>\n BW: <\/b><\/span>The business model matters. Don’t try and pick a business that’s providing services materially differently to yours. There are already enough challenges in an acquisition without trying to shift how their customers buy and consume services. So I would encourage them to look,<\/span> and try and find someone providing services in the manner in which they do. Look for someone that has a fairly consistent price, something that’s in line with what you charge. You can’t go out there and buy a business that charges 35% less than you, then expect all of their customers to just want to pay that higher fee.<\/p>\n When we bought our first company, we looked at the business model and at how much of their business was reoccurring revenue versus T&M. We were predominantly reoccurring models, so we looked at that and also tried to look at the team. It’s never just about buying customers or contracts; you need to evaluate their team heavily to make sure you\u2019re getting good people. This is especially true in an ESOP, where we’re not only acquiring companies,<\/span> we’re bringing people in and making them owners as well. So we want to make sure we add the right people, people that want to come onto our team.<\/p>\n BW:<\/b><\/span> If you’re considering doing acquisitions, one thing that frequently gets overlooked is that it is absolutely going to affect the time your management team will have to focus on existing operations and your organic growth. So if you\u2019re just getting started,<\/span> don’t be foolhardy and think you’re going to continue to grow your business at the same rate organically unless you’ve got a separate team. I cannot stress enough about developing your people and thinking about providing training above and beyond the technical side. It’s going to make them more valuable to you.<\/p>\n On the flip side, if you\u2019re looking to sell,<\/span> then your business model matters. Think about the consistency in your offerings\u2014don\u2019t have seven different backup vendors you’re supporting or seven different solutions out there. And make sure your contract agreements are current.<\/span> Some people sign an agreement,<\/span> then just let it auto renew, which can be complex to evaluate in an acquisition. Current multiyear agreements are always valued more highly.<\/p>\n","protected":false},"excerpt":{"rendered":" Brent Williams, president of The AME Group, talks to David Weeks about how his company has grown and what MSPs looking to grow their own businesses can take from The…<\/p>\n","protected":false},"author":78,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"class_list":["post-23978","post","type-post","status-publish","format-standard","hentry","topic-msp-business"],"acf":[],"yoast_head":"\nWhen you did the initial employee buyout, how big of a jump was it in terms of the management mentality?<\/b><\/h3>\n
That step from being a tech guy to a business owner can be pretty daunting<\/b>.<\/b><\/span> How do you advise people on managing that? <\/b><\/h3>\n
If you\u2019re going to get into acquisitions, does that require a different mindset again? <\/b><\/h3>\n
How have the challenges of running a business changed as you’ve grown?<\/b><\/h3>\n
Turning to more specific advice for MSPs wanting to follow in your footsteps, what should companies look for in their first acquisition?<\/b><\/h3>\n
What are the biggest lessons you\u2019ve learned on your journey?<\/b><\/h3>\n