Buying a Small Declining MSP: $300k SDE Deal Breakdown

Buying a small, declining MSP: the $300k SDE deal

Buying a small declining business scares most searchers off, but Brendan Duebner bought IT Total Care anyway: $1.15 million in revenue, four employees, an absentee owner, and about $300,000 in SDE for a $615,000 price. One year later revenue is up 25%. Here is how he judged the risk and why the decline did not stop him.

Was a shrinking $1.15M MSP worth buying?

Yes, because the decline was slow and the revenue was contracted. IT Total Care lost about 5% a year only from neglect, not churn. At roughly 2x SDE, with 80 to 90% recurring revenue and a loyal team, the downside was capped and the upside was the obvious work the tired owner had stopped doing.

SDE means seller's discretionary earnings, the cash flow a single owner-operator actually keeps. This deal is a clear case study in how a small, shrinking company can still be a sound buy when you read the right signals.

Who bought it and why he wanted small

Brendan Duebner, a former Army officer and government consultant in the Bay Area, started his MBA already focused on entrepreneurship through acquisition. He interned for Josh Medow, a self-funded searcher who bought a business without institutional capital. Watching that daily work made ownership feel real.

After graduation, Duebner ran a government consulting business with profitable Department of Defense contracts. The pace was slow and the subject matter did not sustain him. The deeper reason was personal. He met his fiancee in the Bay Area, and staying in California meant dropping his plan to move to DC.

So in late 2023, he committed to search instead. He wanted to build and keep a company for decades, not flip it.

How he found the deal: cold calling, not cold email

Duebner started with the standard playbook: high-volume cold email and low-touch outreach, chasing deals between $750,000 and $3 million in EBITDA. It did not work. By early 2024 he switched to cold calling. Simple and direct.

He called front desks. He asked for owners by name. When he reached them, he introduced himself as a local Army vet who wanted to buy and run a business for life, then asked if they had thought about selling.

One owner said yes: Tony Maros, who had built IT Total Care over 24 years. Tony started as "Tony the Computer Guy" doing odd jobs, then slowly hired. By the late 2010s the business had grown to roughly 10 people and $1.4 to $1.5 million in revenue.

Then COVID arrived. Tony, in his mid-to-late 60s, moved to his Tahoe vacation home full-time. The business coasted on its recurring contracts with no new customers, no sales, and no marketing. For three or four years revenue declined about 5% annually, down to $1.15 million by the time Duebner called. Tony plus four employees remained, with an average tenure of seven to eight years.

What did due diligence reveal about the numbers?

Standard due diligence showed a typical small MSP, with nothing catastrophic. Margins sat near 13%, recurring revenue ran high, and one customer made up 10% of revenue. The decline was the only thing that stood out, and most searchers would treat that alone as a hard pass.

The key figures Duebner found:

• EBITDA: roughly $150,000 in adjusted EBITDA, even with no sales effort.
• Margins: around 13%.
• Recurring revenue: 80 to 90% of the total, on contracted relationships.
• CapEx: minimal.
• Customer concentration: the top customer was 10% of revenue.

A managed service provider (MSP) handles a company's IT on ongoing contracts, which is why so much of the revenue recurs. Duebner had passed on other shrinking or small deals during his search, including a pools business from searcher Ravi Shankar that he later told Shankar he regretted.

How the price and multiple worked out

The price looked cheap once Duebner adjusted for the absent owner. Tony still drew a salary while not working day-to-day. Adding that owner draw back, the sustainable free cash flow was about $300,000 in SDE.

The purchase price was $615,000, of which Duebner assumed $100,000 in unpaid lease liabilities in a stock deal. That put the multiple at roughly two times SDE, or four times adjusted EBITDA.

The real question was not the multiple. It was whether Duebner could add enough value to justify the risk. The biggest risk was concentration: if any one of the four revenue-generating employees left, the business would lose 25% of revenue. At that scale, that could be fatal. If you want more on pricing small firms, see is 3x SDE a good deal and how to structure around acquisition risk.

What red flag turned out to be a green light?

Overpaid staff. Duebner worked inside the business before closing and found everyone was paid above market wage. Instead of a cost problem, he read it as proof the owner genuinely cared about his people. That loyalty signaled honest accounting, no hidden liabilities, and a team worth inheriting.

Tony agreed to let Duebner work in the business pre-close. Duebner lived in it, first to arrive and last to leave. He watched how the team interacted, learned the client relationships, and asked customers what they valued.

Here is why that matters. People do not stay seven to eight years out of desperation when they are paid well, they stay out of loyalty. An owner who pays people above market built the business by keeping them around, and those habits tend to extend to how he records revenue and handles liabilities. The same logic appears in 3 real business deals and what happens after you buy.

What surprised him after closing?

The upside surprised him, not a hidden liability. Duebner expected to be flat in year one, with six months lost to building trust and several more learning the business. Instead, by the end of 2025, about nine and a half months in, revenue was up 25% and EBITDA up roughly 40%.

Part of that was easy money. The business had excess capacity and an underutilized team, so he worked the existing people harder before hiring. But the deeper gains came from basic operations:

1. Implemented EOS (Entrepreneurial Operating System), with a formal leadership team and weekly meetings.
2. Standardized contracts that had drifted under the absent owner.
3. Unified the PSA software implementation across the team.
4. Hired one new person and brought on his first real sales and marketing hire.

None of that was hidden complexity. It was the obvious work a checked-out owner had let slide. The early momentum became its own data: it proved to the team that Duebner could add value even without IT expertise. That goodwill was worth more than any contract clause.

The core lesson: what "small" really means

Duebner's main takeaway is about risk, not multiples. Conventional wisdom says do not buy small because small is fragile, has key person risk, and is not easy to replace. If the main technician leaves, it is a crisis. All true.

But small is also where you can move fast and see every customer, employee, and revenue stream. Small is where your time buys the most growth per hour. And small is where the prior owner may have been genuinely good and simply tired.

Working inside the business before buying did two things at once. It let him see what he was actually getting, past the spreadsheet. And it let the team decide whether they wanted him. When he closed, it was a handoff, not a question mark.

The second lesson is quieter: look at what the owner paid his people. An owner who overpays relative to market is rarely a liar. For more on owner dependency and the most common buyer mistakes, read the most expensive mistake buyers make.

What to check in the Google review history before buying

One signal buyers consistently overlook is the review history trend. Not just the current star rating, but whether complaint volume has been accelerating in the months before the listing went live.

A business rated 4.2 stars two years ago and now at 3.8 stars with accelerating complaints is a different asset than one sitting steady at 3.8. The trend tells you whether the decline is already underway. You can pull that history with a pre-purchase reputation check before you commit.

Frequently Asked Questions

Should you buy a business with declining revenue?

Sometimes. A slow decline driven by owner neglect, like IT Total Care losing about 5% a year on contracted recurring revenue, is recoverable. A decline from customer churn or lost contracts is not. Diagnose why revenue is falling before you judge the deal, because the cause matters more than the trend line.

What is a fair multiple for a small MSP?

This deal closed at roughly 2x SDE, or about 4x adjusted EBITDA, which is cheap by conventional standards. Small managed service providers often trade low because of key person risk and customer concentration. The price reflected a business losing revenue, not a benchmark for healthy MSPs.

Why does overpaid staff count as a green light?

Because it signals an owner who cared. Staff paid above market wage tend to stay out of loyalty, not desperation. Duebner read that as evidence Tony kept honest books and hid no liabilities. An owner who invests in people rarely extracts maximum profit at their expense or fudges the accounting.

How risky is customer or employee concentration?

Very. With only four revenue-generating employees, losing one meant losing 25% of revenue, which could be fatal at that scale. A top customer at 10% of revenue added more. Working inside the business pre-close let Duebner judge whether the team would stay before he signed.

Why work inside a business before closing?

It removes guesswork. Duebner met the team, learned the systems, and talked to customers, so he saw past the spreadsheet to what he was really buying. It also let the staff decide whether they accepted him, turning the close into a handoff instead of a gamble on retention.

The verdict

A small, declining business is not automatically a bad buy. IT Total Care worked because the decline was slow, the revenue was contracted, the team was loyal, and the price near 2x SDE left room to add value. Duebner judged the risk by working inside the business first, then fixed the basic operations the tired owner had let slide.

Before you sign on any business, read its review history the way you read its financials. A steady rating and a sliding one tell very different stories about loss risk. Run a Reputation Audit at velaworks.io before you sign.