Business models / Managed IT Services (MSP) / Own a franchise

A managed IT services (MSP) franchise, or your own?

Three franchise brands run a managed IT services (MSP). Here they are beside the independent version of the same business, with each brand’s fees as it publishes them and worked out in dollars. A brand can bring customers an independent has to earn one by one. The question is whether it brings in more than it costs.

Typical for a managed IT services (MSP): $500k to $10M in sales, and the owner keeps 18% to 30% after paying for its own marketing. Change either to your own numbers.

How the two sides are counted

  • Sales. A brand’s name brings customers an independent wins one at a time, so each brand is worked out at the sales it reports where we have them, and at yours where we don’t.
  • Marketing. On your own you pay for all of it, about 3% of sales here (the SBA’s usual range for ongoing marketing). The ad fund does part of that job, so it is counted once, not twice.
  • Survival. New franchised businesses were about 5 to 6 points more likely to make it through their first two years in Census data, and about half of all new businesses close within five years. It is not in the dollars; each brand’s details give the sources.
The independent version

Your own managed IT services (MSP)

Built and run under your own name

Cost to open
$48k to $256k
Annual sales
$2.2Mtypical
Franchise fee
None
Royalty + ad fund
Noneall marketing is yours
$537,600
The owner keeps in a year, after about $67k of marketing
Taking new owners

NerdsToGo

IT support for businesses and homes

Total investment
$93k to $126k
Avg. annual sales
Ask the brand
Franchise fee
$50k
Royalty + ad fund
3.5% to 7% + 2% of sales
$381k to $459k
The owner keeps in a year at $2.2M in sales (your sales), after $123k to $202k to the brand
$78k to $157k less a year than on your own
Taking new owners

CMIT Solutions

Managed IT services

Total investment
$106k to $159k
Avg. annual sales
Ask the brand
Franchise fee
$50k
Royalty + ad fund
7% + 1.5% of sales
$381k
The owner keeps in a year at $2.2M in sales (your sales), after $190k to the brand
$157k less a year than on your own
Taking new owners

TeamLogic IT

Managed IT services

Total investment
$116k to $151k
Avg. annual sales
Ask the brand
Franchise fee
$50k
Royalty + ad fund
7% + 1.2% of sales
$381k
The owner keeps in a year at $2.2M in sales (your sales), after $184k to the brand
$157k less a year than on your own

Before you sign: what to read in the disclosure document

Every franchisor must give you its Franchise Disclosure Document at least 14 days before you sign or pay. These are the parts that answer the questions above.

  • Items 5 to 7, the fees and the investment. The franchise fee, every other fee (technology, training, transfer, renewal), and the full opening budget, including working capital.
  • Item 19, what owners earn. Whether the brand states owner sales or earnings at all, and for which units. Put its figures in the boxes above in place of the typical ones.
  • Item 20, units opened, closed and sold. How many owners left in each of the last three years, and a list of current and former owners you can call.
  • Item 12, the territory. Whether you get a protected area, and what the brand can open or sell inside it.
  • Item 21, the franchisor’s own finances. Whether the company behind the brand is in good health.

smbnest is a self-assessment tool, not individualized advice. Fees are as each brand publishes them on its franchising page and in its disclosure document, reviewed in the month shown, and change; the figures in dollars are worked out at the sales you enter and are not a forecast. We never take a cut of your deal or a fee from a franchisor. Before you sign, speak with a franchise attorney and a qualified financial adviser, and call owners from the disclosure document.