Episode 41: Hidden Gems

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Erick and Rich discuss how recent news from ScalePad underscores the growing trend toward managed service tool makers building integrated platforms with shared data layers and why it matters, as well as three ways MSPs can differentiate themselves in a crowded marketplace. Then, in an MSP Chat first, Erick goes from co-host to interview guest for a segment in which Rich asks him to share hidden gems of advice for the audience in growth, pricing, hiring, retention, and more. And finally, one last thing: Some surprising (and scary) facts about Joey Chestnut’s new world record in hot dog eating.

 

Discussed in this episode:

ScalePad is running a platform play of its own

Top dog Joey Chestnut beats his archrival and his own hot dog-eating world record

Transcript:

Rich: [00:00:00] And three, two, one, ladies and gentlemen, welcome to another episode of the MSP chat podcast, your weekly visit with two talking heads, talking with you about the services, strategies, and success tips you need to make it big and manage services. My name is Rich Freeman. I’m chief content officer and channel analyst.

At channel master, the organization responsible for the show. I’m joined as I am every week to my delights by our chief strategist at channel mastered and your cohost, Erick Simpson, Erick, how’s it going?

Erick: It’s going great, rich. I’m looking forward to getting back on the road here quickly for another round of conferences and events.

I know you’re getting. On a plane next week to head out. I’ve got a couple of trips back to back in Atlanta, one more of a channel mastered business opportunity trip, and then the next one being, supporting a conference we’re attending together. You just sit at and do your daily at your home office or your home geo or whatever, and you need these.

I think I need, and I think you do too, Rich. I think you’re the kind of person that needs to get out and be at these events and it energizes you. It taxes me and it wears me out and mentally fatigues me because, I am adapting my behavior, but man, I get such a charge and such an excitement out of, the thought that, be back on the road and then come back and have lots of extra stuff to share.

On the MSP chat podcast.

Rich: Yeah, absolutely. I I am very much the same way. It’s impossible. I’ve found through the years to really keep your finger on the pulse of what’s happening out there if you are trying to do that from your home office. And I just I love to travel. I, and I have the same experience where It is a little taxing, a little tiring.

I was on the road last week and I was definitely feeling it over the weekend, thankfully we had that three day weekend just a few days ago as we’re recording this right now, what’s interesting and then we’ll move on here cause people, Don’t need to know this in great detail, but I’m speaking of the weekend.

It’s not just that you and I are on the road next week. Erick, I believe we’re both catching a Sunday morning flights back east. That, that is the degree of dedication we have to to travel and staying out in the road.

Erick: You’re right, Rich. And you know what? It’s just. It’s just par for the course, man.

It’s you gotta do it. You gotta do it. And look at the that reenergizing factor that I really enjoy while I’m out at these events and things like that. But you’re right. At the at the end of the day, it be me time so I can recharge and keep doing it.

Rich: Yep. Yep.

All right. Let’s dive into our story of the week. On its own, this is not colossal news. Erick, although it does involve people we’ve known for a long time, this is another one of those instances of a seemingly relatively small story like some we’ve done recently about Saas Alerts, for example, speaking to a larger issue in the industry right now.

The headline in this particular case is that Dan Wensley, who’s been in the managed services world as long as you have, Erick, he was up until very recently, the CEO of a company called Scalepad. He has stepped out of that position and Chris Day, who is still among a lot of people, best known as the former CEO and founder of IT Glue.

He’s been an MSP himself and in the channel for forever and ever. He was the chief product officer at ScalePad. He’s now stepping up to be the CEO. I had an opportunity to interview him earlier this week. I’ll be writing about this in Channelholic, my blog. And I asked, of course, why the change of leadership topped the company.

And, reason number one is they brought Dan in, Because he had exactly the right skill set to launch and grow ScalePad. ScalePad was originally a company called Warranty Master. They had a strategy to grow and expand. And Dan was the guy to do that for them. And he’s done it. In the years that he’s been CEO over there, he’s grown the company 10x.

He’s ready to take a step back find a fresh challenge. And this is the significant piece Scalepad is at a point in its evolution where the priority isn’t so much driving, acquisitions, which is something that Dan really prioritized as a CEO, but they’re in a sort of technical phase of the company’s evolution.

And according to Chris, he’s a little bit more technically, I’m sure Dan would be the first one to agree. As impressive as his skills are, he’s not the technical guy. Chris is a little bit more technical and they need that. They need that in particular, Erick, because as I said, they’ve been making lots and lots of acquisitions in the last few years, expanding the capability of the platform into areas like backup and data management.

And what they’ve been doing over the course of the last year is [00:05:00] building this sort of shared data layer. For all of these different products that they acquired along with all these different companies so that they can do all the really interesting things that become possible when you’re correlating data from different parts of an end user organization.

And that’s the piece of their story that kind of speaks to this larger trend, because it echoes with me. With interviews I’ve done in the recent past with ConnectWise, they’re building all of their products going forward on this new ASIO platform. One of the key pieces of ASIO is that it has the shared pool database that all of the different ConnectWise applications can share.

Enables all sorts of interesting reporting and AI. You’re seeing a similar thing at companies like ConnectWise. This comes up more and more often particularly in the last year or two years, Erick, and it speaks to me. About a a new generation, a next generation in the story of integration in the managed services world, integrations have been a critical topic for MSPs forever.

But really when vendors talk about integrations, what they’ve been talking about is the ability for two different applications to, on some level, usually a crude level, exchange data through an API, what we’re starting to see vendors realize. Is that there’s this whole new world of possibility you get when you integrate your own solutions, when you build an integrated platform with multiple components, integrate those components, and in particular, build a shared data infrastructure under those systems.

And like I said, we’re starting to see more and more of that happening. Pretty much any XDR vendor we could name would be part of that phenomenon or a trend as well. So obviously we’re going to see more and more of that. And I guess the question I would ask to you, and I guess the question that this trend presents to MSPs is to what extent should they be prioritizing vendors that are down this road or going down this road, vendors that have more of a multi component platform, have a shared data layer.

Are beginning to innovate in this area of reporting and AI and all the other things that shared data makes possible. How big a priority should that be for MSPs down the road versus, as opposed to the more traditional integrations that have always been a priority.

Erick: Rich, yeah, I was waiting for you to say the I word you waited till the last third of your conversation to use the integration term.

And yes I’ll answer your question, but first I want to just raise the reality that, what you said is actually what the MSPs have had to deal with before this kind of new realization and this new push into creating this shared data layer and the value that it brings, and I’ll come back to that in just a second, but, when you said that the kind of the traditional or historical kind of integration was maybe an API at a bare minimum, that was really, I think, in my humble opinion, a way to address this billing and usage kind of data, between acquisitions, like how the first challenge that we always talk about. Or one of the top challenges that MSPs have when they’re trying to select a new strategic vendor partner is, how simple can you make it for me to bill my clients, right? Consumption based billing and all these things.

So when you’re dealing with end vendors that are part of your bundle and none of them have any kind of shared integration or just, so there’s none. There’s maybe some basic API stuff that at least makes it easier for you to. track and bill usage for your clients. And then there’s this new. Awareness and movement that says wait a minute.

If we’re going to continue to make these acquisitions and create a distinction and differentiation among our competition, this being the vendors speaking, in my opinion, then we’ve got lots of legacy stuff. We know, we, there’s a long list of vendors that have tried to grow through acquisition and I’ve had legacy products that, Boy, that code just doesn’t play anymore.

It doesn’t play nicely. And I’ve had to go back and rewrite some of that stuff. Now it’s one of these situations where the next evolution of maturity and rightfully I believe is to create some sort of a shared standardized data layer so that all of these different acquired companies, or that, that were disparate.

And now the front end be rewritten. In such a way to create a more simplified and unified and standardized experience for the technicians and the MSPs using them. Imagine a world, Rich, [00:10:00] where we have a a relationship with a vendor and we are consuming 10 or more services and solutions from that particular vendor.

It makes it much, much easier and more attractive If all of these applications look and feel the same, a great example of that is Microsoft Office, right? Whether you’re using Microsoft Word or Excel or PowerPoint, you know where the tool, you know where the typical stuff is in the toolbar. And there’s that functionality that makes it easier to ramp up and learn.

And if we’re doing that at this late, at this level, that means then that we are increasing that partner’s efficiency, we are increasing their profitability, we’re allowing them to scale more broadly without having to hire more technicians. The kind of stuff that we talk a lot about on this program is fueled by this.

Now, on the other hand, we’ll have the folks that say Erick, that’s certainly putting a lot of our eggs in one basket, right? And that’s always going to be the decision point. The more effective and efficient and consolidated, integrated and profitable a consolidated group of disparate, solutions appears to, appears appealing to one type of MSP that says, boy, I can scale fast, to another MSP that wants a little bit more choice and wants a little bit more.

Decision making, there’s an opportunity for them to say I prefer this particular cybersecurity solution rather than the one that you guys have bundled in here and are working with. So there’s a decision on how they want to go. Do they, how much do they subscribe to, and then how much integration is there available with these other services and solutions?

Or you could have a completely bespoke type of operating. And that’s something that I’ll talk about in my tip of the week is building this very unique, very niche, very boutique style service where that may be a differentiator and you’ve accepted, how you deliver that service and the profits and the efficiencies that you can gain from that.

Look and feel. So I like it. But some folks will have differing opinion, differing opinions, rich.

Rich: But I do think you’ve gotten to the core of the issue, the core question that MSPs are going to have to ask. There are obvious advantages to the vendor of having this shared data layer.

But what really matters for most of the folks in our audience is what that does for them. And scale pad for just as a, for example, Positioned this as a way to satisfy the customer better, but deliver a better experience for the end user because you and your technicians are able to get information faster, move faster, resolve tickets faster when you’re sharing data that way.

And then the, other thing that you highlighted as well is to the degree that all that is true of the data that your techs are working with, the techs are more productive. More profitability, faster growth for the company and so on. So you can see the advantages from an MSP standpoint, going with a vendor that has that sort of integrated infrastructure.

But you’re right. There are also trade offs that a lot of MSPs are willing to make because they do believe that they have assembled a as a It’s said as it goes, best of breed collection of products that may not integrate quite the way everything from Kaseya or enable or connect wise does but just works well enough and works well with the workflows that particular MSP.

We are not going to settle this issue on this podcast here this week, Erick but we’re flagging something about the future of innovation and managed services. That I think is important. And without further ado you have hinted at your tip of the week. So let’s move into that. We were talking about functionality that might be differentiating for a vendor in terms of having shared data.

You’re going to talk a little bit about something that might be differentiating for an MSP. Segue, Rich. Yeah.

Erick: And boy, I, yeah, we could keep talking about, that story of the week for a while, I could even just tag in and say, we talked recently and I will now, so I’ll say we’ve talked recently about, rollups and what’s attractive to rollups, having standardized platforms and things like that. So there’s a lot of nuance to, to, to making those types of decisions, but yes, pushing forward the tip of the week, rich is again, tagging in on this very real value of differentiating your MSP.

From your competitors in an increasingly crowded market. When I had my MSP rich, I used to, we enjoyed me, I will say we suffered and we enjoyed being like one of the [00:15:00] first out of the gate because we had to figure it all out ourselves and we made a bunch of mistakes and things like that.

But we did, once we figured it out and began really growing, we grew like a hockey stick because nobody could compare with our value proposition. Nobody could compare. With, the bundle of services and what was included. And the only thing that we really had to get past rich was this idea of paying a subscription in advance for these services.

That was the one thing that we had to get past. We figured out how to do that as well. And really were very successful at it. Our unique value proposition was that we were delivering services like your own internal it department. Because we’d bundled in service desk. We bundled in vendor relationships.

We bundled in remote monitoring and patching and updating in a way that they hadn’t seen before. So there was nothing they could compare it to. Today, the story is completely different. How do you differentiate yourself as an MSP when a potential prospect may have hired three or four or five or six MSPs over the last 10 years.

So we don’t have to educate them now on the value of hiring an MSP. What we have to educate our clients or our prospects that we’re trying to win business from is how we are uniquely different and better than in more cases than not, their incumbent MSP. So that’s the real challenge. So let’s talk about that for a second.

Three quick tips. One thing, identify and leverage exactly what is important to today’s small and medium businesses. If you’re focused on the SMB, we know, we’ve talked about this ad nauseum on the podcast, Rich, We know that these clients are worried about cybersecurity. They’re worried about, the SaaS applications that they are adopting more and moving away from infrastructure, and they’re worried about compliance, right?

That’s going to be the next big, I think, blue ocean opportunity for MSPs. I don’t know if they’re as worried anymore about. On site visits and guaranteed on site time. That was something that we had to struggle through, when we were, when I still had my MSP is that bridge that said, Oh we’re not going to see you anymore.

And you’re just going to find ways to, bill us and things like that. When in fact, some of those clients just wanted to see us on site because they had that sense of security. It’s like clients that want to see their server closet and see all the blinky lights. I don’t think anybody really wants to see that anymore.

They just want their technology to work. And the differentiation is to create that kind of a niche attraction that says, Hey, we are focused on these three key things that are the most important for you as an organization growing in the 21st century, keeping your assets, your data, your files, your services your devices safe from a cybersecurity perspective, teaching your.

Users, how to avoid falling victim to phishing attacks and things like that. Making sure that we are managing all of your applications, whether they live on premise or in the cloud and making sure that we have a way to monitor, manage, and secure those as well. And finally, to add strategic value to your growth plans, things like these emerging technologies, we’ve been talking about rich AI, IOT, like the things that are on these Clients minds today that are probably different than they were before.

No longer do they want to see somebody on site for four hours and things like that. They want to make sure that their stuff just works. So create that niche specialization, and then also vertical vertical niche specialization. So if you are, if you have more clients in, let’s say the healthcare vertical, it really good at understanding their pain points.

What is your unique value proposition? That’s different than your competitors. It’s no longer enough rich to say, Hey, we have excellent customer service, or we score 95 percent on our net promoter score, your competitors are doing the same thing. What is unique and different? What is the unique value proposition?

What is something that you can specialize in and be the best that really makes a difference? In new prospecting. How do you figure that out? Rich, you ask your existing clients. Why did they go with you? Why do they stay with you? What are the things that they love best about what you deliver? And then you try to hone that in a UVP or unique value proposition that is compelling and uniquely different.

And what your competitors are selling to those same prospects in kind of their sales motion. [00:20:00] So third one, innovative offerings. How can you take an emerging technology and leverage first mover advantage? We talked about this recently on the podcast, rich about using. AI in a uniquely different way, teaching clients how to use AI to improve their workflows.

There’s emerging, this is an emerging technology that is just going to keep growing. How do we take advantage of it? And we build a program or include it in some of our bundles of services to show clients how to get more efficiency, lighten their workflow needs, leveraging AI and integrating it with some of their other.

Applications and things like that. So these are the kinds of things that I think about now in creating some unique distinction between competitors in in the MSP space. And there’s a ton more, I’ll just stop there and ask for your feedback.

Rich: Yeah. A couple of things come to mind and first of all and this too is something we’ve spoken about on the show before.

Hardware matters less and less if it matters at all any more to the growth plan for an MSP. Software even is becoming less and less important because more and more businesses can and will acquire those licenses directly via a marketplace, AWS, Azure, somebody else, right?

Product is not really what’s going to drive your growth and success. It’s the services you wrap around the product. That is really where your margin and your growth is going to come from that. And the services are the high margin piece of what you do, but it really does need to be, as we’ve said before on the show in that zone of strategic consulting.

That, that trusted advisor kind of role. Where you are helping businesses compete better, be more efficient optimize business processes achieve outcome oriented solutions. And so that piece, emphasizing that piece of what you were talking about there, Erick, as a differentiator is a real window of opportunity for MSPs right now.

The other thing I’ll point out is you started out when you briefly detoured back into the the story of the week you were talking about roll ups, MSP roll ups, and I’ll just point out differentiation in a crowded market is always an issue that MSPs need to be thinking about. But if you are a smaller MSP now, and you are increasingly competing with these giant MSP roll ups, differentiation becomes that much more important.

You were really going to have to think. Smart and hard about what it is that makes you worth doing business with unique, different from these giant companies that may be able to outprice you. So the differentiation has always mattered. It’s super important now.

Erick: Great

Rich: insight, Rich. Yeah, agreed.

Speaking of insights, folks and tips of the week, we have channel luminaries on the show in the interview segment. Every week and we are maintaining extending the streak this week except the channel luminary that I will be interviewing when we come back From the break is none other than Erick simpson.

We have a great team at channel master. We love to show off All of the experience and the wisdom that we’ve got here on the team. And so we have team members come on the show now and again, our interview guests this week is none other than channel master chief strategist, Erick Simpson. We are going to be playing a little game that I like to call hidden gems.

When we come back from the break, which is just where I’m going to ask him for some more tips. Tip of the week kind of material, but I’m going to be looking for these underappreciated under discussed hidden gems about improving your business that might be beneficial to you. So that’s coming right up after the break, stick around.

We. We’ll be right back.

And welcome back to part two of this episode of the MSP Chat Podcast, our spotlight interview segment in which our spotlight interview guest this week, as I said before, is none other than Erick. Erick, welcome to the show. Thanks for having me, Rich. I appreciate being here. I’m sure everything looks different from the guest’s chair where you’re sitting right now but we are going to take advantage of this opportunity for me to actually interview you a little bit to play a game that very recently made up that I’m calling hidden gems.

I’m going to challenge you. It’s almost like a stump the band kind of thing. Erick, I’m going to give you a five topics for each one of those. I’m going to be looking for you to come up with an underappreciated Opportunity, something that MSPs in our audience can do to get better in that area. And folks, believe me, please, I’m telling you the truth.

Erick knew that we were gonna play Hidden Gems. He does not know the five topics I’m about to bring up. I don’t think any of them are just crazy compli This is all stuff that he thinks about a lot. But he will be improv ing here, cause he doesn’t know the five topics where he needs to find a Hidden [00:25:00] Gem.

Yeah, are you ready, Erick? I’m ready. No pressure, rich game on. Let’s go. All right. Big topic for the MSPs in our audience topic, number one for pretty much any entrepreneur growth. Give me a hidden gem growth tip for MSPs.

Erick: Boy, I, she’s so many thoughts. Okay. So I’ll share one briefly.

Stop serving underperforming clients. Exit your D and F customers and work your way up to exiting your C customers as you can. This is not a light switch that you turn off and on Rich that says I’m firing all these customers, but prioritize, identify who your A clients are, the clients that, you would keep forever.

If you could. Identify your B clients. These are the clients that, for the most part you would keep forever, as long as they keep growing and you can help them become A clients, the C customers are the ones and the Ds and Fs start at the Fs, go to the Ds and then the Cs. These are the folks that either are the they’re the least profitable because they’re the most painful to work with.

They refuse to take your advice. They tax your team. They prevent your technicians from being as efficient as possible and to deliver processes in a standardized way. These could be customers that Refuse to agree to your enhanced cybersecurity program, for instance. These are customers that simply will not pay more for any more services.

These are customers that are maybe not even growing, but maybe waning. So all of these customers are an anchor on the growth of your business. As you begin to exit them in an orderly fashion, you will be able to scale. And bring on more of your A clients and be more profitable doing it and reduce the need to hire so many techs so fast.

So think about that from a, who’s on the short list and do, I used to say do this yearly, but boy, oh boy, if you can replace one D customer and bring on two A clients, cause you can serve them with the same staff, Do it quarterly if you can, right? But don’t, don’t what’s the term rich, shoot your foot or do something to spike your face.

Just do it in an orderly fashion and do it in a consistent fashion until you’re working with the types of clients that deliver the most profit for you, that allow you to invest in the right tools and technology and hire the best technicians so that you can continue to be that strategic very unique service provider to your A and B

Rich: you’re reminding me of something.

I once heard Don Sizer said, Don is a very smart, successful MSP from Pennsylvania somewhere in Pennsylvania, if I’m remembering right. And I once heard her like in managing your customer list to managing your investment portfolio, like in a 401k for example, and it really hit home for me because.

The very same people who wouldn’t think twice about dumping a fund from their 401k because it’s underperforming, don’t feel comfortable dumping a client from their customer list because they are underperforming. And exactly the same way if you don’t make any adjustments to your investment portfolio, you’re holding yourself back.

If you make no adjustments to your customer list you’re holding yourself back as well. So that was a gem, Erick, hidden gem number one. I love it. Let’s move on to topic number two here. Now maybe not the second most important thing for MSP to think about, but it’s something they do think about a lot, tools.

So give me a hidden gem in the realm of

Erick: tools. Boy, oh boy. All right, Rich, let me try to winnow it down to tools. So here’s the, and this may not be like the earth shattering oh boy, I’ve never heard that before, but it’s just a reminder That we should be Re evaluating all of the tools that we are using to deliver service on a very regular basis Rich, I know msps that I work with today that have legacy tools that they think are good enough, right?

Oh, we’ve had this tool or they feel like they’ve had it for so long. They’ve got this special like Grandfathered ends, pricing or something like that. And they keep it because they’re worried about, that extra buck per user or something like that, that a better tool might cost them and worried about, having to have that conversation with a client about, Hey, I need you to pay me more.

You’ve got to go, the, having the right tool for the job is paramount. I’m trying to teach this to my younger son is look, you’ve got to have the right tools. We do a lot of, working on the cars. We like doing that together. [00:30:00] Like we restore old cars and things. And I’m like, Don’t use that.

Use this is the right tool to do that because it’s so much more efficient. Don’t jack. If you’re going to change the brakes on the car, don’t jack up one side, change the brakes on one side, put it all back together, put it down, go around the other side, jack the other side up and do the same thing. Jack the car up.

So the both front wheels are up. Do it all in a very standardized way. So again, just going off the reservation a little bit rich. But the idea here is that you should be evaluating Okay. Opportunities to upgrade your tools, just like you’re looking at opportunities to upgrade the bundles of services that you’re delivering to your clients.

Sometimes paying more for a tool delivers more value for you in the long run, especially if you’re having to do some kind of weird, lack of integration, as we just talked about earlier. In your tool set. So just have a strict process, just like you’re pruning your garden of clients.

Those C, Ds and Fs on a regular basis, you should be evaluating your tool set, especially as the needs of your current clients and your future prospects continue to evolve as we continue to move more toward this online cybersecurity focused, very strategic value added unique value proposition.

Rich: Yeah. And there’s an opportunity there to do some pruning in the tool stack as well we’re going to have Kevin Lancaster, the CEO of Channel Program as an interview guest on the show in an episode or two soon an upcoming episode.

And if we ask him to, he can speak to this very directly because Channel Program has the service that helps MSP visualize and inventory. Great. Their entire tool stack. And I remember when they launched this, they were thinking, Oh, you’re going to see the 15 or 20 tools that you’re using.

And they were amazed over there that it was in reality 345 X. These stacks are huge. And that imposes a certain amount of cost, so if you’re being smart about re evaluating the tool stack on a regular basis, there are opportunities there to to prune that and and get more efficient.

And we’ve also spoken before about how standardizing on fewer tools is going to set you up for faster growth. Gem number two, we are on a roll, Erick. I like it. Now, here we go. This is one of. The biggest, most popular, most mysterious most oft discussed topics in managed services, pricing.

Give me a hidden pricing gem, please.

Erick: All right. And again, maybe not so hidden, but it’s just a reminder that we should, there’s a few ways to increase your net profitability. Rich. One way is to, Sell higher margin services and grow top line profitable revenue that way. But another way is.

Cutting your costs, right? So identifying where you are spending too much money, but in order to figure that out, Rich, you have to understand what you’re spending. A lot of the work that I do with partners is around identifying what’s in their stack. What is it costing them today? How should they, should there be any changes, to the stack to keep up with, what today’s post pandemic buyers are investing in or what the needs are.

But ultimately really understanding what their profit margins are for each of these things I had a situation a long time ago rich with a an msp Who had developed this, solution? I won’t get into the details But basically, you know now you can get the solution almost for free But they had were like first to the show to do this And they were charging their clients something like ten dollars a month for it And when we started doing their, the analysis of what their blended margin is.

So that’s the real tip here is to start normalizing your chart of accounts and your P and L. So you don’t have this blended view of what your costs are and your revenue and your profit margins are, you need to understand what your profit margin is for. For each of your lines of service at a very, at the very beginning.

And then you can begin being a little bit more scientific about breaking those out deeper. But the idea here is to understand what is it really costing you for that life. And I’m talking about even the things that partners feel are a cost of doing business, a great example. Is your PSA solution, your documentation solution your RMM tool.

Sometimes partners feel well, RMM tool, maybe not so much, like maybe they charge for that because it’s agent based in many cases, but PSAs and all these other things that you’re paying for in order to deliver service to the client that aren’t in the bundle, we have to identify what that is and what it’s costing us and then spread that cost out across our clients.

So we can ultimately get rich to a per user price. For everything that we, our [00:35:00] cost, the per user cost, I’ll say for what we’re selling. And then we assess what is our target margin that we’re striving to achieve. I used to say it’s 50%. Then a few years ago I said it’s gotta be 60%. I’ve got partners that I work with today, rich, that are targeting 70% gp.

On what they’re selling to their clients every month. So that is, and that, and more and more partners are getting there. But the only way that you can achieve that is to understand what your true cost of service delivery is, including your forecasted hours of labor for each client. So you should identify and say, Hey, for a client this size, historically, we went back and we figured out, it takes us about, 12 hours a month or this kind of a client that looks like this or eight hours or four hours, whatever it is.

And then put that in there and make sure that’s pretty accurate. You know what it’s costing you then you add Your target, gross margin to that to get to your ultimate retail price And so evaluate every one of your agreements right now to identify what it’s really costing you to deliver that service to that client Compare it to what your target Gross profit margin needs to be and make those adjustments with your clients on the way up, you’ve got to raise your rates.

You’ve got to raise your price. I know it’s a difficult conversation to have. But ultimately, that’s what separates your A and B clients from your C, D and F clients.

R: Yeah, you you can’t hit your margin targets if you don’t know your costs and you need to know the more accurately and completely you understand the cost.

The likelier you are actually to hit those margin targets, MSPs are sometimes dismayed to discover that really they’re not making as much money as they thought because they, it turns out they didn’t understand their cost structure fully. And a quick little point before we move on it, the number one expense for most MSPs, as I understand it, tends to be labor.

And so a piece of this story about understanding your costs so you can set your prices correctly is being 100 percent diligent and hardcore about making your techs log their time completely, and just really understanding how much time they’re investing in clients and you’re investing in them cause it’s your number one expense.

All another. Fantastic gem. I love it. Erick let’s we were talking about texts there. Let’s let’s get into people a little bit. Give me a hidden hiring gem, please. A hidden

Erick: hiring gem. All right. All right. I’ll preface this by saying in many scenarios, when I’m working with MSP partners, and I’m sure this.

It’s not specific to our channel, our industry, but in my experience, working with these MSPs, the biggest hiring challenge I see is failing to document exactly what the role is that you are hiring for, what the X, what the performance expectations are for that new hire, and how their performance will be measured.

And how they can realize not only their base comp and things like that, but if you’re dealing with, a, an additional like commission based component or an accelerator or a kicker and things like that to document exactly what the quota requirements or the minimum requirements are needed in order to earn those additional commissions or bonuses and things like that.

Rich in, in just about every conversation I have. When I come in and I do a big consultative engagement with MST partners, we do this people analysis and assessment exercise. And, I use, behavioral profiling tools. I happen to this behavioral profiling. I’m certified in disc and other things.

So we use those all the time, but what we’re really looking for is not simply, are they capable of doing the job, right? But do they understand what the job is? Do they understand how, what the, what their number is? What is it that they’re they have to achieve in order to, qualify for even salary increase and things like that.

We got to get away from this, we’re just going to give you a raise just because you’ve been here for, five years now, it has to be performance based and you have to give that employee, you have to empower them. So they themselves have the ability to achieve that level of performance and take away our, sometimes there’s roadblocks to getting them to achieve that level of performance.

A good example is if a technician is required to hit, 80 percent realization, some people call it utilization, realization, right? And we’re just having them just drive to client locations five days [00:40:00] a week and have them sit in meetings for another eight hours a week. We’re definitely impacting their ability to hit that if we’re not if we’re not, accommodating for that kind of stuff So just in caps to wrap it up document the role Make sure that the performance requirements are in the role so that, and how the employee is going to achieve those and what assistance they can expect from you for getting that.

Now, when the employee signs that offer letter, they know exactly what their role is. You know exactly what their role is and you have a way better shot. At getting them to not only achieve but exceed expectations because they know exactly what they’re supposed to be doing every day And you’re measuring their performance that way and you eliminate some of this role creep I use it role seek instead of like scope creep like some folks I talked to a client the other day rich and this particular employee was You know was having a hard time because they’re asking me to do all these 17 extra things You That I wasn’t expecting when I signed on three years ago and it just seeped that way.

So

Rich: yeah, and part of what strikes me is really useful about that advice I mean you’re documenting the role and the expectations and the resources and all of that you know a lot of that most of that is for the new hire, but it’s also Important for you before you start evaluating resumes and doing interviews to be crystal clear on what it is You’re hiring for so that you’re asking the right questions looking for the right experience and the right skills It’s easy to say I need another tech and i’m sure there are a lot of people who Sometimes find themselves without the person or the skillset they need because they just figured I know what I’m doing.

I’m hiring another tech really spelling that out. I imagine it’s going to lead to a, to better hiring decisions. The the other piece of this though, this ties into our final hidden gem opportunity here. So we just talked about hiring. Now let’s talk about retention. If you set the right expectations with somebody you hire that will.

Help with retention and vice versa. But what, give me another employee retention, hidden gem, Erick

Erick: employees. So you want to retain employees. Now let’s assume that. We’ve done everything right from the hiring, but that hiring tip wasn’t just for a new hires. You should have every role documented.

Every person on the team should understand what is expected of them, how they’re being compensated. What are their opportunities? There are to grow in the organization, right? Because they understand what that role requires and things like that and how they can compete for that. Let’s say all that is working the way it should be working, right?

Yeah. So we’ve got a real challenge today, Rich, as we all know, and, and we’ve talked about this before, is, this, I’m going to just call it poaching, right? We’ve got employees that we thought would be with us forever, and a competitor knocks on the door, a headhunter, and boy, they get offered a few extra bucks, and they’re gone, right?

And it’s hard for us to replace them. So how do we retain employees when we think we’re doing everything right? We have to be doing everything right. Number one. So it can’t simply be about the salary increase. There could be other extenuating factors. If you’re doing everything right. If you’re following the last four tips that we’ve been sharing here on this hidden gems segment of the podcast, then you’re probably being very competitive from a salary perspective and things like that, but employees want to know.

That you care about that, like one of the, five levels of leadership, I’ll recommend that book for those of you that are interested in the second level of leadership is how do you get, how do you influence folks to go above and beyond? Not just punch a clock and come in and out and really own.

Their work and be proud of it and want to contribute more is they have to feel like you care about them personally, what their goals are, they want to feel like you care about their families. So this is something that can be very challenging, rich for a very technically minded. Owner or manager or director or somebody like that is all about, KPIs, black and white checkbox performance.

They’re not, there’s two types of people generally, and, I’m sharing a little bit of kind of behavioral tip here from disk and Myers Briggs and things like that. Everybody has their certain dynamic, but there is a real distinction between people that are more data driven.

Like me, I’m an engineer by, by training and I’m very black and white about things. I like process. I like checklists. I like, calculators and stuff like that. And then on the other side, there are the [00:45:00] people where they’re more about people relationships and all of that. And they’re at two complete opposite sides of the behavioral spectrum.

So when we talk about this, You know This friction that we have as msps between kind of our technical team and our sales team guess what? That’s not something that you know is just fluff That’s a real thing because we are wired completely opposite to each other So when we want to lead our team and we want to retain our team We want to be able to understand each individual on the team We want to build a very direct connection with them understand what their goals are what they You know what their dreams are.

And I love, taking them out to lunch, having meetings with them, understanding more about their family and what they’re going through when they feel like they are seen and heard from a personal connection, even if they are the data driven person, the technician that really, you feel like, Oh, Erick doesn’t need love.

He’s a machine, as long as he’s hitting his KPIs and this or that, he’s fine. Yeah. You may think that, but people like being appreciated. They like being recognized. They like being loved. So create opportunities for direct engagement with your staff to create that retention create opportunities for Recognition in front of their peers.

I remember we used to have you know little competitions in my msp where you know Somebody you know hit a specific goal or if there was kpis or something that an individual would need to hit before their role They would get an award if the team they were on hit it There was another award and some value added benefits, you know we You know, good, simple things, rich okay let’s make sure we have skeleton coverage, but I’m taking everybody to the new star wars.

Let’s go have a thing. Probably somebody today would go like what we could never do that today, Erick, but it’s all about that personal connection and feeling appreciated. And so that way, the next time a headhunter comes knocking or a competitor comes, you have a way better shot of that employee.

Coming to you as soon as that happens to say, Hey, I just got this offer from this over here and it gives you a better opportunity. To maybe try to work something out to meet them halfway or something, rather than you getting the two week notice, because they’ve already decided I’m out and I’m making another, 10 grand.

Rich: Yeah, this is really great. First of all, it reminds me just like a few hours ago, as we’re recording this right now, I was listening to a podcast in which the interview guest was the author of a book called radical candor. And and her whole thing is that the most successful companies Have a culture of honesty and candor and they address problems when they exist and they tackle those problems But they know how to do it in a way that conveys respect and caring to use the word that that used used before it’s not a touchy feely thing people want to know that they are respected and and that they’re Thoughts opinions, feelings or a topic of care by management.

It’s a tricky balance and she’s, written a couple different books about it, but comes to mind as you’re talking about that. And then the other thing is that I think is important there is and it’s like a mindfulness, self reflection detachment it’s being aware of the fact that things.

That don’t necessarily matter to you, may matter a lot to the people who work for you. So if you are in that engineer mindset kind of camp and you really don’t need the as I put it, touchy feely stuff. That doesn’t mean it’s true for your employees. And even if it’s true for, half of your techs, it might not be true for the other two.

Having the the observation skills and the sensitivity to understand How I communicate and what I communicate to this person is maybe going to be a little bit different from what I communicate to that person because they’re wired up a little bit differently, different from each other and different from me.

Yeah, all that’s going to create a culture of of retention.

Erick: Can I add one, one, one, can I add one additional thing? Please. So also have quarterly. And these aren’t like, like we talk about this annual performance review. By the time you sit down with somebody and tell them everything that they did wrong and why they’re not getting, the bonus or raise that they were hoping to get it’s too late.

What you typically hear as well, heck, if you’d have just told me you wanted me to do it that way, I would have done it right. And I missed that opportunity. So have more quarterly and people will say gosh, I don’t have time to do it quarterly. No, not like you do it and not. If you do it annually, it takes you an hour or 30 minutes or 45 minutes.

If you do it quarterly, it doesn’t take that long and use those as more of a leadership, mentorship, and coaching exercises, right? More often and really guide and lead your team into that improved performance that they are capable of executing. So having those more often touches of things like that also, I think helps build more of that [00:50:00] mentorship and closer relationships, not, not to mention that, we’re not talking about personal stuff and how’s your family and your dog and things like that there, but it’s just more of a, you’re being more of a leader.

Your job is to lead your team, the next and every time you hire, no matter, depending on how large your organization is, every time you hire a couple of more team members, you have to evolve. As a different type of leader. And so do your managers and VPs and leads under you. So just keep

Rich: that in

Erick: mind.

Rich: You wouldn’t assess security vulnerabilities once a year. Don’t assess your employees once a year either. And and have that conversation about the assessment with them. Great retention tip, Erick, five up five down. I gave you five topics. You gave me five hidden gems. You have aced the hidden gems test.

I thank you for that. Thank you for putting me on

Erick: the hot

Rich: seat today, Rich. I had a lot of fun doing it. I did. So did I actually, I I enjoyed that folks in our audience. If you did too, let us know and we can revisit. This this game down the road and play another round of Hidden Gems. But what we’re gonna do now is take a break.

And when we come back on the other side, Erick Erick will now be back in the co host chair. And we don’t really need to talk further about the interview we just did, but we will have a little bit of fun and wrap up the show. And that’s coming right up, so stick around, folks. We’ll be right back.

Okay. Welcome back part three of this episode of the MSP chat podcast. And as folks in our audience Erick are examining and appreciating the the hidden gems you’ve left them with let’s just go ahead. I, at this point, I think we’ve got time. For one last thing on this episode of the show.

And this particular story is not going to be new information, I think, for a lot of folks in the audience. This was actually all over the headlines. Joey Chestnut champion hot dog eater Joey Chestnut recently set a new world’s record for hot dog eating. He ate 83 hot dogs in 10 minutes.

Now, let me just call this up here, Erick, because, again it’s not as if it’s new information that this happened, but it just got me to thinking as I was reading about it. What, 83 hot dogs, 83 hot dogs, I did a little research, that is 12, 450 calories in 10 minutes. That, and it’s what 1743 times.

Your daily recommended sodium allowance In 10 minutes and then this was the best part. I the first question I had is 83 hot dog. What does that even weigh? Judging by the average weight of a hot dog. That’s a 132 Or no, excuse me. That’s 8. 6 pounds Of hot dog and that’s without the buns. I just looked up what does the hot dog way multiply that by 83 eight pounds of hot dog and so that, you know what, 83 huge number.

Of course this got covered in the media, but now I really fully appreciate just what an accomplishment if that’s the right word, that was.

Erick: Wow. That’s pretty incredible. And I remember the whole controversy with Joey Chestnut and, the fourth of July, thing that the, he was always part of, I think it’s, is a Nathan’s famous that has the thing and he went and did something different.

I thought if I recall his previous record was something like 77 or 78 hotdogs. So he’s definitely exceeding his caloric intake, his sodium intake and everything else. And I just hope, if there is something like a healthy hot dogs and constitution of it, I hope he’s. Using those

Rich: well, all right.

Thank you so much for joining us on the show this week folks That’s all the time we’ve got for you We’re going to be back in a week with another episode until then I will simply remind you that we are both a video and an audio podcast Which means if you are listening to the audio version of the show, but you’d like to check us out on video What you want to do is go to youtube look up msp chat You’ll find us there if you are watching the video version but you like to listen to audio podcasts, too Go to wherever it is you get those Look up MSP chat.

You’re going to find us there too. Nearly certain of that. Either way, please subscribe rate review. It’s going to help other folks like you find and enjoy the program. This program is produced by the great Russ Johns. It is edited by the also great Riley Simpson. They are part of the team with us here at channel master.

They would be happy to work with you on a podcast of your own. And that work is really just a tiny fraction of the stuff we do at channel master for our clients. If you really want to understand what we’re all about, go to www. channelmaster. com channel mastered has a sister company called MSP master.

That is Erick working directly with MSPs to grow and optimize their business. And you can learn. About that business at www. mspmastered. com. [00:55:00] So once again, we thank you for joining us. We’re going to see you again in a week. Folks, Erick and I will probably be on the road when we do that, but we will see you again in a week and until then, I will simply remind you, you can’t spell channel without M S P.