Episode 49: Put a Dollar in the Cuss Jar

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No actual cussing on this episode. Just Erick and Rich discussing Pax8’s new partner program and essential service quality KPIs every MSP should track. Then they’re joined by Rayanne Buchianico of ABC Solutions for a conversation about CFOs and why way more MSPs should have one. And finally, one last thing: An AI hallucination that left a lot of Dubliners disappointed on Halloween.

Discussed in this episode:

AI hoax causes thousands to show up in Dublin, Ireland, for non-existent Halloween parade

 

Transcript:

 

Rich: [00:00:00] And 3, 2, 1, Blast off! 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 the chief content officer and channel analyst at Channel Master, the organization responsible for this show.

I am joined this week as I am every week by your other co host, our chief strategist at Channel Master, Erick Simpson. Erick, how’s it going?

Erick: It’s going well today, Rich, in between long airline flights for both you and I.

Rich: Regular viewers and listeners will know that we did the last episode of this show side by side physically at the Kaseya DattoCon conference.

You, tomorrow as we record this, are flying off to Ingram Micros One conference. I am flying off to, To the ConnectWise IT Nation Connect Conference. And we both managed to get in a few days at home in between these two road trips. Did you catch up on your sleep? Relax a little bit?

Erick: The only thing that helped me, Rich was a daylight savings time.

So I did regain an hour that first night or two. So that definitely helped, but yes, we are back on the road tomorrow, dividing and conquering as they say, and we will be conducting our next MSPChat podcast. While we’re at two different locations rather than side by side at the same event.

Rich: I should say coming up on this episode of the show, we have an interview recorded earlier with Rayanne Bucianico about CFOs and what it means to have a CFO if you are a managed service provider, that was actually recorded at DattoCon.

We are physically in the room together for that. That’s coming up. But for right now, let’s dive into our story of the week which comes to us from PAX 8 Erick, as we’re recording this just hours ago, PAX 8 announced that they have a partner program. Now on its own, partner program news is not a bombshell in the channel.

Partner programs are being rolled out or revised pretty much every week. This is a little bit different, I think, in, in some ways that are interesting. First of all according to our friend, Jay McBain of Canalys cloud marketplace growth just in 2025 will exceed 45% also in June, Pax8 officially rolled out their new marketplace platform, something that they’ve invested multiple years of development effort in, not to mention many millions of dollars.

So it’s a big deal for them. As you and I know, and we actually, this came up on a, an episode of the podcast that we recorded with Carol in April back in August. Pax8 no longer refers to itself as a distributor. They are a marketplace. This is now what they do. And I went her twice in recent months when I’ve been on an interview with Pax 8, if I’ve called them a distributor, they have very very gently, very politely said, that’s not what we do anymore.

We are a marketplace. And when you do that, if you’re a company like Pax8 and you say, we’re not a distributor, we are a marketplace, you’re actually changing the definition of who you compete with a little bit. So in addition to the companies that they have been competing with for a long time, TD Cinex, SynchroMicro, D& H, all the familiar names.

Now that they are in the marketplace business, they are also to some extent competing with hyperscalers like AWS and Microsoft and with pure play marketplace operators like tackle and app direct. So big growth in the marketplace space. MSP for MSP, there’s no longer, should I not be investing in marketplaces?

Yes, absolutely. You should be. This is increasingly where your customers and therefore where you will be doing business in the future. The question is which marketplace or combination of marketplaces should you invest in? And if you’re Pax8 and you want to be the answer to that question, what do you do?

Maybe. Yeah, introduce a partner program of the kind that vendors have had for many years, but dare I say distributors, they’re not a distributor anymore, but when they were distributed companies like that, they have communities, but not necessarily partner programs per se. So the new Voyager Alliance program from Pax 8 follows some.

pretty familiar conventions of channel partner programs. They have a tiered structure. As you rise through the program, you get access to discounts on professional services from Pax8. You get access to elite levels of technical support. You get access to new financing options. Not right now, but at some point in the future PAX 8 will be adding a rewards program to Voyager Alliance such that for every dollar you spend with PAX 8, you accrue points.

You can cash those points in for marketplace purchases, for training and enablement, A [00:05:00] number of other different things. So interesting kind of sign of the times. Erick here, it I was talking about the distributors like TD Cinex, Ingram Micro, DNH, et cetera. What this might be pointing us to is a future in which for companies like that.

And marketplace operators like Pax8, it’s no longer enough just to have a really great platform marketplace, which Pax8 feels like they, they have now, and it might not even be enough to have communities and training and enablement programs of the kind that Pax8 has had for a long time to really compete and win in this marketplace, you might really need going forward to introduce the kind of program that incentivizes and rewards MSPs for investing their marketplace business with you.

And I, right now, I don’t know a whole lot of other Parker program offerings of this kind out there in the marketplace world. So interesting change for PAX 8.

Erick: Yeah, Rich, definitely redefining what we all expect when we hear the term marketplace versus distributor or distributorship. So I’m going to coin the phrase, I’m going to say, Rich.

So every time we say distributor, when we should be saying marketplace, we need to put a dollar in the vendor marketplace cuss jar, that should be the title of this episode, by the way, so I nominate that, but it’s striking to me how,

Whether we’re a marketplace, a distributor someone that MSPs look to partner with, it strikes me how similar the needs of the MSPs are that drive some of the adjustments that are being made specifically when I heard you say, Oh, it’s a point system. I thought, Oh, so the parallel for a distributor dollar in the customer is.

MDF, right? So MSPs like what they like, right? Rich, we’ve talked about this on the show many times before. They want to know that, the marketplace relationship with them is good for their customers or clients that they want to make sure that it’s good for their technicians and staff, like there are, it doesn’t make it easier for them to subscribe to services as it make it easier for them to onboard clients and provision them and things like that, and ultimately is it.

Is it good for the MSP business owner or the business itself? How much margin you’re doing it? The other things that we talk about are integrations with billing systems and PSAs. We know that PAX 8 does that very well. The other things that we talk about are automation and support, pre sale support, marketing support, things like that.

So there are parallels, there are things that MSPs like, and I see PAX 8, it sounds to me like they are addressing the needs of the MSPs with this partner program now, that is MSP.

Rich: Yeah. And remember, they, they have been doing work of that kind for, and with partners for a long time our mutual friend Rex Frank has been at Paxage for a number of years running this very sophisticated partner training and enablement program and helping MSPs grow and improve the performance of their business.

It’s this Kind of financial incentive, financial in reward angle. That strikes me as new here on this idea that they are going to pull you in to their channel, not just with the quality of the platform, which is a huge point of emphasis for them, but with this other somewhat more tangible set.

Of benefits of the kind again, vendors have been doing this forever. But it’s a little bit new for the the Pax Eights of the world. And I’m not calling on the distributor because I don’t want to put a dollar on the cup.

Erick: Just did, by the way, but go ahead.

Rich: You know what? While I go fish up a dollar bill let’s move on to your tip of the week. Erick, what do you got for us?

Erick: It’s all about establishing clear metrics for service quality and performance as MSPs mature, they need to be aware of delivering services in a consistent manner.

Efficient, profitable manner that allows them to reduce client churn, to keep them from asking for their favorite engineer all the time to add value to their organization when they’re looking to, a future exit, things like that. And of course to allow them to profit in such a way so that rich, they can reward their existing staff, keeping them from, looking elsewhere in, and also to grow the business and scale it broadly.

So I came up with. Just a couple of tips on defining KPIs, and they go beyond what I think a typical technician or engineer would consider something that needs to be tracked. Now, of course, I’m going to include the [00:10:00] typical service desk KPIs and the project management KPIs, but I want to also throw in the bag customer satisfaction.

APIs employee satisfaction, APIs, marketing, KPIs, sales, KPIs, things of that nature. So rather than go through the entire list of 150 APIs that I could just probably, have a conversation about rich, let’s take probably the most opportunistic ones and share with our audience, the ones that I think are valuable and track.

On the service desk side, we’re looking at some of the common ones you would expect. Tickets received, tickets resolved, time to first response, first contact resolution rate, average resolution time and then I go beyond. Here are the extra ones. Cost per ticket, profit per ticket, and then SLA success rate, we expect that, and then technician utilization slash realization metrics.

So the ones that I’m going to pick out from that. List are let’s see, cost per ticket. How do you determine cost per ticket? Rich, you need to understand what your hourly cost of service delivery is for the technician that’s closing that ticket. So doing a little math. It really ends up being taking what you pay them in their W2 at the end of the year, everything, benefits and everything, and then dividing that by 2048 or 2060, whatever your preferred, hours are per work hours per year are, and then you get a per hour rate.

And then you can use that formula rich to determine how long did it take this technician to close that ticket and without getting into maybe the next tip of the week will be, determining how to identify and route tickets so that you’re delivering, you’re routing the tickets to the most efficient and profitable technician, rather than having.

Tier three dragon slaying engineers close password reset tickets. You know what I mean, rich? So those are some of the ones that I like on the service desk KPI front. Now, let me jump into project management KPIs. This is an area rich where I find a tremendous opportunity to help MSPs mature into a very oiled.

Kind of a project management framework. And it includes things like, risk management and change management and communication management, things like that. And making sure that we are implementing change appropriately to eliminate scope, creep and scope seat. But just some of the top ones that I like to track number of active scheduled projects that we have on the board.

Overdue tasks. Missed deadlines, percentage of tasks completed, resource utilization and realization, just like on the services, because Rich, many times we are borrowing technicians who are wearing many hats to do some of the stuff. And once we figure out what their hourly cost of service delivery is, we can determine their cost and profitability for their contribution to the project completion as well.

A percentage of projects completed on time and on budget, our internal budget. Not the client’s budget number of changes requested and or approved budgeted cost actual cost gross profit net profit So those are some of those there’s also some service dispatch kpis You know how many level one incidents are closed within the expected time frame?

I like to get down to where we’re closing level one tickets less than 30 minutes rich So that means that a level one technician can close You Potentially 16 tickets per day. Think about that. That’s a huge difference compared to some MSPs that kind of have an expectation that, you know eight, eight tickets a day or six tickets a day is probably right now when we get efficient and effective, we can close many more tickets a day and only send tickets to level one technicians that they can close.

Don’t send them a ticket that they have to escalate out. But I’m coloring outside the lines now on, on these tips of the week. So those are a few rich. And then of course we established marketing KPIs, right? Cost per client acquisition, things like that. Marketing costs leads generated. And then of course, sales APIs, the activities that lead to sales.

What are those critical activities that we expect our sales team to execute? And then how good are they at achieving those KPIs? It could be calls per day, appointments, set proposals. QBRs scheduled and completed, things like that.

Rich: So I have I have two thoughts about the, so first of all it’s really, so when I hear service quality, at least I tend to think of that as something that you look at from the customer the end user’s point of view how quickly are you resolving their issues?

How effectively are you [00:15:00] resolving their issues? What’s really interesting about a lot of the metrics or KPIs you were talking about there, Erick, is they are more from the MSP’s point of view, a different way of thinking about service quality. Is how quickly are you resolving tickets? What is the cost per ticket?

These metrics matter as well. So the idea that you need to be looking at and measuring service quality both from the standpoint of the customer’s point of view, but also from your business point of view I think is an interesting thing. The other thing, and we don’t have time for that this week on the show, but let’s put a pin in it for a future episode, because there were a lot of KPIs that you ran through there.

They’re all very interesting. But you can’t put a hundred KPIs on a dashboard and keep track of all of them. So the idea of how do you prioritize? How many do you track actively? How do you pick those? I think it’s a really interesting conversation topic for a future episode of the show.

Erick: Yeah. I look forward to diving into it rich because yeah, there are, some required KPIs and there’s some optional ones.

Then as an MSP just starts out. The required ones are what we focused on. And as they grow, then you get some of these optional ones that truly start impacting that client experience. And I think that’s what you’re talking about, Rich is if we’re doing in the KPIs that I showed, if we’re doing all of these things correctly, then we are delivering a better client experience.

And I’ll, and remember one of the first KPIs I mentioned was client satisfaction. That has to be our North star as we make adjustments here. And again, Getting clients off of wanting to work with just one favorite engineer. If we’re doing everything consistent and standardized manner, and everyone is doing the same thing, the same way, I E I’m going to do a password reset the same way I’m going to, fix that printer issue the same way.

Then we break that desire or we have a better chance of getting clients to work with the next tech available technician rather than their favorite technician who may be on vacation for the first time in a year. With his family and they’re going to wait till they get back to get solved.

I’ve had that actually happen.

Rich: Great topic, Erick, more to come. But we’re going to come back and get back into this in a future episode of the show. Until then, we are going to take a quick break right now. When we come back on the other side, as promised, we will be joined. By Rayanne Buccianico of ABC Solutions for an interview that Erick and I recorded with her in person at Caseta DattoCon last week.

It’s gonna be about what it means to be or to have a CFO. If you are a managed service provider, it’s a topic that doesn’t get discussed nearly enough. It’s a really interesting one. I think you’re going to enjoy this interview. So stick around. We will be right back

and welcome back to part two of this episode of the MSP chat podcast, our spotlight interview segment, which as you can see, we’re doing in person at DattoCon, which took place last week as you are watching or listening to the show. And we are joined by our longtime friend, Rayanne Bucianica. She is the founder and owner of ABC Solutions.

She is one of the foremost both Autotask, but also MSP Finance experts I know in the industry, I have ever known in the industry. And Rayanne, welcome to the show.

Rayanne: Thank you very much, Rich and Erick. It’s great to be here with you guys.

Rich: So the topic of this interview is a familiar one to you, but I think an unfamiliar one to a lot of folks in our audience, which is exactly what the CFO role could be or should be for a managed service provider.

And I’ll give you just a little bit of context for why this topic is on my mind so much. Sometime back, I was at a TD Cinex event and their CFO was on stage and he was talking about how. If you work in finance long enough, you get to know the private equity playbook. And he was encouraging the partners in the audience to just run the same plays as private equity on your own.

You don’t have to sell to private equity. You can just do what they do and you’ll generate the same kind of growth. And I got a chance to ask him at one point what are those plays? And number one play in the book was hire a CFO. The first thing a private equity company will do is bring in a CFO because that person is going to Find waste and opportunities to, to grow.

And and yet in my experience, very few MSPs have a CFO. So why is that? What you’re thinking about? Why so few

Rayanne: For starters, I want to say that a lot of, at least the smaller MSPs, they often like to believe they can do it all themselves, right? So they start off and many of them get that entrepreneurial seizure that we’re also very familiar with, and as their business grows, they beyond [00:20:00] them, then they start to drop balls left and right.

And that’s when they start looking for outsourcing, or building an accounting team, building, somebody to do the bookkeeping. And then after a while, when you realize you can’t hire a 25 an hour bookkeeper and get quality books that they need help. And then they turn to the peer groups.

And so the peer groups help them understand where they are lacking and with some things that they can do to improve. And those peer groups are great. Like they are great for mentoring. And, but when they get back to the office, they still don’t have anybody to produce the work. So then. After a while as the company starts to mature and or even as they start to perhaps start thinking about an exit.

That’s when they get really serious. And and I always like to tell people, you want If you’re looking for a CFO, you want to start early, like you don’t call and say, Hey, I want to sell my business in six months and expect us to work miracles, right? Because these things don’t happen overnight.

And it’s usually about three years, the first year is. Identifying the problems, organizing the finances and and really starting, to understand the profitability in different sections of your business. But beyond that, after that, then you can start to make things more efficient, optimize and and promote growth and viability of the company over time.

So I don’t know if I answered your question, but I hope so.

Erick: Absolutely. Rayanne, let’s dig a little bit deeper like you said, MSPs start out, they find an accounting person, maybe a tax preparer along the way, and then as they mature, the need for a CFO becomes evident, but how does the CFO play the best role for an MSP Along with some of these other folks that they’ve got on the team, they’ve got the account, they’ve got the tax report.

What is it that the CFO brings to the relationship that the MSPs should pay attention to? And, When is the right time? Is there a fractional kind of a decision? Is it a full time decision? Give us a little bit more in how the team is built and the value that the CFO really brings to supercharge that MSPs performance,

Rayanne: right?

That’s a great question. Even at, even at the smaller level, let’s say a million five and top line revenue, when things that worked. When you were sub 1 million, no longer work. And you need that higher level of expertise to, and forgive the cliche, go to that next level.

So the CFO that you bring in, even if it’s fractional for starters, you may not need a full time CFO until you’re, between that. Five and 10 million number, in the first, from the one to five million, you could probably easily deal with a fractional. Actually, some of our clients are 10 million and above, and we’re still fractional.

Why? Because we know The business. And, so it’s not just a matter of looking at numbers and relate and relating, this number to that number, but it’s understanding the entire business as a whole, what, how is the service delivery? Running is the service department running optimally.

What about the, co managed systems, and really looking at all of the different tools, all of the processes and being part of the team for every one of our CFO clients, we are a part of the team. I go to their leadership meetings. I have weekly staff meetings. I’m learning what’s on what’s going on in the pipeline, what changes they’re making.

I help them make those decisions. And I am literally, almost. I dare I say an employee or a team member of the company.

Erick: So would it be fair to say then that kind of the accounting resource and the tax reporting resources are more transactional relationships and that CFO is more transformational in

Rayanne: that respect?

Absolutely. Absolutely. Yeah. Cause you know, you have to understand what’s going on. You can’t just. Take an hour and look at these financials and think that you’re going to be able to transform this company magically into a profitable organization. You have to roll up your sleeves, get involved, and earn the respect of the entire team.

That’s another, that’s one of the other challenges, I think, you bring in this CFO, like the Bob’s, come walking in the consultants. And But, and then you have to earn their respect. You have to show [00:25:00] them the value that you’re bringing to the table and let them see it firsthand, and then you’re accepted as part of that team.

Rich: You’ve probably already Touched on a few examples of this but what are some of the pain points? What are some of the opportunities that a CFO can an MSP address? And, and particularly that MSP owner or founder who wouldn’t otherwise know how to deal with these issues.

Rayanne: Yeah and I’m just going to try and grab a couple right off the top of my head.

One one company contacted me. And they they were trying all of a sudden and they couldn’t understand why they were no longer profitable and they were just bleeding money hand over fist. And so what we did, the first thing I did was a labor efficiency, calculation, and I was like I can see the problem.

The problem is that you have too much staff and And not enough revenue, so you can either reduce the staff or increase the revenue and and let’s take a look at why the staff is not, running optimally. And so then we start looking at, utilization and I built these different spreadsheets, where I grabbed the information from the PSA, I grabbed the information from the accounting system and I marry it, and then I can start to look at, this customer, is requiring 20 hours a month and this other customer is requiring 60 hours a month.

But look, it looks like they’re paying the same amount of money. Let’s investigate that. So we start to rip apart all of the information and really, like I said, roll up your sleeves and dive in. Others. Another thing is the cash flow, not understanding exactly where their money is going and or even how to get out of it.

Sometimes by the time they call us, they there’s already no more cash left in the company. There’s no more reserves and and they’re. And they’re thinking I need to close my doors now, hang on. You don’t need to close your doors. What we need to do is just take some drastic steps and let’s dive in and figure out what’s going on.

Yeah and again, it’s knowing it’s knowing the business, the industry, the client, the company, and all of it, it just all comes together.

Erick: Ran, you talked a little bit about kind of timing, like when Should an MSP or a business owner start really thinking about, bringing on a CFO, you gave us a range of like maybe a million, five and above.

There’s also the benefit that I’ve seen, when you work with clients and gotten them in that more fractional role to start getting them thinking early about what they want to do with that organization, right? What is the exit strategy? Do you want to grow through acquisition? Do you want to get to a point where you exit?

Can you walk us through how you have those conversations with a client and how you guide them in terms of? Preparing for that ultimate, milestone, because unfortunately in some cases, we both know organizations that, or business owners that have had to exit their businesses way earlier than they were ready to, because of something that has happened in their lives that has forced them to do that.

So that I know I threw a lot at you there, right? But how do you have the conversation with a potential. New prospect that is maybe an early stage business owner and give them that long view that says, look, it’s easier if we start now. What do you do to get them prepared for that? And then how do you?

Engage with them and then have more impact as they mature.

Rayanne: The first thing that I do, Erick, is I build the rapport with that potential client. I I have an open discussion. I call it a discovery session where I’m asking a lot of questions. How long have you been in business? How big is your company?

How many employees you have? What’s your top line revenue? And and. What are your plans? What is your vision? Help me see your vision. For your company. And then once I understand what that vision is, then I start to zero in on specific areas. And then I ask more, probing questions and how long has this person been with you?

And how long is that person? And what is their role? And who does this? And who does that? So I just, I really dive in and ask a lot of questions. And then as I’m getting those answers, I, I start to build a plan. And let’s, what do we want to work on first? What’s our priority?

Is our priority cash? Is the priority profitability? Is it growth? Is it acquisition? And of course, I always encourage people to look at To have your [00:30:00] company ready for sale at any given time, because you don’t know when that life changing, that life altering event just comes up, somebody in your family gets sick, you get sick, somebody gets hurt.

And there should always be a process or a plan to keep the company moving forward, whether it’s with you or with somebody else at the helm.

Erick: And is there a specific? Time frame when folks should start thinking about this, if, I remember when I had my MSB boy, if we would have had the guidance of someone like you earlier on, we probably would have been profitable much quicker.

More quickly because we were banging our heads against the wall, making all the mistakes that aren’t worth the communities then. And there weren’t the, the leaders and thought leaders and influencers that that we could, rely on. And we didn’t think about engaging with a CFO.

We probably would have been. Better off sooner than we were.

Rayanne: I’m going to tell you a really fun story. About five years ago, it was just before the pandemic, it was 2019. And two gentlemen from the Midwest contacted me and they were starting up this MSP and they had plans. They wanted to, they wanted to grow their company and they’re, they were planning to sell it.

I dunno, six, seven, 10 years down the road. We’d like to grow this. And and Oh, by the way, we’ve heard that you can help us, maintain our company and get our company, ready for sale. And I said, but do you have any clients yet? I said, no, not yet, we’re going to get, make that happen.

And we have some big plans to grow this company. And we just, we don’t want to be bogged down with the finances. All right. So they started. They started off, they were this big, and we, we just did the, we managed their payroll, their bookkeeping, their sales taxes, and their corporate tax filings on an annual basis, right?

And then they started to grow, and then they started to grow. And that was 2019 and it is 2024 and they just sold their business for 3. 5 million. And, and throughout the entire due diligence process, though, one thing I kept hearing from them was how organized all of their documentation was.

So these two gentlemen had the foresight to know that their ultimate goal was to sell this company. And they didn’t want to have to deal with, figuring all of that stuff out, hand it off to somebody in the beginning and and talk to them. I met, I would meet with them at least three or four times a year, tax planning, discussions, vision discussions, things like that.

And ultimately our goal was to get them, to grow and make money. Their company valuable to others, and it apparently work.

Rich: In a way, the moral of that story is it is never too early to at least bring in a fractional CFO, if not a full time CFO. For the folks in our audience, though, who do feel like, I’m below that 1.

5 percent. Million number you were talking about. I’m not quite ready to either pay a consultant or hire someone. What, I’m curious what they can do to start thinking a little bit more like a CFO. And this is a topic we’ve discussed many times in the past. What are some of those core finance related metrics?

But a CFO is going to start looking at right away and an MSP might not really know to pay attention to.

Rayanne: Yeah, actually, I built I built a sheet, I call it key financial trends and and it tracks top line revenue growth. Gross profit growth, EBITDA growth cash flow growth and accounts receivable turnover.

Like those are my five core things that I keep my eye on, and I can use that information to to come up with a very simplified valuation, which I actually built into this worksheet. I’m happy to share it with you if you would like, and then you can put a link to it in to it. On, on the podcast.

But I’m going to say you want to focus on, oh, and there’s one more labor efficiency. You want to make sure that the gross profit of the company before direct labor labor should be four times that number. Or, The gross profit should be four times your labor number. I scratch that reverse it.

That’s actually built into my sheet as well. So you can you want to make sure that the revenue that you’re getting per technician, per direct. Labor technician is going to be, about 25%. Add the most of your top line gross profit margin before labor.

Rich: Let’s talk about a few other metrics [00:35:00] on that lister.

So you, there was a cashflow metric there, there was a what? Accounts receivable turnover me. What are the the baselines, the targets that you’re looking for there and why are those numbers important?

Rayanne: Yeah. We like to see accounts receivable turnover. As a higher number, because that means the higher the number, the faster your clients pay.

And if your clients are all on auto pay as they should be then that number is going to be super high. Also, another another metric that I measure about accounts receivable is the percentage of. Revenue that is in accounts receivable. If you have 150, 000 of, invoiced sales in a given month, and 125 of it is still in accounts receivable at the end of the month, that’s that’s dragging down your cash.

You’ve got to get better at collecting your accounts receivable

Rich: and

Rayanne: cashflow. We, one of the things, one of the things I see so many MSPs do is pull all of the cash out of the company. They take all of the profits out. And so while the company may be viable, if the owners are, are robbing the company of all of its operating cash at the end of the month, then there’s no money left over to pay, or to grow or to market keep the bills paid.

So we like to measure the cash flow. To make sure that the cash stays in the business and grows, month over month and, there should be a savings account, a money market account, an investment account, where you’ve got at least a solid three months worth of operations working capital, burn rate whatever you want to call it in a in a savings account earning interest.

Erick: Rhian, you mentioned So it’s a big mistake that some MSPs make is taking all the profit out of the company. What’s setting that one aside? What’s the biggest mistake MSPs make just in general in their financial operations?

Rayanne: If I had to pick one and I wasn’t prepared for this question, but if I had to pick one, And I would say maintaining.

a worker who isn’t producing. You have somebody, you love them, they’re part of your family, they’ve been with you, they’re loyal but they don’t produce. And you’ve got to get them out of that wrong seat, if you can move them from, from direct labor or, into an account management or some other role, if the longer you wait to identify somebody being in that role.

wrong seat, the more it’s costing you money. That’s probably the biggest one I see because it’s really hard. I’m just going to say this during the pandemic, a lot of us, a lot of us hired any warm body that walked through the door two years later, we’re recognizing now that. We probably should never have hired them and they need to go and we don’t have a workforce problem so much anymore, so we don’t have to put up with the mediocrity that we did during the pandemic.

Am I wrong?

Rich: And you’re reminding me of something. You wrote for us at ChannelPro when I was at ChannelPro about the importance of culture and in hiring and the importance of being willing to let go of somebody who’s maybe really good at their job, but not a culture fit.

Rayanne: Oh, gosh. Yes. I had some of those, right?

Like they just, toxified the entire, organization, like the amount of damage that one person, technical skills aside but the amount of damage that person can do to a company and how quickly they could take a company down is really eye opening.

Erick: Yeah. And you never, you always hear From staff and clients after you exit someone that was that toxic.

You hear the stories and you’re like, wow, why didn’t anyone say anything? Why didn’t I have the awareness?

Rayanne: Because, and you’re right when you do let them go. The whole office breathes a sigh of relief and they’re like, oh, thank God. And you’re like, why did you not say anything?

I know we’ve all been there, I think.

Rich: So you spoke about some metrics that people can pay attention to at any stage in their evolution to think more about more like a CFO, you’ve spoken about hiring a consultant or a fractional CFO at some point in time. If you. Grow big enough.

It probably does make sense to have a full-time, CFO on board. What are the attributes? I mean it’s specifically if you are an MSP, what are the attributes to look for when you go to market and you’re trying to recruit and hire A CFO?

Rayanne: Oh, that’s a good question. And. First, [00:40:00] talk to some of your peers.

Who are they using? What does what does that CFO do for them? And when you are when you’re looking or meeting with possible CFOs, have a list of questions, very specific questions. So often people will ask general questions and you will get general answers. And but. Ask them, how would you handle this particular situation?

Or, what sort of reports do you want to look at? Can you give me a list? And they should be able to, say, these are the things that I’m going to bring and and hold them to that. You make sure you get a statement of work, make sure you get a list of deliverables and. And the timeline for those deliverables, too because he wouldn’t make sure that there’s a real good set of mutual expectations.

What can you expect from them? And what can they expect from you? And so I think that’s the 1st place to start is define exactly what it is that you’re looking for and make sure that, the person that you hire can answer those questions. Effectively during that first conversation, if you get one chance to make a first impression,

Rich: I’ll go ahead and say it. They can go out and look for a CFO. They’re going to have trouble finding somebody more experienced specifically in the world of managed services than you. For folks in our audience who would like to get in touch with you. Follow up on some of what you said here and maybe investigate working with you.

How do they contact you?

Rayanne: You can pretty much find me on all of the socials. There’s not too many RaeAnn Butchianikos in the world, just saying. But our website is abcsolutionsfl, as in florida dot com, abcsolutionsfl. And you can find me probably on most of the Facebook MSP groups and on linked in.

I’m on a lot of the linked in groups. You should have no problem reaching out. And thank you for that plug there. I know that there’s a lot of great MSP, CFO companies out there. Some of them just provide you reports. Some of them provide you some, guidance in some meetings. Some of them provide a little bit of this and a little bit of that.

But the one thing I think that separates us is that we will dive in and, and help

Rich: And we will share the or a link to the financial metrics worksheet that ran was talking about. That’ll be in the show notes. Folks. Check that out on some of the contact information details. Ran just shared ran. Thanks for coming on the show with us.

Rayanne: Thank you very much, Rich and Erick. I really enjoyed talking to you.

So I’m excited to be chatting with you guys today. All

Rich: right, so we are going to take a quick break here. When we get back on the other side, Erick and I will share some final thoughts about this conversation with Brianne, have a little bit of fun, wrap up the show. Stick around. We’ll be right back.

And welcome back to part three of this episode of the MSP chat podcast. Erick, I the impetus for this interview, the reason I reached out to her and knowing that the three of us were going to be at at this conference together and asked her to come on the show and talk about CFOs.

It goes all the way back to a presentation I saw, gosh, it’s got to be two, three years ago at a TD Cinex event where. Their CFO was on stage and talking about the importance for channel partners of having a CFO. Basically When a an MSP is acquired by a private equity company, pretty much the first thing they do is bring in a CFO, and even fairly large, sophisticated MSPs sometimes don’t have one.

So I really wanted to get into this topic with somebody who understands What that person does, why it might be really valuable to you today and going forward as you grow the business to have somebody in that role, which may not feel quite as central or urgent as some of the more familiar roles inside a an MSP organization.

Thanks to Teran for joining us and shedding some light on that.

Erick: Yeah, that was a good call, Rich. And, you and I have known Ray Anne for many years and appreciate the work that she does for her clients. And, it, the CFO role is a very strategic role in, in many cases.

And I think, again, it’s a maturity kind of a alignment conversation, as MSPs begin to grow and scale. Having that strategic oversight, even if they start off with a fractional resource for a CFO at first, it gives them a different way to look at finance and look at profit and look at growth strategies and rich [00:45:00] someone that they can trust to hold them accountable.

Instead of trying to figure out, what the next strategy might be is to give them the Demonstrate the value of the strategy and then hold them accountable and then measure that growth forward. The other point that I’d like to bring up is, yes, CFOs are a critical role, especially during an MNA engagement.

They’re definitely. Critical during due to the financial due diligence during the post merger integration process. The first two departments that we typically integrate during an acquisition or, on day one are going to be and potentially begin strategizing way before that are going to be finance and HR.

The two, what, two, two of the most critical units in a business and the CFO and facilitate and accelerate due diligence because they have the ability to deliver the data that can bring confidence and trust in the buyer. They can argue about valuation because they have the numbers and they can get them involved in those discussions.

And then just make sure that during the integration process, That things go smoothly between the different. Buyers finance department, their finance department. Moving forward and then have established a process or we’re measuring financial performance. And that’s also helpful in getting the buyers confidence up and in many cases that confidence.

The higher the confidence level is, the more attractive acquisition target is, the higher the valuation potential.

Rich: And I’ll just quickly point out, cause it’s something that we’ve talked about before you don’t want to wait until three months, six months before an M and a transaction or an exit to get the company into financial shape.

You really want to be working on that literally for years in advance. And don’t put off that, bringing in somebody in that finance role you may be closer in time to when it makes sense for you to have a CFO fractional or full time than you think depending on what your your exit horizon looks like.

Erick: Yeah. And as we mentioned during the interview with Rayanne, sometimes, tomorrow isn’t promised. Anything can happen. So it’s just best practice, best business practice. To make sure that you’re operating a lean, profitable business in any event and that way you’ll be ahead of the game.

When someone comes knocking or when you were forced to make a decision to sell the company.

Rich: Agreed. And folks that leaves us with time for just one last thing. And as Erick and I are recording the program right now, it’s just a few days after Halloween. As you are listening to or watching it, it’s probably more like a week, 10 days after Halloween.

But we’ve got a Halloween story for you anywhere because it takes place at the intersection of Halloween. And artificial intelligence. It comes to us from Dublin where roundabout Halloween, some folks started noticing reports on a website, an AI generated website hosted in Pakistan announcing that there was going to be a Halloween Parade in Dublin, a specific starting point was identified.

And this was not just a Halloween parade. Erick, this was a Halloween parade that I guess used to be a big tradition in Dublin. The, it, it stopped happening in recent years, but people that, Oh, okay. They’re going to start doing that beloved parade again. And word gets around pretty quickly and hundreds, perhaps thousands of people line up on the streets of Dublin.

Excited to witness this parade, which was, as I’m guessing you figured out already, a total hallucination. There was no parade. No parade took place. But this AI generated website did manage to to motivate a large number of people to get out into the street and get excited about something that unfortunately, very sadly, they they were disappointed not to receive.

Erick: Rich, your intro to the story. I thought you were going to channel Rod Serling there, the intersection between fantasy and reality in the Twilight Zone.

Rich: Indeed, hallucination and reality in this case. Folks, that is all the time we’ve got for you on this episode of MSP chat. Thank you so much for joining us.

We’re going to be back again in another week’s time with another episode for you. Until then, I will just remind you, this is both an audio and a video podcast, which means that if you’re listening to us, but you’d like to check us out on video, it’s a very easy thing to do. You go to YouTube, you look up MSP chat, you’ll find us there.

If you’re watching the YouTube video, but you’re into audio podcasts, go to Spotify, Google, Apple, wherever it is. You get your podcasts. You’re going to find us there too. And however you find us, please subscribe, rate, review. It’s going to help other people find and enjoy the show. Just like you do. The show is produced by the great Russ Johns.

It is edited by the great Riley [00:50:00] Simpson. They are both. part of the team with Erick and me here at Channel Master. They would be happy to create a podcast for you, too. Podcasts are a tiny sliver of what we do for our clients, though, at Channel Master. Just to get the complete picture, you want to go to www.

channelmaster. com. Channel mastered has a sister organization called MSP mastered that is Erick working directly with MSPs to grow and optimize their business. And you can learn more about that at www. msp mastered. com. So once again, folks, we thank you for joining us. We’re going to see in another week, Erick and I have flights to catch right now.

Until then, please remember you can’t spell channel without MSP.