Last month, we held our peer group meetings in Philadelphia. It was the first time TruMethods has had in-person meetings in more than two years. More than 200 MSPs came to town over the course of the week.
For many members, it was their first in-person meeting since the pandemic began. The overwhelming feedback was about how awesome it was to be back in person. We could see relationships being built. Our longtime members were thrilled and catching up with one another. It made me start to think about how this shift to remote work has impacted not just company culture but customer relationships.
Has your ‘face time’ been reduced with customers? Do your vCIOs prefer Zoom meetings over in-person meetings?
You can’t underestimate the impact of face-to-face time with customers. I know it’s easier to be remote and at times it may seem to be more efficient — but there is a cost.
You need to make decisions around what face-to-face time looks like with each of your customers, from a vCIO standpoint, and a technology alignment point of view. If you have customers that are now fully remote or have decision-makers that are outside of your geography, so get creative!
Maybe the strategy meeting is on Zoom with key stakeholders, and you schedule a breakfast or lunch with the decision-maker two to three times a year. Take some time to discuss this with your team.
Our world has changed and how people work has changed. However, people and relationships are the same. We are all in the relationship business first and the technology business second.
I want you to think back to before the pandemic began in March of 2020. How have your customers’ needs changed? What are you doing for them today that you weren’t doing then? What tools have you added to your stack? What security process and governance have you added?
I hope the answer is that a lot has changed.
Your customers have hybrid environments. They have increased their dependency on technology. The security landscape has changed dramatically. Your tools and process should have changed too.
Now, here’s the reality check.
How much have your costs changed? Are your tool costs higher? Are you paying higher salaries? Do you know how much it costs to deliver additional processes?
If your prices have not increased significantly over the past two years, there are only a few reasons why. You’re either falling behind, seeing lower margins, or both.
I encourage you to do a deep dive into your Micro and Macro Picanomics. Go to the TruMethods portal to watch the videos on both topics and use the calculator we provide. For our peer members, we will be doing a special project on packaging and pricing this quarter.
A few tips come to mind.
Be sure that everyone who delivers services fits into one of your delivery areas. If not, you will not be capturing their costs. This means your margins will be lower than what you calculate. For tool cost calculation, take each tool that you include for the delivery of your managed offering and do a unit conversion to the average cost per seat. Remember that we’re targeting 70 percent of the gross margin on our core managed offering.
Our industry has gone through so many changes over the past few years. If you haven’t made the necessary adjustments in your business to adapt to the reality we’re now living in, it’s time to reassess your approach.
We always say that time moves quickly, and it does — it’s already Q2 2022. Notice how I noted the quarter, not the month?
A quarterly mindset is important in business. You should look at your business in four 13-week quarters. When you think about the business planning process, you have a long-term vision, three-year targets, an annual plan, and then your quarterly action plan (which is the only one with actions). That means you do all the other planning simply to determine what your priority should be for this quarter, and then hold yourself and your team accountable to execute on this.
In my last blog post, I asked if you were too busy to succeed. A quarterly mindset is the antidote. If you’ve been in business for a number of years, and it seems like your full potential is not being realized, a strong quarterly focus will help you with moving the needle.
Take time to review your Q1 results, sales profitability, and operational metrics. Then, look at your goals (what we at TruMethods call “rocks”) and your actions for the quarter. Did you complete them? If so, what adjustments will you make for Q2? Finally, determine your rocks for Q2.
This is the process we teach in our peer groups, and it has helped hundreds of MSPs fulfill their potential. Each quarter will pass with or without you having the right priorities and the accountability to complete them. The best part about a strong quarterly focus is that even if you fall short of accomplishing all your rocks, you will still move forward dramatically faster than if you didn’t have a quarterly focus.
The key is to prioritize the accountability process. Be sure that your accountability process and the rhythm that you have in place to stay accountable is your top priority.
It’s already Q2 2022. Don’t let another quarter go by treading water.
I think many people confuse leadership with management. In working with business owners for a very long time, I often ask them to define and rate their leadership styles. I then talk to their teams, and guess what? They’re typically not viewed the way they think they are.
What they (and most people) often fail to realize is that leaders empower people. They work to make their people self-sufficient, determine and share the results they expect, identify the metrics that define success, and pinpoint the process or the map to achieve success. Most importantly, they provide their team members with opportunities to grow.
Let’s do a quick exercise.
First, I want you to write down the business you would like to have in two years. How much revenue would it generate? What would your profit be? How many customers and employees would you have? Then, think about what your role would need to be to run that company. What would your responsibilities be? How would you need to spend your time? What would you expect from your team?
Next, track how you spend your time today. For a week, track what you’re working on in one or two-hour increments each day. Then, compare your role today with the one you would need to have in two years to reach your business goals. What do you see?
There are differences, aren’t there? (If there aren’t any differences, then you’re not thinking big enough!)
The most common thing I see with MSP leaders is that they want a better business and think they can get there by doing more of the same. Every week I hear, “I’m too busy to attend an accountability call or prepare for a meeting.”
What you really mean is the following: “I’m too busy to succeed.”
So, try the exercise I outlined above, and then put a plan together to define your role in the business based on where you want to be.
After 20 years, we’re still talking about patching. How is that possible?
Recently on The CyberCall, a weekly MSP cybersecurity podcast, we discussed common threats and breaches. An Incident Response (IR) expert said that the majority of the breaches relate back to something being unpatched. We are talking patching!
Here’s my take. At the end of the day, asset inventory and patch management need to be the foundation of your approach to security. Don’t spend another $10 to $20 per seat on a bunch of security tools unless you have your foundation (again, asset inventory and patch management) in place. And I’m not the only one who feels this way.
Jon Murchison, the CEO of Blackpoint Cyber, a technology-focused cyber security company headquartered in Maryland, agrees with me. His theory is this — less is more when it comes to security stack and controls. For example, understanding threat actors and the very common tactics they use will get you to the right approach. Upgrading to advanced antivirus (AV) and endpoint detection and response (EDR) (which threat actors can socially engineer around) without doing the basics doesn’t move your security posture forward.
Implementing the basics to prevent cyberattacks doesn’t have to be challenging, especially when there are resources out there to help you along, such as the Center of Internet Security (CIS)’s implementation groups. But, while your implementation groups cover all the right bases, don’t spend too much time on steps three through ten until you have process and discipline in a repeatable way around steps one and two.
Sometimes, I have a false sense of security and optimism about the MSP market and its future. I forget how far along the TruMethods and The CyberCall communities are compared to what I call “the general population of MSPs.”
I spoke at a local event in Philadelphia recently, where about 50 MSPs attended. During the discussions I had with the MSPs in attendance, I became a bit concerned about the overall MSP market. They asked me the same questions about the same things I’ve been hearing for the past five years. Even worse, they pushed back and questioned things our communities have either moved on from or overcame.
If you’re a TruMethods member or a listener of The CyberCall, I feel like this creates an opportunity for you. While you may be up against some good competitors in your market today, the lion’s share of incumbents isn’t as advanced as you. As you uncover prospects, you’re going to ask them the right questions and uncover pain. Unlike your competitors, you’re going to create separation between a prospect’s current provider and you.
Take advantage of this situation.
Your understanding of this business (the way you look at it through the TruMethods framework and lens) is superior. Believe me, most MSPs still don’t have a good grasp on their costs, delivery roles, and metrics. What does that mean? You guessed it: They don’t have a great grip on their results.
So, let’s dig deep. If I were in your shoes right now, I would want to be in front of as many prospects as possible. From a marketing standpoint, think about what you can do to get in front of new people to share your story.
I think you’re going to like the results when you do that.
We at TruMethods built a benchmarking platform for our peer group members. It looks at financial data, operational data, sales data, marketing data, and does a bunch of great calculations. We’ve added more ways to view the MSP business over time. More recently, we added some calculations to help MSPs simplify their businesses.
On the platform, MSPs can now calculate professional services revenue per engineer. Each professional services resource should generate at least $20,000 of monthly revenue. So, if you, on average, have $15,000 a month of professional services, and you have three people in that area, you need to ask the question, “What’s everybody doing?”
The second calculation we added looks at the average number of tickets divided by the number of support resources you have available. Each support resource should be able to close 10 to 14 tickets a day. Again, if you have five people closing three people’s worth of tickets, you must ask, “What’s everybody doing?”
Professional services and support need to be efficient, not just for the obvious reasons of leverage and profitability, but also because when they’re inefficient, you can’t have that capacity working on value-added proactive roles, such as alignment, vCIO, and centralized services. And today, that also means that you can’t secure yourself or your customers the way that you would like to.
Many MSPs are working so hard to grow their revenue and profitability. But these two service delivery areas keep holding them back. They create resistance in the business that’s impossible to overcome.
Preparing for Tax Day isn’t only a Q1 activity for World-Class MSPs. For them, it’s practically an all-year event. But unlike them, many MSPs procrastinate filing their taxes, and that’s where they can get themselves into a world of trouble.
MSPs aren’t the only ones who put off doing their taxes. Thirty-three percent of Americans wait until the last minute to do their taxes, according to a recent survey by IPX 1031. But filing taxes doesn’t have to be tedious for MSPs if they take initiative throughout the year.
Here’s what you should do throughout the year to better prepare yourself for Tax Day.
Don’t Ignore Your Bookkeeping
Bookkeeping is one of those things we tend to put off more than we should. Staying up to date with your accounts saves you (and your accountant) a lot of headaches during tax season. Waiting until the end of the quarter (or year) to get your finances in order is a mistake, one many MSPs make, so you’re not alone. If you are doing the bookkeeping yourself, consider hiring a professional to ensure your business accounting is organized come tax season. While hiring a full-time bookkeeper may be out of the question for you, having someone review your books regularly makes all the difference.
Don’t Forget About Your Estimated Taxes
What you may not know is this: The IRS requires you to pay taxes as you earn or receive income during the year. Now, this usually isn’t a problem for someone receiving a paycheck every couple of weeks, but for small business owners, this begs the question: How often should I pay Uncle Sam? Most small business owners pay what is called estimated taxes, which are quarterly tax payments you make throughout the year. “To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year,” according to the IRS. Determining your estimated tax is not always easy, so consider seeking help from a professional.
Know Common Tax Deductions
“I’ll just write it off,” is a common phrase heard among business owners, but what does “writing it off” actually mean? If you’re new to the business world, you may not know. You can’t simply write off every business expense, as not all business expenses are tax-deductible. And even if an expense is tax-deductible, there could also be restrictions or qualifications. For example, you can deduct your meals, but only 50 percent. Knowing what you can and cannot deduct matters in the long run. Also, be sure to maximize pre-tax retirement deductions.
Seek A Professional
Ever try reading the income tax code? If so, how far did you get? It’s near impossible to understand, isn’t it? There’s no reason why you shouldn’t hire an accountant to help you with filing your taxes. Your efforts are better used elsewhere. Find an accountant who specializes in businesses, and if you can find a business accountant who also works with MSPs, even better.
Getting yourself caught up in tax issues can lead to big problems. It’s not worth the risk. Do what you can to understand the basics, including basic deductions, but after that, leave it to the experts.
Remember, it’s not how much you make, it’s how much you keep!
This article is intended to help MSPs gain perspective and is not intended as accounting advice. Be sure to consult with a CPA for expert advice on the accounting needs of your business.
Your customer base is like a garden. It needs to be pruned, watered and cared for regularly, or it becomes overgrown and overwhelming.
I recently had a conversation with an MSP struggling with profitability. They were profitable, but they weren’t profitable enough to grow and secure new customers. So, we spent some time on Micro Picanomics. And what did we learn? They needed to charge more. (No surprise there!)
We then talked through their customer base. What became clear was that they only had “feelings” about who was a good customer and who wasn’t — and they were pretty confident in those feelings. Hoping to change their mind, I asked them to watch the video ‘Not All MRR is Good MRR’ in our FormulaWon portal and fill out the MRR Evaluator included as best as they could.
This led to questions around what customers should be included and what MRR is. So, we went back to Micro and Macro Picanomics, and I explained why we look at the business through this lens. Once they had the first pass at the evaluator, it became clear that their feelings around who was a good customer did not align with the facts.
Within five minutes, they had a better idea of why they were feeling pain and noise in the business. It was not an easy or quick issue to solve, but we agreed on a list of priorities to focus on over the next quarter. They also agreed to review the evaluator every quarter and set new quarterly objectives, including raising prices, digging into the source of tickets for noisy customers, resetting edges, making project recommendations, or even firing a customer.
Every MSP has customers that they may not have sold today based on new standards, customers with old programs or pricing, and relationships that have drifted over time.
If you don’t attend to your customer garden, new customers suffer, employees feel overwhelmed, and, eventually, you get stuck.
By now, you’ve heard about Russia’s invasion of Ukraine. This war is being fought on multiple fronts, one of which being cyber. Russian hackers are launching an all-out assault on key Ukrainian government, banking, and infrastructure targets. Experts expect that these attacks will escalate in Europe and in the U.S.
I spoke with Jim Lippie, the CEO of SaaS Alerts (they monitor more than 120,000 users across 2,100 SMBs for 400 MSPs), and he said that his company is already seeing an upward trend in attacks.
Cyber attacks can take on a life of their own. In 2014, when Russia last attacked Ukraine, they used a cyber bot in their attack. The bot ended up rolling across Europe, creating more than $10 billion in damages (this was just an unintended consequence of Russia’s attack).
Russia’s capabilities are far beyond 2014. In fact, we will see a lot more of what they’re capable of in the coming weeks and months, so what does this mean to us as MSPs?
Well, obviously, there’s an increased risk for us and our customers. You need to use this event to further communicate to your customers that we live in an assume breach world. You need to be discussing why they need business impact assessments (BIAs).
BIAs are a key to incident response planning. It means that every customer needs an incident response (IR) plan and you need to perform tabletop exercises.
I suggest you listen to this recent CyberCall session, where we spoke to the two MSPs that I had on stage at Right of Boom. They were both victims of an RMM breach. We did a survey on the Cyber Call and found that more than 80 percent of MSPs on the CyberCall have not yet done an RMM tabletop — that’s alarming.
This is a chance to get on the same page with every customer to add processes and roles to your offering and increase the value of your services.