Steve Alexander is the CEO of MSP-Ignite, an organization that helps managed service providers achieve maximum equity and recurring revenues through facilitated peer groups. We talk about the benefits of being part of a peer group, the recurring revenue model’s impact on business valuation, and how to maximize your profit margins as an MSP.
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Join an Industry Peer Group with Steve Alexander
Our guest is Steve Alexander, the CEO of MSP-Ignite, an organization that guides MSPs, managed service providers, owners, through facilitated peer groups to achieve maximum equity for their business by maximizing recurring revenues. Welcome to the show, Steve.
Thank you, Steve. Great to be here.
It’s great to have you. And you have such an interesting business and such forward-looking in terms of focus on the recurring revenue and peer groups. So lots to unpack here. I’m excited to have you on the call. So let’s just start with your story, your origin story. How did you become someone who runs a peer group business? It’s not the most plain vanilla thing that I guess we come out of school expecting to do. How did you end up with that business?
It’s a great question. And I was thinking about it ahead of time because obviously this question was going to come up. And like most things in my life, it wasn’t planned. I’m not the best of planners. I could think ahead, but I’m not the best of planners. I can think ahead, but I’m not the best of planners. So I’ve been involved in the channel, in the computer IT industry, since the late 80s. Really a time when most people don’t even realize there was a channel at that point. I worked for the first mail order catalog in the PC industry that was based actually right down the road from where I’m standing right now. But I did that job, I ended up opening my own IT company. I had an MSP before I ever heard the term MSP, in that I was focused on recurring revenue.
So what is MSP? Just as an aside, because we already mentioned it three times, managed service, what’s a managed service provider?
You know, that question, I was once at a CompTIA event for a trust mark they built for that. And I swear to you, we spent two days discussing what is an MSP.
Give me the short answer.
In my mind, an MSP is somebody that delivers services on a recurring basis and manages more than just the services that they deliver themselves.
Now, I’ll tell you, before I heard that term, my focus was not necessarily on my clients and what their best interest was when it came to managed services. It was my own selfish desires to not have to have a big sales conversation every year about the yearly support contract. So I looked for an easier way and got into monthly recurring and started delivering software that way as well. And then one day at a presentation for Tech Data, the distributor, I gave a presentation on my model and the very first question was, so I’ve heard about managed services before, I never realized this is what it was. And I’m hearing that question going, me neither.
I never thought about managed services, I get the concept, but I didn’t think of it that way. But I built that business predominantly through networking and chamber of commerce and local businesses like anyone does when they start a local business. I really focused all my attention on doing what was right for others. And that’s how I became a master networker and grew my business. I sold it to a much larger company. And right around that time, I had formed, through my networking, I had formed a board of advisors, just three other guys, four of us, around the same age, all small business owners, that realized we had a lot of things in common.
And when it came to business, we always had things to talk about. So we started getting together every month. And the only rules we had, we didn’t talk about family or sports. This was our business meeting. And we all said it, we can have lunch tomorrow if you want to talk about some family issue or about the latest game that we all saw. These dinners were strictly business. And over time, we would start to refer to each other as a board of advisors.
A casual conversation with somebody, whatever, and something happened at that moment. Everyone we mentioned it to said, “Hey, can I join you guys for dinner?” And the answer, by the way, was always no. We had this trust with each other. We could talk about anything, absolutely anything we could talk about, not worried about being judged, not worried about being ridiculed, just throw an idea out there or throw a challenge out there and the other guys would try and help. And after about the 10th time someone asked about joining us, we said, maybe we should do this as a business.
And we started what I would call a traditional CEO type group. It was small businesses though, not large, but insurance company, the founding director of a law firm, an advertising company, an architect, an accountant, you know, didn’t matter who it was. I eventually ended up buying out the company I sold my first business to. And it was at that time that I realized I can’t run both. I can’t do this business advisory. I stepped away. The other three guys said, without Steve, we don’t want to do it.
He kind of is good at running the meetings so we did it stopped I bought I bought out the people that bought my company really with the idea that I was going to flip it to my employees in five years and make some more money five turned into eight those employees were all gone within one and I eventually did sell it but only because one of my advisors that same group that I’ve been with for 30 years now, that same group, one of them came to me one day, he walked into my office, said, “I was driving by, I figured I’d stop, see if you want to have lunch.”
I said, “I can break away, but we’re having dinner tonight.” He said, “Yeah, I know, I want to talk to you about something.” He saw a stack of paper about this big on my desk. The only thing that could possibly be is an SBA loan because it’s like 600 pages, right? Which it was, and he knew about it, he was my accountant. So he knew all about it.
And he said, is that the SBA loan? I said, yeah, I just want to read it over over the weekend. I know it’s crazy, I know we’ve done them before, but I was borrowing close to seven figures but to fund the next phase of expansion in my MSP. He picked it up, he threw it in the garbage and said let’s go to lunch I’ll talk to you about why I threw that away. And what he said to me that day is how I got in the peer groups.
Okay, So, what’s he tell you?
He said this business is not your passion. You’re good at it but it’s not your passion. I’ve never seen you as passionate as when we ran that business advisory group and I think you should sell the company now. I had just gotten divorced it was the right time to make a change. He said, “I think you should sell the company for cash, no long-term tie-ins where you’re stuck there, and you should go do some business consulting and eventually build some business advisory groups.” That day at lunch really is what, by the way, that evening I told the other people I’m selling the company, I already made up my mind.
He’s right, I’m doing it. Wow. That was a quick decision. So, Steve, it’s a fascinating story. What I’m really curious about is that there are so many business advisors or mastermind groups or peer groups. I’ve been in a couple myself. I ran a couple myself as well. However, is a lot fewer of is industry specialized groups, because often these mastermind groups, they say, you know, the beauty of this group is that everyone comes from different industries, so we can feel freely share, we can cross-pollinate because, you know, things travel between industries, you can really be a unique, you can bring in a unique marketing approach, you learn somewhere else, no one is doing it in your industry, and you can break through with it. So that’s kind of something that a lot of people are aware of, but an industry-focused group is, I think it’s going to be a different animal. So how is it similar and how is it a different animal?
Such a great question, Steve. You know, you mentioned mastermind groups. So let’s start there for a second. Similar to that, what is a definition of an MSP, is what’s the definition of a peer group, right? Because really, mastermind is thrown in there all the time, business accountability groups, advisory groups, they’re all thrown into the mix. Peer communities are thrown in as peer groups. And I believe there’s a lot of different definitions and you have to hone in on the one that works for you.
As you said, anyone can tell their story tilted towards what their group is about. So if I’m generic for multiple businesses, I’m gonna tell the story you just told. If I’m for one industry, I’m gonna tell the other side of that and say, everyone in this group has either been through what you’re going through, or they’re about to go through what you’re going through. Every story will be relative to you. There’ll be nothing ever discussed that won’t pertain to you in one way or another when you’re in an industry specific peer group.
You can discuss vendors and selection of vendors. You can discuss other organizations you belong to, and whether it makes sense or not. You can discuss the industry as a whole and where it’s going, which managed services, that’s a big topic these days. You can discuss all kinds of things. I believe we set ourselves up to be different in a number of ways. First of all, a mastermind group is typically a group that is self-run. A mastermind group by definition is typically everyone in the group is equal and they take turns being in charge of the meeting.A mastermind group is typically a group that is self-run. A mastermind group by definition is typically everyone in the group is equal and they take turns being in charge of the meeting. Click To Tweet
And usually what happens is one person might be the most vocal, they’re probably running the meeting for a while. It doesn’t mean they’re best suited for it, it just means they’re the most vocal, right? that are run with the mindset of, we have a plan to follow, and we’re gonna follow that plan. That plan might be, it might be pinnacle, right? What you have right behind you. It might be a management structure. It might be something else that we’re talking about. When you’re focused only on the industry, the industry is the commonality, and that’s what ties everyone together and makes it so attractive for people in the business.
Ok, so I’m going to ask the question, which you probably get every time, most of the time from people, but maybe most frequently asked questions is what about confidentiality? What about competitiveness? If there are all MSPs in the group, are they not going to keep their cards close to the vest, not want to share their challenges? They don’t want to look vulnerable. They don’t want to get to get out, to be taken advantage of, to lose customers perhaps to others in the group. So how does that work? How do you control this dynamic?
And I’m sure other people might do it a different way. For us, first and foremost, there’s no geographic competition in any one group. So if you happen to be located in Baltimore, there’s not going to be anyone in the entire DC metropolitan area in the peer group you’re in. You might be in a group with someone from Canada. You might be in a group with someone from Southern California, Northern California, the middle of the country. And there are enough MSPs out there that we can do that. All 17 of our groups, there’s no geographic competition in the group. So right off the bat, that kind of makes it a little easier to talk and share.
We also, of course, we sign NDAs and confidentiality agreements, but let’s face it, if you’re concerned, you’re concerned. And those agreements don’t matter, right? But we do sign them. We share full financials. So if you’re joining our group, you’re going to be prepared to say, here’s my P&L, here’s my number sliced and diced the way you want to look at them so we can compare to each other, because that’s the value of being in this group. And if you don’t share, you’re not gonna get the value. So we honestly don’t have that kind of problem too often. We might have it a little in the beginning. When someone’s new, we certainly have to nurture them a little bit.
Okay, well, that makes sense. So the geographic competition, so all these MSPs, they are local, they are serving local audiences. So the geographical competition is not really an issue. I get that. I get that.
Now, where it gets difficult is, right, we’re moving faster and faster, we’re moving to a world where everyone services people no matter where they’re located. And what we say is, where do you market? Where is your marketing efforts? We know that someone might have a client in Dallas, Texas, even though they’re from New York. We get that. And oh, by the way, if you’re in a peer group with someone from Dallas, Texas, maybe they can be your local hands and you don’t have to pay someone to fly there when you need to. So you get that benefit also.
Okay, so that’s a very interesting. I’m glad that you mentioned the sharing numbers because one of the things that we talk with Greg Cleary in this book, Clinical, is about benchmarking your profitability and to figure out what your elite industry profitability is and engineer your business to get there. So I assume that you talk about that as well. So you compare numbers. So people say, OK, this guy is doing 20 percent net margin. What is he doing to be able to get that? And then you’ve got these ideas.
The other thing I wanted to ask you about is this whole idea of recurring revenues. And most of the listeners here are familiar, probably with the concept of recurring revenue, that it’s much better to have recurring revenues because this business is more stable, it’s more plannable. You can sell the business at a higher multiple because buyers know that they are buying multiple years of income, most likely. What I’m interested in is the philosophical difference between project revenue and recurring revenue and what is the mindset, the difference in mindset that is required for someone to really embrace this and to be really be successful with selling recurring revenue contracts?
It is, it’s a fine line because in this business and probably most businesses, there will always be projects, there will always be things that you should not include in part of your recurring fee that charge extra for, right? And things of that nature. What we try to focus on is most people have some dream of a legacy plan. That might be that they’re going to build it and sell. That might be that they have a family member they want to turn it over to their staff and take residuals.
Whatever it may be, predictable recurring revenue is the key, as you said, to getting the best multiplier if you’re selling, or to have the most borrowing power if you’re going to borrow money from the bank, right? Or if someone else is gonna borrow money to pay you off to buy the company. Anyway you look at it, predictable recurring revenue, steady growth versus spikes in revenue and valleys in revenue, or how to make the company worth more?
So I get that, but what I’m really interested in is how do you create, what is the mindset difference for people who are recurring revenue focused as opposed to project focused? How do you select projects? How do you sell a recurring revenue, how do you construct your business model in order to produce recurring revenues? That’s what I most definitely, I like to know.
The first thing I tell people is, and it’s one of the things we do in peer group all the time, is I don’t want you to separate your books in your accounting system per se, but I do want you to have the ability to look at your recurring revenue and the costs of running the business for all that recurring revenue separate from everything that’s billable projects or any T&M work. And the reason we say that is you want to be able to build a model where your recurring revenue carries all your costs and expenses and your and your required minimum net profit all in there. Because once you get to that point, we call it the turning point.
Once you get to 10 percent, 20 percent, 30 percent over your turning point, you now have the power to realize that I can be a lot more selective on the other work. Now, some people would say that means that I’m saying you don’t want to do project work. I’m not. What I am saying is you should have a methodical approach to projects too. Most people don’t because they need the money. So they jump, right? You know, you and I as consultants, we’re kind of busy, but boy, it’d be nice if we had just a few thousand more a month and someone calls us that doesn’t feel like a perfect fit, but they’re willing to pay, we end up saying yes, and we’ve both been doing this long enough, we know what happens.Once you get to 10 percent, 20 percent, 30 percent over your turning point, you now have the power to realize that I can be a lot more selective on the other work. Click To Tweet
We should have trusted our gut. They’re a terrible client, they’re not a good fit. We have Ajita, we don’t sleep at night when we have to see them the next day, right? They don’t help us with anything other than the dollars. And by separating your mindset my business is a managed service business first and foremost, and projects buckle into that rather than the other way around, that you now can have a measured approach to projects. You can now say to clients, we can take on this project for you and we can deliver it in July.And they say, well, we were hoping to have it done by next Friday.
And you say, I know, but it’s May and my project schedule is booked for everything but emergencies. And if someone has an emergency, I need to have bandwidth to take care of that too. So you take a different approach and by doing so, you find yourself quoting projects the right way without shortchanging anything, right? So because you don’t have that desperation of needing the money and it changes everything. I also think for most managed service providers, that the real key is when they get to the point where they can have separate people delivering projects than the people servicing their managed service funds. Because then it’s a lot easier to also separate the expectations.
Isn’t there also a different perception of the client, of the provider, whereas a business that lives off of project revenue mainly are seen as a more of a transactional partner and a managed service provider is more of a strategic partner who is there all the time and who is not nickeling and diming but focused on the business being successful?
I would say this, the company that needs projects to make a living is seen by the client as someone that’s always selling to them. And the managed service vendor is seen as someone that partners with them. Right? So it just changes the relationship in the way you work.
I love that. So let’s switch gears here. I’d like to talk a little bit about the dynamic of a peer group and for a member who wants to become a member or he does become and then stays a member. What do you see as being the main attractions for people to join a peer group and then secondly to actually stay in the peer group? And then here’s what I’m asking.
When I was running Vistage groups, the saying in Vistage was that people join the group for you as the facilitator, because you’re the one who took them into joining and they are attracted to what they can get from you and of course the group as well. But over time, they stay because of the other members in the group, because they’re going to get most of the knowledge that you can partake to them anyway in a couple of years and then what’s remain. So that’s for a kind of a mixed business type peer group. But what do you see for a specialized industry peer group, these two values mean?
It’s very similar in that a few years ago, I was looking to build some testimonials up. And at the end of a meeting, I said, I just want to go around the room, and I want to ask you guys two questions. Why did you join MSP Ignite and why peer groups in general now that you’ve been in one? And every single person said they joined MSP Ignite because of me. And I said, you guys aren’t helping me. That’s not a testimonial. I can’t use that.
And I went, isn’t that the same as every small business owner? Doesn’t every MSP say, as the owner, I’m the best-selling person this company has? Well, yeah, because you speak with a different passion and a different authority than anyone else could. I do think people tend to get interested because of the facilitator and the passion they bring and that they get to know them. I really do believe that as their companies mature and as their relationship with the other peers mature, they get to a point where they may really like the input from the facilitator, but if the facilitator stays quiet, they don’t really notice the difference because everyone else is chiming in, in a more mature group.I really do believe that as their companies mature and as their relationship with the other peers mature. Click To Tweet
So if I look at my groups that have 10 to 50 employees, I would say most of them fit into that description. If I look in my groups that have less than 10 employees, they may always need me as a facilitator with 35 years experience to weave in different things that no one else maybe have experienced yet at this point in time. But I think what gets them to, what really gets them to stay even more than a facilitator is the realization that going home and talking to their spouse about business every day is not great for the business or the marriage. And we all do it, right?
That’s what everybody ends up doing. But the truth is, I always tell people, your spouse has an agenda. You don’t know necessarily what their agenda is at any given point in time. Their agenda may be that they feel you’re not bringing home enough money. So when you talk about needing to give a raise to a key employee, they’re going, that’s less money for us. No.
I am the key employee. I need a raise, right?
Right. Or when you talk about taking on a big project that’s going to tie up some of your time and they’re thinking, you don’t get home for dinner enough now, then that’s driving their response. And that’s important, but that doesn’t really help make the business decision, right? It helps make the life decision.
Well, sometimes you need to have a good life decision to actually have a sustainable business.
Well, I 100% agree, but here’s what I would say, Steve. When you build a relationship with your peer group, they already know the challenges. They already know if you’re going home enough for dinner. They already know if you never take a vacation. And they’re going to give you the same input. But they still don’t have their own agenda. They’re giving it for you rather than a spouse giving it for them.
No, I get it. I’m just being difficult here. Okay, so let’s talk about how you run these meetings. These are a specific agenda that you have that is kind of a certain structure that you have found works well for a peer group to follow? Or it’s always different depending on the situation and the issues or the challenges that the members are bringing to the table?
I would say the answer is yes, both of those. So I train new facilitators, I’m going through this right now with somebody and I say there’s the science of running the meetings, how much time we give each person and how much time we should give each person and dividing it up, that’s easy stuff. Then there’s the art of it. Sometimes someone has an issue that maybe has some emotional ties to it for that person so strong that you say forget the agenda right now. I don’t care how much time we spend on this.
It’s going to be valuable and it’s important for this particular member and everyone else will understand. Or it’s a topic that really resonates with everybody anyway, and you say, let’s just stay with it. To me, that’s the art part and it’s hard to teach art. Maybe because I don’t have an eye for art, but it’s hard to teach that. That’s just learning the people and learning the personalities and learning how to make sure everyone feels like they got value or at least felt value from the meeting.
But we do of course have an agenda. We always have a spotlight for each person and a set amount of time for each person. Sometimes they come to the table with questions to answer that we’ve given them. And sometimes they’re just coming with, here’s what’s going on in my world I’d love to get some feedback. All right and that’s that just depends and then when we get together for two days it’s not that much different but we obviously have much more time to get deeper you know on different topics
So for a Monday meeting it would be every member brings their spotlight they share what’s happening with them then they bring their issue and and that’s it you go around the table or?
So for a two-hour call, your description is pretty much spot on, yeah. You know, we watch the time and we keep it moving and whatnot. But yes, for a two-day meeting, we start with financials and we spend several hours looking at our benchmarking, comparing each other, asking each other questions about their numbers compared to the last time we got together. That’s several hours before we do anything. Then we do those spotlights and everyone knows that they now have more time on a spotlight.
Like, they’ll get feedback. There’s usually a guest speaker at those meetings. And then there’s, then we pull topics to get deeper on from the spotlights and say, hey, this is something that would interest everybody. Let’s tomorrow just hammer this for an hour and really talk about it. So we try and be flexible depending on what’s going on.
Love it. That makes sense. What about personnel dynamics? Have you had charismatic personalities who polarized the group that they were in? I’m asking this because I have had, and that was one of the biggest challenge for me as a peer group facilitator to deal with, how do I manage, try to manage that person, an unmanageable person basically, whereas not to alienate him or her because they are also creating a level of drama that is actually interesting for people to be exposed to and it’s a little bit entertaining as well. So there is this, there was this dynamic that I never really cracked the code to it. Have you experienced this?
Every single day I would say I experience that. You know, so I’m on eight years now of doing peer groups. And certainly I’ve learned how to deal with the personalities that can be a little polarizing, if you will. Not just more outspoken, but actually polarizing. This goes back to the art part a little bit. You have to get to know the person and figure out what makes them click. But more often than not, what I find is if I reach out to someone like that privately and literally just say, hey, I need your help. Now I don’t necessarily tell them they’re polarizing or they’re annoying or they control the group too much.
I do tell them you clearly are more than willing to share and be helpful, but you also kind of suck the air out of the room at times because the people with quieter or more reserved personalities, they just sit there. And eventually as a facilitator, I’m gonna call on them, but by then they’ve tuned out the conversation because they stopped listening. So I’ve never said that to someone that didn’t go, oh, I didn’t realize I do that. They always say that and go, hey, can we work out a way that you just tell me? Like, can you just chat me privately? And I don’t care what, say shut up and I’ll understand it’s not personal, you know?
Or, and then what I tell them is, if you would just do this, whenever someone shares a challenge or a request for help, defer to others and don’t feel you have to be first. And that usually changes it. Do we every once in a while get someone that we just can’t figure out how to make the dynamic work? Sure, we do. What we’ll typically do is we’ll think about whether they’d fit better in another group. And if they do, we move them.
And if we don’t, or we try that and it still doesn’t work, we call them and tell them we don’t think it’s working. It’s never comfortable, they never agree, they think we’re wrong. But I always say it this way. My first responsibility is to the group as a whole. My second responsibility is to the individuals to make up that group. And I have to look at it that way all the time. But you bring up an interesting point, my friend. It happens all the time.
Thank you. So talking about trust that you need in these groups to, to actually grow and develop and sometimes these parts and people can can kill for us and they can improve trust, because they are so vulnerable and so sharing, sometimes oversharing but to create, whether there is a polarizing person or not, but do you have a systematic approach for deepening the trust of a group and what techniques or what approaches do you use for them?
One of the things, when I first started the group, I started it because I looked at other groups. I was a member of other groups and I always found that there was something off. Like I enjoyed them and I saw the value in them. They were either too tied to a vendor or too tied to their own philosophy of how they do things. And they would, the one thing that I found they all missed was catering to the individual. And the example, and this is really how I left one peer group and decided to do them on my own.
I was in a meeting that was sponsored by a distributor and they brought a bunch of people together and said, we wanna pay for you to experience being in this two day meeting with somebody running it just to see how it goes for you. And then at the end of it, that person said, you guys wanna stay together as a peer group? And we did, but we all knew each other before because we all worked with the same distributor. We didn’t know each other well, but we knew each other.
At the very first meeting, the facilitator is going over financial issues and he’s talking to somebody about a specific number, probably his net profit and why it was so low. And the guy broke down. He broke down and he started talking about how he knows he’s not making enough money, he’s also not spending enough time with his family, he’s feeling inadequate as a business. Like all those things that someone that’s having a breakdown would start to say to the point where you started to realize what he needs is someone to hug him right now. Like he needs that more than he needs. And the guy running the meeting kept ignoring that. He literally kept going, let’s just focus on this one thing.
I think it will help you. He wasn’t trying to be an ass, to be honest with you, but that’s the way it came out to me. And when I thought about it after I realized, I knew what he was trying to do. His approach was to try and say, we can’t focus on all of that, let’s try and focus on one thing. My approach is, everybody’s different. Everyone comes to the table with challenges that we don’t know about, even as well as we get to know people, at every meeting they could be coming with a challenge we don’t know about.
As a matter of fact, our in-person meetings we start with, let’s go around the room and just talk about what we’re bringing to the table today. Not the business stuff we’re gonna talk about, but overall in your life, what are you bringing to the table today? What’s your mental state right now? And it kind of puts everyone in a position where they start to realize, yeah, this is a business group, but we’re all individuals, we’re people.
We have to tie that together and say, let’s take care of each other so that we can then take care of our businesses and really focus through that and go through that way of doing things. So that’s really my mantra all the time is to see where people are. Those that are quiet, help pull them out of their shell. Those that are too talkative, help quiet them down so that everybody is on the same playing field. But it’s also, it’s not being afraid to call people out publicly if you need to, to joke, to pick on each other in a fun-loving way where we all recognize, hey, it’s not a personal attack.
So, for example, if you were sharing something and you were asking for feedback, and while you were sharing it, I was going, my God, I’m having a very similar issue, but I didn’t even realize that I’m having the issue. I need to ask some questions to make sure I understand how this relates to me. And now I’ve got asking questions related to me having the issue rather than related to the help you’re looking for. To me, that’s called self-serving questions. Well, it’s not my spotlight, it’s your spotlight. I can bring it up when it’s my turn or ask for more time at the end, but I need to focus on you, right? We actually will pull each other out and go a little self-serving there, how about we hone in on this issue and keep everything honed in on that one thing.
So what I’m hearing, Steve, is that the way to build trust is to really listen to the members, to meet them where they are, rather than forcing your own agenda. Throw out the agenda sometimes, if need be, and to create a balance where the quiet members still feel engaged and they are, they can engage in the more, I don’t know, the more aggressive members or maybe the more extroverted.
Yeah, the extroverted.
They are also kind of controlled, reined in, so that they don’t become overbearing. And then you create that balance and then people bring their personal issues and that they are being vulnerable with each other, they give permission, and that’s going to generally build the trust. So there’s no, there’s no silver bullet here. It’s more of an approach. Or there are also some silver bullets.
Well, there’s a few things. So for example, during onboarding, we’ve got a pretty detailed onboarding process for new members. And whoever’s facilitating the group that that member is going into, they are heavily involved with that onboarding process. And they’re involved just to start to build a relationship. Like I always tell them that, don’t worry about what you learn or don’t learn about their real problems. Build a relationship because they’ve got to trust you before they can trust everyone else in the room.
Let’s face it, they come to their first meeting, they’re meeting everyone else for the first time. So if we, the organization, are somebody that they feel comfortable with, then we can also guide them. We can chat them privately if we feel like they’re not opening up. We can push them a little bit. We can remind them that we understand you don’t want to share your financials yet. Just so you know, there’s really only one reason people don’t want to share their financials, because they’re embarrassed.
Everyone in this group went through the same thing. Everyone whose financials look like they’re top-notch and on top of their game now, they weren’t when they started. And now we get other members talking about it going, hey, listen, I just looked at your numbers. Mine were a lot worse when I started. Like, you’re actually in pretty good shape. You just don’t realize it. And that’s how we start to build that trust, welcome people in.
Got it. Well, that’s very fascinating. Very interesting to hear the similarities between a generic peer group and industry, but there are also differences. And sharing the financials is even more important in one of these industry-based peer groups. So kind of circling back to the benchmarking, before we wrap up, I just want to ask this quick question. So when you figure out what the elite level of profitability is for an MSP, for a local service MSP, which doesn’t own products, let’s take just an average situation, then do you have a menu of how the profitability can be, how this can be achieved, how people can engineer certain things in their business to achieve it? Is this something that you have or is it case by case?
So we do have certain benchmarking goals and there are certain ways people can improve their numbers. But it’s really important to remember this, for us anyway, everyone’s goals are not the same. Some people, it used to be, when I was younger in business, it used to be if someone described your business as a quality of life business, they were really making a derogatory comment about your business.
Today, we don’t talk about quality of life businesses, we talk about lifestyle businesses. Why? Because that term doesn’t even sound as derogatory. Yes, that’s correct. So for example, we have some members, they are the size they want to be, they don’t want to grow. So that doesn’t mean they don’t want to make more money, but it’s going to be packed somewhere because they don’t want to take on more work. They don’t, right? Well, we have to know that when we give advice, right?
And talk about how they’re going to change things differently than how someone else would change things, right? If someone says, I’m in my three to five year plan, I want to sell in three to five years, that’s a lot different, right? Okay, if you want to sell in three to five years, let’s follow a plan to maximize the valuation on your business. Since I do business valuations, I can bring that to the table and say, here are the factors we’re going to look at. So let’s talk about how we improve these factors in your business.
So it’s case by case. There’s no elite level for all businesses. It depends on the life needs of the business owner.
There are elite levels for business, but not everyone wants to achieve elite. That’s my point.
Or they don’t want to pay the price for achieving the elite because it’s not their priority.
I get it. Well, that’s fascinating. So if someone would like to learn more about your approach, learn about the peer groups that you run, where should they go? Where can they find out more about you and about MSP Ignite as well?
The easiest thing to do is go to our website, which is msp-ignite.com. There’s a chat bot there that will start talking to you right away, a live person will jump on if you want more information, they’ll gather your info and send it to us, and one of us will give you a call to talk to you further or schedule time to speak with you further. That’s certainly one way to do it. You can look me up on LinkedIn, Steve Alexander, MSP Ignite, you can certainly look me up on LinkedIn and connect with me there.
As far as really learning more, we tell everyone this. We do not have long-term contracts. We are a month-to-month business. If it’s not a good fit for you, we don’t want you to be stuck in a contract. We want you to move on and do something different in life. So give us a call, fill out an application, get in a group, come for a few meetings. I can pretty much guarantee you will find value in that time and not want to leave if you do that.
That’s interesting. So it used to be that the recurring revenue business was defined as someone who has three to five-year contracts. Now, a recurring revenue business is a business that the customers don’t want to leave and they don’t need the three to five year contracts because they just keep giving value and getting paid for it.
Well, I don’t know that that’s changed. I think what I’ve done is I’ve given you a glimpse into where my goals are. So I am not in the three to five year where I’m looking to sell. So who needs these long-term contracts? Think about the gripes that are going on in the industry with one big vendor who’s buying another big vendor. Three-year contracts is the major gripe. Well, if you look at the big vendors in this industry, they’re all pushing for three-year contracts because guess what? They’ve all gotten to that size where they want to go IPO, right? So contracts matter at that point.
I agree. There’s also a trend, you can see, jeans advertising, no contract is a big thing. No contract because people have been trapped in long-term contracts that didn’t read the fine print and it’s just wanting to make your customers comfortable that there’s no fine print. It’s all about value exchange. If you’re getting what you want, you just keep paying your membership.
That’s awesome. So Steve, thank you for coming and sharing your bag of goodies secrets with us of BeardGroves. It’s a unique, it’s a very rare occasion that we get to hear these things. And for those of you listeners out there, if you are an MSP or if you want to become an MSP, and I made the note that becoming a managed service business doesn’t necessarily mean that you have to be an IT business.
And it’s all about providing a recurring service, taking care of customers in the long term. So if you want to be a managed service business, check out MSP Ignite and also check out this podcast, because most of our business owners are trying to figure out how to create recurring and the successful ones are already creating recurring revenues. So thank you for listening. And I speak to you next time.
Take care Steve. Thank you very much.
- Pinnacle: Five Principles that Take Your Business to the Top of the Mountain
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