What I wish I knew before starting an MSP
We all have one thing—or in some cases, a couple of things—we wish we knew before starting something big. Ian Richardson, CEO and Founder of Doberman Technologies LLC, has been working in the technology industry since 2005, and has focused on managed services since 2011. After successfully building and growing his Michigan-based managed services business, there’s no doubt there were challenges along the way. If Ian had some guidance on navigating these challenges before starting his business, the process might have gone smoother. Now he’s sharing the guidance he could have used with all of us.
Sit back, relax, and take notes as Ian shares the things he wishes he had known before becoming a managed service provider. Whether you’re already a managed service provider or looking to branch out into life as an MSP, Ian’s insight is here to help.
Understanding profit and loss
Starting your own business, changing your career path, or heading into a new industry is an exciting yet challenging task. Most people do this because they’re passionate about the work they’re about to start—which usually doesn’t include the financial aspect of things.
Not many people go into business with a driving passion for profit & loss (P&L), but having a thorough understanding of P&L statements is something some MSPs overlook, or haven’t fully grasped, and they could make a big difference in your long-term success. Most MSPs never even look at them, mainly because they don’t understand them, but knowing how to manage above and below the bottom line is a basic requirement of running a successful business.
Before starting as an MSP, seek out proper training around profit and loss statements to fully understand that part of a business. Believe it or not, you won’t have to stress about paying the bills any longer.
Where there’s a business, there’s additional cost
Another aspect that comes along with starting your own business is the additional costs involved. Most business owners overlook some major ones, like hiring employees. This includes training, the cost of a recruiter, fixed equipment costs for onboarding, and so on. Plus, there are other hidden costs like taxes, workers compensation, insurance, healthcare, benefits, and a 401k.
Keep in mind that hiring someone at $50,000 a year doesn’t mean it’s going to cost you $50,000 a year—it’s going to cost a lot more. Then again, a powerhouse employee could be the key to rockstar customer service or closing a lot more sales. Keep a close eye on these numbers to ensure that hiring someone new will keep your financials moving in the right direction.
Key performance indicators (KPIs)
How else can you keep your financials—and ultimately your success—in check? By using KPIs. KPIs are a measurable value that demonstrate how effectively a company is achieving key business objectives. Ian believes that anyone starting an MSP today has a huge advantage over someone who started back in the 90s or 2000s. Today, there are so many ways to build and fully understand KPIs that will work for your business, such as leveraging a master MSP or an outsourcing firm.
“It’s way easier to start hitting the ground running and making a profit these days than back when we were all just trying to figure it out,” says Ian.
Let’s shift gears to the people who work hard for you day in and day out. Making sure your employees are fully trained in the areas they should be will only boost their success—and yours. Ian believes that training new people is easier too these days; there are so many training opportunities for free or low cost, making it simpler to add skills to your team without breaking the bank. Being fully aware of the different opportunities available for training would have been a serious game-changer for Ian when it came to starting his business on the right foot.
When in doubt, reach out to your community
Training opportunities weren’t the only thing Ian missed out on in the beginning. Getting engaged in your community is key to success, and it’s important to know the different ways you can network, share valuable insight, and even discuss similar challenges with other technology professionals. You never know, someone else may have dealt with the same challenge you are currently, and they’re even willing to share with you the ways they overcame this challenge.
A great way to achieve this is by attending industry events that bring together IT professionals in different regions, whether it’s local to your city or across the country. They give you the chance to grow your network, learn from others, and achieve success.
Documentation is key
Last but not least, document everything. If you document your key business processes, follow them, and continue to optimize them, everyone does their job better. “Your vendor partners are going to have more successful integrations into your clients’ environments. Your client environments are going to become more stable. Your staff will know what to do no matter what the situation is, and you’ll have money in the bank at the end of the day,” says Ian.
This doesn’t mean you can’t have exceptions, or do some custom integrations every once in a while—but those should be the exceptions and not the rule. Everyone wins by becoming more process-focused as an organization.
Sometimes, it’s okay to be boring
That was a lot of information, but don’t stop taking notes just yet. We also asked Ian the number one piece of advice he would give to someone starting a managed services business. What was it?
“Know your numbers. That’s the single biggest thing that’s made a difference in our life. Know what your true costs and true margins are, understand what profit is, and don’t be scared to make a fair profit. There’s no problem with charging people for good service,” says Ian.
He concluded his helpful advice by fitting in one last thought, which was “know how to say no.” Don’t let the shiny objects distract you, because it’s okay to be a little boring. Doing so makes you predictably profitable, with the ability to give your clients predictable results. “Make everything boring, just don’t get bored,” Ian shared. “There’s nothing boring about a good profit and loss statement.”
Now go live your dreams of becoming a successful managed service provider—but don’t forget to keep these key points in mind. You’ve got this!