Transform your business by asking two simple, but powerful questions

Posted:
09/13/2021
| By: Paul Dippell

Having worked with Technology Solution Providers (TSPs) around the world and built four of them to be between $50mm and $2bb, I’ve found CEOs are focused on three things: driving Revenue, reducing costs and reducing risk. Some are better at doing this than others. What I’ve also found is that some struggle in one, two or even all three of these areas. 

To grow faster, be more profitable and increase stock value is a journey. And it all starts with asking two simple, but powerful questions: How am I doing? And how do I do better? Granted, these questions are simplistic in nature, but when you really start drilling down into it, the answers you find may not be what you expected. This is where you can start to transform your business. 

Let’s take a deep dive into each question. 

How am I doing? 

You can’t get to where you want to go until you’ve seen where you’ve been. That’s because your trajectory to date, helps what’s needed for your future course and speed. Periodic benchmarking gives you insight into how you are really doing by comparing financial and operational performance to date, in comparison to the Best-in-Class in your specific business model. Without knowing how you are performing in comparison with your peers, and how you could be performing, the likelihood of improving is diminished. Benchmarking is the foundation for all likely, sustained improvements in financial performance of TSPs.  

Deep dive into your financial performance 

You can look at your performance in two ways: 1) see how the Best-in-Class in your business model are doing (with you mentally comparing your performance); 2) how you compare to the Best-in Class in your business model (your numbers and theirs, calculated the same way, side by side on the page).  

For example, in the Service Leadership Index® (S-L Index™) 2021 Annual Profitability Report, the industry encyclopedia of TSP performance worldwide, you can see how the top, median and bottom quartile MSPs performed in over 40 critical metrics. The chart below shows that, over the past 13 years, the top quartile of profit percentage for MSPs was, on average, 2.4 times higher than that of the median. (They also grew faster; the “common wisdom” that one must sacrifice profit to attain higher growth not true in the IT services business.) 

EBITDA___by_Year.jpg

You can mentally compare your company’s performance to this chart, but you can’t be sure your numbers are calculated in a comparable way, and this report only comes out once a year. 

On the other hand, the S-L Index Owner Quarterly Benchmark Report Book, is a private report that contains your company’s numbers compared to the Best-in-Class in your specific business model, calculated the same way as the benchmark population, and it comes out quarterly. The chart below is an actual example (company name redacted) of one of the 80+ metrics provided each quarter. 

EBITDA___Adjusted_EBITDA.jpg

When you compare how the Best-in-Class in your business model are doing with your own performance, you now have an accurate picture of your situation and potential. Armed with this insight, you can make even more effective business decisions and begin answering the next question: 

How do I do better? 

“Do better” can mean different things for different TSP owners. It could mean, I want to make more money, create more value so I can sell in X number of years, change my business model from Product-Centric to Services-Centric, or support more employees and therefore more families. 

Whatever your mission, your management team needs the appropriate methods and processes in place to get you to the next level. You need a way to tap into how the management teams of the top performers in your business model are doing things more effectively. By doing the things more like the top performers do, you will get even closer to your desired results. 

Creating an action plan 

To get to the next level, you need a plan that you can share with your management team. SLIQ, an online Operational Maturity Level progression tool for TSP management teams, analyzes your current operating methods and then creates a customized, detailed action plan completed with step-by-step best practices assets (document, tools, templates and videos) to drive up your operational maturity and attain Best-in-Class performance. 

Putting it all together 

By answering these questions, you can more easily and with less risk, transform your business and put your company on the road to Best-in-Class performance.  

Now, for a limited time, you can download a 10-page excerpt from the S-L Index 2021 Annual Profitability Report showing actual charts and data and find out how combining the Annual Report with quarterly benchmarking and SLIQ can accelerate your journey to Best-in-Class.