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A comment on a previous post asked me to recommend the business books that have had the most influence on Everon. I wouldn’t dare pretend to have all of the answers, but I think this list has served me and Everon well as we’ve tried to build our IT services business, and would be a good part of any entrepreneur’s library.

Here goes:

E-Myth Mastery: The Seven Essential Disciplines for Building a World Class Company - If you’ve ever been to one of my presentations, you know I’m a big fan of this one. Building a business that allows you to step out of the day-to-day requires processes, and this book teaches you how. On a side note, Arnie Bellini of Connectwise was kind enough to let me join him and others for a private lunch with Michael Gerber a few years ago when he spoke at Arnie’s Connectwise Summit - thanks Arnie!

The Great Game of Business - This is another one that should be taught in every business school but generally isn’t. It’s a great story and has fantastic lessons about how to engage your employees and run an “open” business.

Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm - Another book that should be taught at every business school but generally isn’t. Verne “The Growth Guy” Harnish boils down the successful habits Rockefeller used to run his companies and teaches you how to apply the practices to your business.

Killer Customers: Tell the Good from the Bad–and Dominate Your Competitors - This was the first book I read that made it clear that not all customers are desirable customers, which can be a tough thing to swallow for a customer service-oriented entrepreneur. Most importantly, it explains how to tell the difference between good ones and bad ones.

Patrick Lencioni Library (Five Temptations of a CEO; Four Obsessions of an Extraordinary Executive; Five Dysfunctions of a Team; Death by Meeting) - Lencioni does a fantastic job of using simple short stories to teach important business lessons and then gives practical advice on how to implement what you just learned. These make for great quick reading assignments for your executive team!

Now, Discover Your Strengths - This is a fantastic book on finding and managing to your natural talents/strengths and those of the people that work for you. It gives you access to a highly regarded survey that determines your strengths - I was amazed at how accurate it seemed to be for everyone on our executive team.

Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People, Revised and Updated Edition - This is the HR system that was famously put to use by Jack Welch at GE. It provides a clear way of evaluating talent and making organizational decisions that raise the overall level of talent at a company.

How to Read a Financial Report: Wringing Vital Signs Out of the Numbers (How to Read a Financial Report) - This book may look elementary, but don’t be fooled. It’s the best explanation of the major financial statements and how to use them that I’ve ever seen. I’ve used it to teach financial literacy at Everon with great success.

New Venture Creation: Entrepreneurship for the 21st Century with Online Learning Center access card - I think this is the best book on how to analyze a business opportunity and write a business plan; much better than any other business plan books I’ve read. This is a newer version than the one I have, but I think it’s pretty much the same.

Jack: Straight from the Gut - Jack Welch has been called the “Tiger Woods of business” by Warren Buffett. This book was written by Jack himself, and is full of lessons on how to manage people and companies.

And finally, one resource that isn’t a book but I think is some of the most fascinating business reading around is the annual reports of Berkshire Hathaway, the company that Warren Buffett runs. I’ve never read anyone that can take the most complicated business lessons and turn them into easy-to-understand language like Buffett can. His annual reports are the only I’ve ever found that are actually worth reading. Be sure to read his “Owner’s Manual” as well - great stuff!

Full disclosure - I’ve included Amazon Associates links to each of them so if you end up buying them Josh and I will make our first Internet sale! If you do, we promise to hang a “our first sale” dollar in a frame like you see in restaurants and post a picture of it on the blog.

MRC

Tomorrow I go to the mountaintop.

Since I live in Colorado, you may think I’m REALLY going to the mountaintop, but I’m referring to my process of taking time away from everything to set clear goals for myself.

Are you doing this on a regular basis?  If not, start!

I’m pretty sure that anyone that knows me well would tell you that I don’t sit still much.  I think my biggest fear in life is not doing all of the things I want to do, so setting clear goals is incredibly important.  Taking a bit of clear-headed time to think about where you’ve been over the last few months, where  you’d like to go in the next few months, and what you need to do to get there, is one of the most valuable exercises you can engage in.  And it takes time.  Yes, I could write a few goals down in 1/2 an hour at my office tomorrow, but I’d be robbing myself of the benefits of slowing down long enough to really think about what I want and getting myself fired up to get there.

Once you get good at this process yourself, the best thing in the world that you can do for your business is to teach the same process to your key employees.  At Everon, everyone on our management team goes through this process each quarter and shares the results with all of the other managers.

This habit has created a great degree of clarity and communication within the team that has led to much more getting done much faster.  Since we started doing it I am shocked that we ever made it without doing it!

So wherever you are, carve out some time to go to your mountaintop soon, and set some big goals that will propel you and your business forward.

MRC

One of my recent posts led to a “comment conversation” about whether or not providing a really high level of service is necessary or the best way for a managed service provider to grow.  See the post here.

Now, the obvious reaction to the question “Is providing a very high level of service better for your business?” is a resounding “Of course!”.  In fact, I think most of you would choose a few expressions with a little bit more bite and possibly question my sanity for even asking the question!

The less obvious answer is “maybe”, and it makes the discussion of why a very important one.

The scenario that started this conversation in the first place is the following: while selling in the Denver area recently, we’ve been running into some small business packages offered by the big telecom companies that are competitive to some of our offerings.  The packages are lower priced, but offer a much lower level of service, and they are selling like hotcakes!

Now, at Everon we pride ourselves on delivering remarkable service.  It’s a part of our culture that people are allowed to do anything within reason to make a client happy, and we have a very high bar in terms of our minimum service expectations.  So when I see the big telecoms selling what I would normally consider “junk” services so successfully, it makes a young CEO stop and say “hmmmmmmm”.

Now, the easy way out is for me to say “those big companies suck at service, which is why we are going to crush them”.  But the reality is those big companies are big for a reason (many reasons actually), and their “junk” services have a lot do to with that.

Let me explain my theory here:

1. In order to be big, you must be able to sell like crazy
2. In order to sell like crazy, you must have very standardized offerings and delivery processes
3. In order to have very standardized offerings and delivery processes, you very intentionally must avoid being all things to all people
4. When you stop trying to be all things to all people, a lot of people start saying you “suck”

So, the reality is that in order to get big you must:

1. Offer a very standardized offering to the masses at a low enough cost/value ratio that people will put up with it not being customized for them and largely ignore the things that “suck” (or at least not switch services)
2. Offer a customized service at a cost/value ratio that gives you fat margins so you can afford to have non-standardized offerings and delivery systems

Examples of these scenarios in the marketplace are easy to find.  Everyone in our industry loves to gripe about Dell’s support, but they have a model that works and has allowed them to grow an enormously successful company.  On the other hand, Nordstrom is known for letting you return stuff you didn’t even buy at their store, but they have fantastic margins on what they sell and can afford this level of hand-holding.  They are not nearly as big as Dell, but very successful with their model.

Now, I know that for many of you the objective isn’t necessarily to grow big.  I get it, but the lessons here are still very important to understand.

I get asked fairly often by people in our industry to try to identify the secret to Everon’s success.  I would have to put in the top three of that list the fact that we are very disciplined about sticking to our standardized offerings and standardized delivery processes.  If someone wants something custom, we determine that they aren’t the “right” customer for us and we move on.  That has made a world of difference in how we are able to sell and operate.  It’s not easy, and sometimes not fun, but it works.

I can tell you one thing for sure.  If you are a managed service provider in the SMB space, offering really customized services and a high level of hand-holding will not allow you to grow a big business.  Why?  Because SMB’s can’t pay enough to justify the extra operating expense you’ll have to deliver this level of service.

Don’t believe me?

Ask yourself why there are only a handful of companies in our space doing greater than $20 million in service sales.  The truth is that most people in our industry bend over backwards for their clients, and don’t get paid enough in return to build a viable business.  Needy customers will suck a person with a great service personality dry, leaving him with nothing to reinvest in his company.

So how do you get beyond this in your business?  Very carefully!

I’m not suggesting that you start delivering a poor level of service to your clients!  I am suggesting the following:

1. Choose your clients VERY carefully.  Look for clients that are willing to standardize and don’t need custom everything.
2. Aggressively pursue the development of very “productized”, automated services such as hosting, SaaS delivery, back up services, etc.

If you do those two things very consciously, you will start to build up a client base that is made up of smaller revenue accounts that are much easier to deliver and have much higher margins.

I’m sure this idea will cause another round of debate - I look forward to your comments.

MRC

I have a couple of friends that have independently told me about some interesting happenings in our marketplace lately:

1. Verizon is offering IT management services to small offices.  I have seen their model, pricing, etc.  I’m not worried about them being a competitive threat, but I’m sure they’ll sign a lot of small customers and we’ll start running into them more.
2. Two major telecoms are in a bidding war over a small, remote IT services company that focuses primarily on the home office and very small business marketplaces.  I’m not a journalist…I’m not going to leak the name!

Very interesting times in this marketplace!  The question is becoming WHO ISN’T A MANAGED SERVICE PROVIDER?!

MRC

The stories we tell ourselves…

Somebody used this expression the other day, meaning that we tell ourselves stories so frequently and consistently that we start to rule out any possibility that isn’t consistent with that story - it then becomes our destiny.

Everyone does it, whether you realize it or not.

“Starting a business is too risky.”

“Most businesses fail.”

“Managed services is a pot of gold.”

“Managed services is a very difficult business to make money in.”

We’ve each got our own story running through our head, shaping how we view everything. At Everon, we had a story in our collective heads about what kind of gross margins and net margins we should expect to achieve. Then we met with Paul Dippell, and he told us about the people in our industry that were kicking Everon’s ass in terms of margins.

Well…the good news is that awareness is curative!

One thing that I love about our team is that when you stick a goal in front of them they get completely focused on achieving it. Now that we know what’s possible, we have a new story that is much more exciting and lucrative! I have no doubt that we’ll be giving anyone in our industry a run for their money by the end of 2008.

So what kinds of margins are realistic? I know that most companies in our industry operate in the low single digits in terms of net margins. I also know that many are operating around 20% net margins. I know which ones we are shooting for.

What stories are you telling yourself? What can you do to get a different perspective?

MRC

We spend a lot of time talking about our culture at Everon. We have created a service culture, one where service skills and customer feedback are rewarded ahead of tech skills.

We have spent five years “getting the right people on the bus and the wrong people off the bus” which committing to is not as easy as one might think on the surface. We have been very successful over the years creating a place where everyone likes coming to work the majority of days – we all have the occasional I would rather not be at work moment. So why in the last handful of months (we opened our second operations office in Colorado about 8 months ago) has our culture become one of discontent for some employees?

This is a question I have found myself asking and I believe it was best captured by one of our senior employees that I was talking to: “when things are perceived as fair they become more than that to people, they become good.”

On the surface this did not seem like a particularly important insight, having studied psychology I was familiar with the concept, but it got me to thinking that for the first time in our five year run at Everon things were out of balance.

In our case it was the perception that the Colorado folks did not work as hard as the Boston folks. Now I can tell you that this is not true in anyway especially since I spend most my time in this office, but we were able to figure out where the perception was stemming from by talking to our people and listening to what they had to say. It is always amazing to me what one can learn when they enter a situation with an open mind and from this situation we realize that there are a few things out of wack and we need to make some adjustment to make sure we don’t have people jumping from the bus.

So why am I sharing this experience you may be asking and that is a great question. Partially because it is what’s on my mind today as a wrap up and get ready to hit the sack and partially because we all spend a great deal of time thinking about our people and our culture as we grow our businesses. For those of use focused on a culture of excellence it is important to remember that “fair is good” in the eyes of our employees.

There is almost nothing Mike or I would not do for our people but if we are not constantly listening and keeping thing fair in their eyes we will eventually lose good people and that is something we don’t want to happen if we can avoid it.

JC

I hope to see you there!

I take the stage at 250pm ET, and I’ll be around for a while before and after.  I hope to connect with some of our readers in person.

MRC

I first met Paul Dippell at a Connectwise Partner Summit a few years back. I can remember thinking after his presentation:

“Damn, that guy is smart.”

Paul runs a firm called Service Leadership, based in Dallas, TX. His background in our industry is one of running companies of various size as well as serving as the head of mergers and acquisitions for All Covered during their growth boom. In other words, he’s got a background that you can learn from. His business today is advising managed service providers on how to grow successful, profitable businesses.

The team at Everon was fortunate enough to be able to pick his brains this week. We had Paul come and spend all day Monday working with us to “sharpen our sword” as they say. It was a great experience for our team and for me personally.

Paul isn’t cheap, but you get what you pay for. If you have the opportunity to do so, I highly recommend hiring him to assist your company - particularly in the areas of P&L optimization and growth strategy.

MRC

It sounds so easy on the surface, in fact those that have done it successfully will tell you that there is no secret formula and everything they would advise you to do you already know – they are merely reminding you to take action.

I had the opportunity to speak with and hear from some of the greatest service minds in the country over the last week and they all say the same thing – with their own variations of course or you would not buy their book – your people and your culture are your most valuable asset.

As I think about our culture I realize that for years we have talked about creating a culture that we care about and that we want to come to work in every day – this to us is all about our people – but I have only recently been able to clearly express what that means to someone on the outside looking in.

In a way Mike and I have been lucky in that we intuitively have been able to build a fun and exciting place to work. We have benefited from low employee turnover in an industry that is knows for employee churn. As a result of this we have also seen incredibly low customer churn numbers during our time in business.

So you may ask, how have we managed to pull this off? Well, we have done nothing more than start with a hyper focus on the people we bring into the organization. I would rather have to work 80 -90 hours a week than to hire someone just to fill a spot. Is this an easy thing to do?? No way. In fact there was a point early in our business when we lost our patience and hired just for the sake of filling a hole, you could say we hired skills rather than cultural fit and we paid for it over the three months it took for this person to move themselves out of the organization. In hindsight (I am always incredibly smart in hindsight) it was one of the best things that happened to us because it both consciously and unconsciously created the commitment we have to only hire the best fit for our organization no matter how long it takes.

Over time we have developed a standard interview process to help us gain an understanding of a person’s heart – what they are all about and what they will bring to the culture – while simultaneously allowing the interviewee to gain an understanding of the type of culture we are. Remember the questions from back in the day when Google and Microsoft used to ask interviewees mid sentence to tell them how many hubcaps there are in NCY? We use similar puzzles and questions to get at the essence of how a person performs under pressure, how deep their critical thinking skills go, and ultimately what kind of people person they are. We have interviewees tell us frequently that our interview is the most fun and challenging they have ever been on, we also have had some that we thought were going to walk out mid interview but hey, at least we knew they were not a fit.

So as we go through this process we look for these four items listed in order of importance:

Cultural fit – can they laugh at themselves, do they take themselves too seriously, do they like to have fun, would you choose get together with this person outside of work

People skills – you have heard me say it over and over again, we are first and foremost a people business we just happen to be really good with this technology stuff

Critical thinking skills – no one can survive in the tech world without having great critical thinking skill

Technical skills – we believe these are least important and the easiest to teach out of the bunch

So next time you are about to hire someone because they know the technology that will round off your team, or they have the exact skill set match that you are looking for, stop for a minute and think about what that person is going to bring in terms of service excellence and cultural fit to your team. And if you need to, step back and exercise patience in order to preserve your culture.

JC

I’ll be presenting at this conference.  If you read our blog and can make it, I’d love to meet you in person.

Here is the registration page.

My presentation will be covering the key service processes and metrics every MSP should have in place and how to make them work.

Hope to see you there!

MRC