Welcome to SMBITPros - make sure to sign up for our RSS feed!

“Hire slow, fire fast.”

I don’t know how many times I’ve heard and personally repeated that phrase, but it’s a big number.

And yet for anyone in a managerial position that doesn’t have a heart of stone, this can be a really tough one to execute on as effectively as you should. It’s not fun to let people know that they no longer have a job, aren’t meeting your expectations, or aren’t fitting into your culture.

Not fun, but necessary.

We’ve been reminded of this recently at Everon. I think we’ve almost always done a very good job with our hiring, but occasionally you get someone that makes it through the interview process looking like good, but doesn’t live up to their potential once they are on board.

Or maybe something changes over time. Maybe they don’t grow with the company. Maybe they lose their positive attitude over time. Whatever it is, the response is the same.

They have to go. Fast.

Now, I’m not talking about the employees that do something really stupid like steal from you or bad mouth a customer. Those are the easy ones! You’ll fire them immediately and feel pretty darn good about it.

I’m talking about the tough ones.

The employee that does her job pretty well, and has a decent attitude, and comes to work every day like you need her to. But she isn’t growing, and she isn’t a positive influence in the office, and she isn’t loved by your clients. These are the tough ones.

But this is where you earn your management pay.

If you want your company to continue to grow and excel, your employees must continue to grow and excel. There is no way around this, and you have to be absolutely committed to proactively trimming the bottom 10% of your talent pool to make room for the next new hire that is going to dazzle you and your customers.

Jack Welch became famous for his execution of this philosophy. Many people thought he was a ruthless bastard, labeling him “Neutron Jack” for the destruction he left in his wake. But imagine the balls it took for him to do what he thought was right. To get rid of literally hundreds of thousands of people in order to ensure the survival of the business and the remaining jobs.

Do you have the same balls?

There are all kinds of reasons to not do it. It’s bad timing. The person plays a really important role. You’re too busy. You like them. Whatever. All of these are just excuses and rationalization.

As I said, we were reminded of this recently, and I’m proud of the fact that our management team go its act together and made the tough decisions that needed to be made. The company is already better off because of it.

MRC

We celebrated our 5  year anniversary in Colorado with a whitewater rafting trip and bbq, and in Boston with a booze cruise through the harbor.  Both were great fun!

Another fun event was our Annual Field Partner Summit.  This is the second year we’ve had this event, and it’s been incredibly valuable for us.  We get together with representatives from most of our field partner companies and discuss how we can work together better…and of course, have some fun.

Last year’s meeting was mostly about logistical stuff, whereas this year we were really able to spend most of our time and energy on strategic issues.  We discussed:

• How we saw the market changing
• How we needed to position ourselves to take advantage of the changes
• How Everon could shift our model to use partners to an even greater extent for the benefit of both parties

I’ve come away from it with a great deal of optimism and engergy about creating a bigger model for Everon, which has always been my goal.  Time will tell, but I think we hit on some key takeaways that will allow us to achieve greater impact in the marketplace.

MRC

A lot of noise has been made recently about the Master MSP model and the number of new entrants in the space.  Bob Vogel from Autotask referred to them in his post here last week, and it isn’t hard to find a number of other articles on the subject, including these at MSPMentor:

Jamcracker’s MSP LaunchPad: Ready for Liftoff?

Dell’s Next Move: A Master MSP Strategy

At Everon, we’ve always worked with partners (that would normally be our competitors) in local markets to provide IT services in the field; we deliver them field work and they help us provide great service.  It’s not a very big leap for us to turn this into some sort of Master MSP model where we integrate all of our services for the good of both parties.

It makes me curious as to how this compares with the models that are currently out there.  I’ve yet to talk to anyone that is actually working with a Master MSP, so I’m hoping someone out there can give me some insight into their experiences.

MRC

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

I have to take my hat off to the crew at Autotask. I recently asked some questions of those working with them and I am shocked to see the response from the community.

Not shocked that they are involved in the community but rather shocked that so many in the community took the time to stand up and speak about their overwhelmingly positive experience in working with them.

We all are busy growing and running our businesses each day and as small a task as it seems it can take a decent effort to share our experience about a vendor. In my experience you are much more likely to have someone take the time speak up about their negative feelings in working with a vendor than to take the time to share a positive experience.

Some one that has had a bad service experience is likely to tell everyone they know about it (these are detractors) while someone who has a good experience is likely to remain silent about it. It is only the user that has a remarkable service experience that takes the time to say good things about the vendor (these are promoters). These promoters are worth their weight in gold when it comes to growing your business and having credibility in the market.

% promoters minus % detractors equals a companies net promoter score.  This comes from Net Promoter Score and is what we utilize at Everon to measure our customer satisfaction. I encourage everyone to use the measure as it brings great clarity for your employees and fantastic insight into your business. I truly believe as stated on their site that “net promoter score is the single most reliable indicator of a businesses ability to grow”.

I do not know if Autotask uses NPS in their business but I would suggest based on the response to my post that they would have a high score in the community indicating a continuation of their fantastic growth and success.

Congratulations to everyone at Autotask and thank you for being out there helping MSPs succeed.

JC

We spend a lot of time at Everon documenting and improving our processes in all areas of our business.  Over the years, it’s resulted in the creation of a “playbook” on how to run a managed services business that I’m sure is probably worth as much as Everon itself!

That being said, we almost never actually look at the whole playbook itself, certainly not in any printed form.  Why?  Because it is constantly changing and under development.  The value is in the process of creating it, not in having a final version at the end of the day.

The E-Myth newsletter just post an interesting post about how UPS is constantly improving their processes.  The post focuses on the fact that UPS went so far as to try to eliminate left turns from their driving habits because left turns take up too much gas!  How awesome is that?!

Every company has their version of “left turns”, some more obvious than others.  Are you taking the time to find yours?

MRC

Sorry for the long time in between posts - we’ve been busy!

We just moved our Boston office to a new location in Boston that we LOVE.  The space is only about three blocks from our old space, which is close to downtown and the water.

The new office is the entire fourth floor of a historical five-story building that has been completely refurbished but still has its old Boston character - lots of brick walls and wood beam floors and ceilings.

I’ve included a video tour of the office if you are interested in taking a look:

If you are in Boston anytime soon, please let us know and we can give you a personal tour!

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

This is an interesting question for me.  Everon has grown our managed services business fast since its inception, but we are still a very small company, as are 95% of our competitors.  So how big should we expect to be able to get, and how fast?

Entrepreneurs, including me, aren’t exactly known for being patient.  I would like Everon to be a $100 million company right now, and I’d like to do it without any additional outside funding.  Given our current service mix and the margins they create, that isn’t a possibility.  I’ve figured our self-financable growth rate (SFGR) to be around 30% at this point, and that’s what we are shooting for in terms of growth this year.  At that rate, it will be  a decade before we hit $100 million.

Now, anyone will tell you that 30% sustained growth is amazing and very difficult to achieve.  So maybe I should be satisfied with that; but I’m not.

Which makes me think of the levers we can use to increase our growth rate beyond this current limit:

1. Acquire companies
2. Raise additional cash to fuel faster growth
3. Increase our margins on our current services to increase our SFGR - giving us more internal resources to fuel the fire
4. Sell different products or services that are faster to sell and have higher margins
5. Develop a growth model that has a more variable cost or self-funding model, such as franchising

All of these are viable options, and are being done by one company or another in our industry.  It remains to be seen if one of these models will prove to be “right” or superior to any other.  Will faster-growth models allow them to maintain high levels of service, or will customer churn end up spiking?  Will certain models allow for flexibility and speed to meet the changing demands of customers and changing trends of technology?  Time will tell.

One thing I know for sure: Everon will be putting the pressure on ourselves to find faster ways of growing, as it is a land-grab right now.  The worst-case scenario for someone who builds a decent business in this industry right now is to get bought at a fair price, and the bigger you are, the better the price.

I’d be curious to hear other’s thoughts on their growth rate plans and how they hope to achieve them and even accelerate them.

MRC

Getting good feedback from your employees gets harder and harder as you grow.  In addition to the “layers” that get created in the organization, employees seem to be more intimidated by the boss when they’ve been brought into the company at a later stage and perhaps don’t get as much quality time with the exec team.

Obviously any MSP that wants to continue to grow and grow fast must find a way to get regular access to the good stuff that is in employees’ heads, and employee morale will only be improved if employees feel execs are listening.

At Everon, we’ve recently started using the following tool:

https://www.employeesuggestionbox.com

I highly recommend it.  They’ve done a great job of capturing all of the basis systems and processes you need to solicit and review feedback.

Check it out - perhaps it will be a good fit for your company.

MRC