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I was talking to a new MSP yesterday about how they should structure their service plans, when a saying from Kent Erickson at Pointivity in San Diego rang in my head:
“It’s all about risk management, Mike.”
Sometimes a few words can turn on a light bulb in your head and make things so clear. Kent’s phrase was one of those times for me.
The business of managed services is about risk management. You are assuming a level of risk on behalf of your client, relieving them from some of the headaches and unknowns of technology. In return, you are getting paid.
It’s all quite simple, but easy to forget in the course of your daily business operations. I have a simple formula that can help you put this simple insight to work at your managed services practice every day:
More Risk = More Compensation, Less risk = Less Compensation.
Pretty simple, right? But totally powerful as well.
In all dealings with your clients, and in all cases where you are designing and pricing new services for your business, keep this formula in mind while you evaluate the decisions you are making.
Would adding this feature to your service offering increase the risk you are assuming? Then it must increase the compensation you will receive as well?
And if your client wants a lower price from you, what are they willing to take out of your service equation to lower the risk that you are managing?
Keep this formula in mind at all times and I guarantee you will see increased margins in your business over time.
Thanks Kent!
MRC
We discuss this and other topics in our membership site for MSP executives, MSPCoach.com.
As I am sure most of you have seen by now Zenith has made public their new data center as a service (DaaS), Box Office, and Data Center in a Rack (DCIR) offerings over the past few weeks.
So what’s the big deal? Great question and one that I think many MSPs as well as some of the big dogs such as Microsoft, Dell, Rackspace, and the Planet will soon be asking themselves.
At the most basic level the new technology uses shared hardware and storage components to run virtual servers across the resources creating built in redundancy, backups, scalability, and speeds close to that of operating on bare metal. All of this is done through a drag and drop Visio like interface that allows you to map out a network in minutes that is automatically built and provisioned on the back end.
The difference between the products is simple at this point:
DaaS is hosted by Zenith in their data centers and you can resell it to your end customers branded as your product.
DCIR is hosted in your data center and give you a bit more flexibility with direct connections for clients such as MPLS or point to point lines.
Box Office is installed at the customer site and is smart client capable.
Sound too good to be true? I sure thought so but I can tell you after testing their beta product and getting a chance to see under the hood it is for real and it is a game changer.
HP released its Single Box Networking earlier this month and if you thought that had potential this Zenith offering blows is away.
I don’t expect anyone to have the answers yet but a question we are asking is how does this product, and others that will follow, change our business?
Overnight we can compete with the data centers that have spend countless dollars building out their infrastructure and even have an advantage as they take time to strip away the inherent cost built into their model, but is that the best move.
Immediately we will be able to provide a higher level of service to our customers with reduced management costs creating better margins in our business, but will they care.
We think this technology and technologies like it will level the technology playing field for small businesses, simplify everything and put a large portion of people in our industry out of business. Technology will become about driving business efficiencies and productivity rather than working about the plumbing of the business.
The key to survival in our mind as this change takes place is sales and marketing. Create a strong brand, be the trusted adviser for the client, and control where their dollars are spent in this new world. I know this doesn’t sound much different than the Managed Service pitch but the major difference is that you will not be pitching IT service and support you will need a product that speaks to a business owners needs in order to get through the door. All of the plumbing will be taken care of with a Box Office.
We are working to figure out what these products are and will be over the coming quarter and would love to get input from the community weather you have seen the new Zenith products or not.
This new service allows us to have a completely different conversation with a business owner; “let me work with you to drive leads and ultimately revenue to your business Mr client, I am going to help you find your next customer with my service and I will also take care of all the plumbing that things need to run on.” That sure changes the conversation from what it was a year ago; “We can more effectively manage and maintain your IT infrastructure while providing your strategic advice on where to spend your IT dollars.”
I just got the email below from the folks at Autotask. What a nice capability to have in your toolkit. We don’t do a ton of field work, but I would still love this feature. If you do a ton of field work in your business, you NEED this feature!
MRC
Dear MICHAEL,
Ever send a tech to a client site, and the client ends up disputing your bill, after-the-fact?
Did you have to scramble to dig up documentation on that account and then argue with the client about when the tech was there, what he did, and how long it took?
If this has happened to you, then you know the importance of getting written client sign-offs on all work performed on site.
If This Hasn’t Happened To You Yet, Consider Yourself Lucky.
Many of the best service providers have set up a best practice to obtain client sign-offs on all work, and until now it was all manual and paper processes.
The most common way to get a client sign off is to print out a paper “to-go” form before leaving the office. Your tech manually completes the form at the client site. The client reviews and signs the paper. Then you hope the document makes it back to your office. Maybe you scan it into your system, or maybe you just add it to the mountain of paper files for your records.
Alternatively, you could use a specialized electronic signature capture system, which is expensive and not always reliable or legible.
At Last: A Simple, Bullet-Proof Client Sign-off… Using Any Mobile Device.
Well, all that has changed! We’ve just upgraded our software to eliminate the need for your technicians to bring paper sign-off forms with them on site.
Instead, clients view the service details directly on the technician’s mobile device and then they enter their private PIN code, acknowledging the work performed.
A permanent electronic note is automatically added to the service ticket history of the acknowledgement, and a digital receipt is automatically generated and e-mailed to the client who signed off.
Our Customers Love It, And You Will, Too.
“This is a great feature for those of us who have clients that sometimes dispute service work,” said Koen Van Overberghe, an Autotask user based in Belgium.
Our new Autotask Digital Sign-Off process eliminates the time-consuming and wasteful steps of generating paper sign-offs, and leverages the very same mobile devices your techs use in their everyday work – any cell phone or PDA with internet access.
In addition, because sign-offs are captured on the actual ticket being closed by the technician, at the moment the work is complete, there is little chance for errors, delays, or disputes.
Click here and complete the demo request form now, and we’ll show you how you can run your IT business better with Autotask and our new Digital Sign-off feature. Be sure to ask for our special offer.
Best Regards,
Bob Vogel
Chief Marketing Officer
Autotask Corporation
P.S. The Autotask Digital Sign-Off service is the latest in a continuous stream of business automation innovations being built into the Autotask IT Services Management platform. Our software is designed specifically for IT Service Providers, MSPs, IT Consultants, Systems Integrators and other technology solution providers who want to run their businesses, better.
Autotask is accessible on any PC, at any time, without any downloads, Autotask can intuitively manage and automate the key operations of your service business, including complete service desk management, scheduling and dispatching, project portfolio management, sales opportunity and contact management, inventory management, time-tracking, invoicing, and reporting. It integrates seamlessly with most Managed Services software applications, all at a monthly cost less than what you bill for a single hour of service time.
Are you ready to streamline and automate your IT services business like more than 20,000 other service providers? Click here and complete the demo request form.
I know Mike wrote a post about spending time with Paul after our first meeting but we just finished our second day long strategy session with him and he is an incredibly smart guy. If you have the opportunity at a conference or thorough his services to interact with him I highly recommend it.
So what did we take away from this meeting you may ask? I can’t say that we walked out with any secrets that are going to change our business but I can say it was time well spent.
Paul has a fantastic understanding of the industry and growth trends that are taking shape and it was great to use him as a sounding board for our future plans.
Big takeaways from our time together:
There are very few strategic buyers in our marketplace so the acquisitions happening are finance buyers. what does this mean? Well, it means if you are acquiring, selling, or planning to do either you better be paying close attention to managing your P&L.
Compensation plans for your service team need not be as complicated as we make them in our heads. Create plans tied to gross margins and performance (fill in the top three key metrics for your team here) and get the plans rolled out. We spent time around structure and percentages of incentive pay but the most helpful part of the day was the realization that this stuff doesn’t need to be complicated.
Anyway, as Mike said last time we spent time with Paul, he is not cheap but he is a great resource to have in your corner as you continue to grow.
I recently wrote a post about what criteria I would use to determine the right time to sell a business. The third criteria I mentioned referred to changes in the marketplace potentially changing the value of the opportunity.
Today, Everon’s executive team had the privilege of having Paul Dippell from Service Leadership in our office for a day of discussion about best practices, opportunities, and risks.
We had a very interesting conversation about the changes that are happening in our marketplace and what that means to Everon. Our team members are big believers in the idea that cloud computing/virtualized infrastructure are going to experience massive adoption in the next 24 months.
This is exciting stuff, but with the change comes some questions about margins, competition, etc. Business models in our industry are going to go through serious changes (again), and we’ll all have to be on our toes to make sure that we are able to find and take advantage of opportunities.
Managed service providers will no longer look like managed service providers. In fact, I’m not sure if we’ll call ourselves managed service providers anymore. It will take a pretty significant investment to make the jump to whatever new model prevails, and I think everyone in our industry will have to do a serious gut check to determine if they want to stomach the risks of making that investment.
MSPMentor mentioned in a recent post that a lot of providers are interested in selling out right now. Maybe this is part of the reason why; maybe people are nervous about the changes in the marketplace.
It has long been a goal of ours to be the number one choice of employees in our industry and I have to say we have done a great job creating a culture and enviorment that people like to come to work in each day. Our emplyees often say they “Love” coming to work.
But once you have your culture and environment figured out the next challenge you run into when you are a business that is growing quickly is that everyone wants to be promoted and everyone wants to make more money. As I am sure you know there is a financial reality to what you can pay a person in a certain position and still have a healthy business. And there is also the reality that not everyone can be promoted after their first year - you need your front line people for the business to run. So how do you compensate and motivate the person that says the “Love” coming to work before they start to no longer feel that way?
As we continually evolve our roles, responsibilities, and comp plans I thought I would share some key factors we use to attempt this challenge and get the opinion of the group on other ideas that you all are successfully employing:
Pay for performance - People that want increased pay with no performance requirements or growth in responsibilities will eventually leave the company weather you help them do so or they do it on their own. It is always interesting when someone decides they should receive a 20% raise because they do a good job or a year has passed.
Create a compensation program that rewards top performers more than everyone else. - Why should your top people not receive better compensation. Create a pay grade that everyone wants to achieve and outline clear steps and time frame to get there. Make it so attractive that once someone is there they won’t want to leave.
Pay tied to basic job responsibilities - This is something we have been thinking about lately. The idea could be something like should a hundred bucks a week of your pay or a couple hundred bucks a month depend on you showing up on time? Sure seems like it would fix that problem once and for all.
Compensation tied to the financial health of the company - One of the most powerful things we have implemented, and we are just in the very beginning stages, is open book management. It sure does create a whole different conversation when someone wants a significant pay increase and you can say “you know the business, show me where the money is gong to come from in your group to pay for that increase.” Amazing things start to happen in your business and with your people when you do this. Ideally they start to create new efficiencies and even products that increase profitability which is what we are starting to see.
Create clear growth paths - It is important that your employees can see what their future can look like if they apply themselves. It is just as important that the criteria for getting there is on paper and clear to everyone.
Make it clear that you invest in the development of your people but that it is their ongoing responsibility - Purchase the study and lab materials for the certs that make sense for your employees and your company and then make it each individuals responsibility to receive them in a certain time period. Create tests about your company, culture, and products that have to be completed successfully in order to continue on to another level in the organization.
Bonus plans - I have to put it here because someone would call me out if I did not but in a fast growth company cash bonus plans can seem insignificant or become expected causing challenges. This is not to say I don’t think they can work, we just have not made them work to date. We have on the other hand successfully implemented Annual Themes with mini games and rewards that work wonders. The ides is to put a goal up on the wall and tell the team to go get it - the power of reaching the goal and the pride they take in doing so is all they need, although we also compensate the success with a celebration, team outing, or cash when appropriate.
These are the types of things we keep in mind when figuring out how to compensate and motivate our people.
What are you doing in your business? What have you seen work?
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.
I’m a big fan of books that open my eyes and teach me valuable lessons, and I always promote the ones that I think have a big impact (I also promote business that I really love the same way and often rant about In N Out Burger, as anyone that knows me can tell you!). If you read this frequently, you probably saw the post I wrote recently about the books that have had the most influence on Everon. Well…I’ve got a new one to add.
When the student is read, the teacher will appear.
That’s the way I felt when I read Dan Kennedy’s latest book:
Now, please don’t judge the book by the cover…or specifically the title. Dan is well known for being a pretty bold guy, and his book titles are a way to get attention. But man are they valuable. Dan is a lifetime entrepreneur with a lot of hard-earned lessons, and he shares a ton of them in this book.
I don’t think I’ve ever underlined so much in a book as I’ve read it; it has so much valuable advice. I first read it three weeks ago and still haven’t stopped carrying the book in my work bag every day so I could reference it throughout the day.
I think many people will be turned off by the word “ruthless”, but my interpretation of it is very positive. By ruthless he means absolutely, positively, 100% committed to getting things done without being deterred by distractions, bad employees, or excuses of any kind. Who couldn’t benefit from being a little more “ruthless” when it’s defined that way!?
If you are currently having challenges with difficult employees, with managing your time, or with managing your profits - I HIGHLY recommend that you buy and read this book.
