How Guy Baroan Is Reducing Staff Overhead While Simultaneously Growing Nearly $1 Million Year Over Year

What are the top three business indicators you use to measure your company and why?

1. Monthly recurring revenue (MRR) plus recurring subscription adoptions (e.g., Azure, Microsoft 365, ID Agent). The more recurring revenue, the more value, the more gross profit and gross profit dollars, which moves you further away from the costs of the tools and management, etc.
2. Total labor cost divided by gross profit. Gross profit and labor costs are two of the three levers that are really important to us. Our target is 70%, but we’re a little higher because we have overhead positions as we’re onboarding clients so they don’t have a bad experience.
3. Gross profit margin. The experts say best in class should be around 42.5%. We’re a little lower because of the added labor to push for additional sales this year. It’s extremely difficult to find good people, so we’re always on the lookout. When we find somebody good, we hire them.

What is the top lesson you had to learn that allowed you to kick-start your business growth?

Realizing that not all clients are equal. Clients need to be a good fit. If prospects/clients view technology as a necessary evil, it’s probably going to be difficult to work with them. We look for clients that look at technology as a differentiator to compete better. We apply the 80/20 rule, which came about after hearing Tim Ferriss talk about it. In a book by Richard Koch on the 80/20 rule, he talks about how the company he worked for determined that the top 20% of clients were providing 80% of their revenue. Curious, we wanted to know if 20% of our customers were giving us 80% of our revenue. At that time, we had around 120 clients. I found that 40 businesses provided 4% of our revenue.

I started to think, if we spent one hour a month on every one of them, that’s 40 hours a month. What if we took the 40 hours per month, turned our attention to the top third of the clients and gave them 40 hours worth of making them better and providing better service? We let go of those bottom 40 businesses, found them a home and transitioned them in a nice way. When we did that, our sales grew by almost 20%. Getting rid of the bottom third created additional capacity for us to follow up with the clients that wanted to give us more business.

What is your single secret to success this past year?

Focusing on sales instead of relying on referrals. In our 25-year-plus history, we had never had a sales team before. We provide very high-level, white-glove service, so we’ve always received a lot of business referrals. The problem with referrals is you can’t control growth.

This year, I joined business networking groups and turned my attention to getting myself out there to make sales. We brought in people to make outbound calls, built a pipeline of potential clients and have a bunch of different balls in the air specifically focused on sales when we never did that before.

What would you say is the biggest challenge you had to overcome this past year related to reaching that growth?

Getting myself out of doing the day-to-day processes so I could focus on sales. I have relationships with all our clients and have done all these tasks in the business daily. We’ve worked to document, systematize and automate my 26 years of tribal knowledge on the documentation platforms.

Who is a partner or what is a tool that helped you along the way?

We are a Kaseya VSA shop. We feel that the platform is hands-down the most powerful product on the market to manage systems. Nine years ago, we took the Kaseya VSA, and we brought in a developer to learn that product and help us with automation. This automation allowed us to take advantage of the full power of the Kaseya VSA. It is an extremely powerful beast of a product. When we deployed it, it automatically cut down by 62% the number of tickets and alerts we generated. It worked out so well that we started MSP Builder and created a product that automates and auto-remediates a lot of our tickets or alerts that come in.

Last year, 84% of all the issues from alerts were auto-remediated. By automating and leveraging the technology of Kaseya’s VSA and MSP Builder, we can address the majority of level one and level two issues. This gives us additional capacity to use our engineers in other areas, which means we can operate with a team of 22, whereas similar organizations require 30+ employees.

If you were going to recommend a book to other MSPs or SMBs trying to grow their business, what would you say they should read?

One book that stands out is Let’s Get Real or Let’s Not Play by Mahan Khalsa and Randy Illig, who were Microsoft software consultants when they wrote the book. It talks about a consultative sale. The key takeaway is “What’s your intent?” Our intent ties into our core values and our mission.

What words of wisdom would you give to other MSPs who are looking to grow their business or build a successful exit?

Carve out a consistent weekly block of time to work on the business. It’s a challenge, but you must keep working on it. Take one thing at a time and work on it till it’s good enough. It doesn’t have to be perfect. Our mantra at Baroan is to identify, document and automate. We talk about it. We make a list. We prioritize it. We have a whiteboard where we write everything down and talk it through with the team. This gives us some shape, and then we put the system into play as best we can. IT Glue by Kaseya is a great way to do that. Automation and focusing on getting things implemented properly make a big difference.

For more information on Baroan Technologies, visit https://www.baroan.com/