Continuing on the “fear factor” train from last week’s Rant in a nod to Halloween and all things frightening, here are items 4 through 6 of the things you should be very, very afraid of as the owner of an MSP…
4. Lack Of Accountability For Anyone Or Anything Important. Roughly half the salespeople I talk to who were hired by MSPs were NOT given a sales quota. No quota! How can this be? It’s because someone dumber than a box of rocks hired them. Okay, that’s harsh. They aren’t dumb, but grossly ignorant when it comes to how to run a sales department.
Even more common is no accountability or coaching; their managers didn’t monitor these sales hires in any way…just give them the 2-part training of “Good luck and hang in there.” MOST OF THE SALESPEOPLE HIRED BY MSPs DON’T KNOW WHAT AN MSP DOES. But it’s not just sales – ANY position in your company ought to have some accountability for hitting some metric, quota, number, percentage or goal, INCLUDING and especially YOU, the owner.
Pearson’s Law states that anything measured will improve, and anything measured and reported upon will improve exponentially. That’s why WeightWatchers was, for a very long time, the #1 weight-loss organization in the country. They’re failing now due to a lot of dumb choices by the leadership, including no longer being about losing WEIGHT and instead more about health. Doh! But that’s not the point. WeightWatchers worked because there was 1) measurement of what you put in your piehole, and 2) accountability to your coach. You needed to go into a WeightWatchers location to weigh in. No mailing it in, texting it, etc. It’s the ACCOUNTABILITY that makes the person’s behavior change, not the diet.
In your organization, do you have clear financial goals that you measure, report on and review weekly to determine if you’re on track or off track? Do you have goals for sales, new client acquisition, profit targets, customer satisfaction, etc.? If not, you’re what Zig called a “wandering generality,” guaranteed to never hit any significant milestone or goal.
5. Lack of a numbers-driven marketing plan. Following from the above, another area that is lacking in nearly all the MSPs I talk to is a numbers-driven marketing plan that works backwards from a goal to the specific leads and activities to generate those leads so the goal is assured.
To be clear, I’m NOT talking about a marketing schedule of promotions, posts, e-mails and newsletters. I’m talking about a specific GOAL for new clients, sales, profits or all of the above, worked down to the specific number of prospects you need to target to hit said goal. Money is not just sloshing about in the streets for anyone walking around to pick up. DISORGANIZED, random acts for client acquisition and revenue generation NEVER result in success, and if you don’t have this, it should scare you. It IS a weakness that needs to be addressed.
One of the things I teach my clients is how to do backwards planning from a goal to the specific number of sales appointments they need, qualified leads, raw leads, etc., to absolutely ensure they hit their goals.
6. Not knowing whether you made money UNTIL your accountant completes your tax return. The other day an MSP at an event asked, “What is gross profit?” I almost choked. This guy is not a newbie business owner. He’s been running his MSP for over 10 years. TEN YEARS and he has no idea what gross profit is? I don’t even need to ask him about how he’s doing. I know.
Kevin O’Leary said, “One hundred percent of the successful businesses that come on Shark Tank know their business and their numbers cold.” They know where break-even is. They know their competition and their market size. They know what their customer acquisition costs are. They know the lifetime value of a client. Those who don’t get funded in the Tank are easily stumped by those numbers.
Numbers ARE the game of business. If you don’t love numbers, you can’t love business. Here are some BASIC numbers you should know, COLD, and be TRACKING in your business.
- YOY Topline Revenue Growth (MSPs Should be growing 12% to 18% organically)
- Gross Profit By Product Line And By Client
- Net Profit (EBITDA) After Paying Yourself A Fair Market Salary (10% is essentially break-even; top MSPs generate 18%+ net)
- MRR/ARR Growth In Dollars And As A % Of Revenue
- Client Churn (Number Of Clients And In Dollars)
- New Client Acquisition (marketing and sales metrics, backwards planning)
- Enterprise Value (EV)
I understand if you’re a new business owner and don’t have a handle on these numbers yet, but you should make it a PRIORITY to know these numbers and track them. Further, there are leading sales and marketing metrics you have to get a handle on before you’ll succeed in implementing a marketing plan.
Far too many MSPs get caught up in being a better tech and operations manager than being a better entrepreneur. That’s why roughly 79% of all MSPs never break the $1 million mark. A big part of my advice on productivity and time management is that you need to truly understand what to prioritize in your day and what to focus on, then set and stick to your agenda of priorities. It’s too easy to focus on what you know and what comes easy, but growth entrepreneurs force themselves to master areas of the business where they aren’t strong, lack skills and expertise and, candidly, feel uncomfortable.
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