MSPs need to dramatically rethink the way they leverage, compensate and train their teams, according to Paul Cissel, an IT industry and finance specialist and Expert In Residence with TMT.
“You’re working too hard right now trying to keep people who probably should be moving on,” said Cissel, who spoke recently at a TMT Producers Club meeting in Nashville.
It’s not that your best techs aren’t incredibly valuable. It’s not that you don’t want them to stay. It’s just the cold reality that no matter how hard you try, turnover among your very best is simply just going to happen.
And here’s why that’s a good thing…
FIRST: You’re Probably Using Them Wrong
According to Cissel, you’re probably using the wrong people on the wrong projects.
For example, with an average MSP generating $4M in revenue and $2.8M in service revenue, according to Service Leadership, here’s how service team members get assigned and the end result:
25 total employees with the mix as follows in service:
(1) Service Manager @ $100K = $100K
(1) Project Manager @ $90K = $90K
(1) Project Tech Level 5 @ $110K = $110K
(2) Project Tech Level 4 @ $90K Each = $180K
(2) Service Dispatch/Coordinator @ $50K Each = $100K
(3) HD Tech Level 3 @ $90K Each = $270K
(6) HD Tech Level 2 @ $60K Each = $360K
(2) Help Desk Tech Level 1 @ $42K Each = $84K
TOTAL: 18 Service Employees @ $1.294M and fully burden (20%) = $1.552M
EBITDA = $353K (8%)
In comparison, here’s Service Leadership’s breakdown of payroll, staffing and assignments for a Best-In-Class MSP — again, with total revenues of $4M and $2.8M in service revenue:
20 employees with the mix as follows in service:
(1) Service Manager @ $90K = $90K
(1) Project Manager/Coordinator @ $50K = $50K
(1) Project Tech Level 3 @ $117K = $117K
(1) Project Tech Level 2 @ $86K = $86K
(1) Service Dispatch/Coordinator @ $50K = $50K
(1) HD Tech Level 3 @ $76K = $76K
(3) HD Tech Level 2 @ $58K Each = $174K
(7) Help Desk Tech Level 1 @ $47K Each = $329K
TOTAL: 16 Service Employees @ $972K And Fully Burden (20%) = $1.17M
EBITDA = $797K (20%)
The difference? An “average” MSP assigns high-level team members to low-level tasks like help desk, while a Best-In-Class MSP hires additional entry-level team members and assigns them to handle responsibilities more appropriate to their skill level.
The end result is greater efficiency in getting work done and a significant improvement in EBITDA and per-employee revenues, as Cissel noted in the chart below:
SECOND: You Can’t Afford To Pay What They’re Worth
Cissel noted there are around 20,000+ MSPs in the US that take care of SMBs, 1,500 that focus on enterprise customers and 150 that take care of Fortune 1000 companies — each with its own pay ranges for techs:
- MSPs who serve SMBs can afford to pay from $30K to around $120K for a tech.
- Those who serve the enterprise pay that same tech somewhere between $75K and $180K.
- And those who serve Fortune 1000 pay their technicians upward of $200K to $250K.
How many techs do you think move up in their careers from serving SMBs to serving enterprise and then to the Fortune 1000 service providers?
Not all. Probably not most. But a lot for sure — and that means the big boys are inevitably going to come a-calling for your best people.
That’s why you need to embrace an approach where you constantly recruit, grow and let go. And the perfect model for this way of thinking already exists…
THIRD: You Need To Start Thinking Like A High School Football Coach
In the US, there are about 1.1 million high school football players. Of those, about 12,000 make it into college…and only about 1,500 make it to the NFL.
So, the high school football coaches aren’t developing those kids for the pros — they’re training them to play the game of LIFE.
According to Cissel, we should likewise embrace our role as high school coaches. We should understand that we will have techs who grow up and out. We should celebrate it.
Hire, Train And Let Them Fly Free
You simply have to invest in constantly finding, training and mentoring young people.
Cissel urged MSPs, “Put a recruiting process in place and constantly recruit. Hire younger people and mentor them. Push your team to think out of the box.”
Some will certainly grow in skills beyond your ability to compensate them. And that’s OK. Let your best fly free — just keep growing more of them.
“We should embrace it,” said Cissel, “because it enables us to grow as MSPs from average to Best-In-Class.”