Stephen and Stephanie Cracknell founded USM Technology (formerly US Medical IT) in 2010. The Dallas, Texas-based MSP is on a path to building a $5 million business and last year grew 33% year over year. In this MSP Success interview, Stephen shares the MSP makeover that kick-started growth to move beyond the plateau the business had hit.
MSP Success: What are the top three business indicators you use to measure your company, and why?
Stephen Cracknell: Our growth in net profit, MRR, and gross profit. These are the big three that I focus on. Is MRR leading to growth? With gross profit, what do we have left over after we’ve paid for our direct labor, hardware, and software? And then how well are we running our business as far as net profit?
Behind each one of these, I think about what leads them to growth. For instance, with MRR, are the marketing activities we’re doing leading to newly signed contracts? Primarily, I focus on how we make these efforts reliable and consistent. I track gross profit to make sure that it’s in a healthy place. The MSP industry talks about going through this “bathtub of despair” when you get to around $2.5 million to $5 million. It’s a challenging period because you don’t have enough revenue to justify the infrastructure you need to drive a $5 million business. Currently, we are making investments and sacrificing short-term net profits to build a $5 million business.
A big “aha moment” for me was that I needed to be OK with my net profit dropping while I went through this period of transition.
MSP Success: What is the top lesson you had to learn that allowed you to kick-start your business growth?
Cracknell: Last year, after hearing my peers tell their stories of success and growth, I realized “I” was at the heart of every reason my business wasn’t growing the way I wanted it to. My company’s culture is a direct reflection of my decisions to act or, in most cases, not act.
I began to think about my business as if I were starting it from scratch, and I could make every decision again with no guilt, remorse, or mental baggage. What would I do?
I imagined I had zero employees. Then I thought, “Who on my team would I hire if they weren’t already working for me?” We made all the marketing investments I was too scared to make in the past, such as writing a book. I hired a dialer, and we put a marketing program in place. We are still striving to map out the magic MRR formula, but the good news is we are no longer being held back by my timidity.
MSP Success: What is your single secret to success this past year?
Cracknell: Focusing on ideal clients [midmarket] that are a better fit has given us a turbo boost. I failed to raise my prices for many years, so when we raised prices, the clients who were not a great fit left. This gave us the resources to deliver better quality service and find clients willing to pay for it.
We brought on five midmarket clients who see technology as a differentiator, not as a cost center. Our profits grew quickly because one new, rapidly growing midmarket account is worth at least five small clients. These clients invest in technology, their support issues are less common, and my staff is happier. Plus, many of these clients are buying other businesses. Not only do we get project work associated with merging two organizations, but our MRR grows with every acquisition.
MSP Success: What is the biggest challenge you overcame this past year related to reaching that growth?
Cracknell: Turnover. We had to fight through people being recruited away in the 2022 hiring frenzy and make hard decisions about letting people go who weren’t a good fit for the organization. But our team is a lot stronger than 12 months ago because of it.
MSP Success: What partners or tools helped you along the way?
Transforming our technology landscape with Kaseya’s ProfitFuel program has supercharged our efficiency and profitability. It’s delivered unbeatable cost savings by securing the most competitive rates for essential technology, coupled with more economical cyber insurance. It streamlined our operations, converging multiple tools into one seamless ecosystem accessible through a single login. This enhanced our tool integration and simplified our workflow. We are also provided with a dedicated representative, eliminating the hassle of juggling multiple contacts.
This focused approach of investing in one vendor rather than scattering our dollars across multiple vendors commands attention. That translates into superior service and support. As a result, our resources are strategically allocated, amplifying our capacity to achieve ambitious goals.
MSP Success: Who is the most impactful business leader whose techniques or leadership style you try to emulate or are influenced by, and why?
Cracknell: Elon Musk. I admire his focus and drive. He refuses to accept the status quo, starts from scratch, and rebuilds an industry. He’s taken a single mission from his childhood—populate Mars—and built an entire ecosystem around that idea. In the process, he is revolutionizing the way we live. Electric cars, batteries, satellites, solar, robotics, and soon AI. He is an absolute force of nature. From his management style, I’ve discovered we need to never be satisfied with good enough. We need to implement his “burst mode,” where he and his team apply concentrated effort over a short period of time to achieve significant progress on a project or goal.
MSP Success: What book would you recommend to other MSPs or SMBs trying to grow their business?
Cracknell: Greg Crabtree’s Simple Numbers 2.0 was a game-changer for me. When I opened my P&L in the past, I would jump from the revenue number at the top to the net profit at the bottom. Then I would either cry or cheer. Now, I can actually read my P&L and use it to make decisions.
MSP Success: What words of wisdom would you give to other MSPs looking to grow their business?
Cracknell: If your business isn’t performing the way you want it to, it’s your responsibility. You’re responsible for making decisions that drive the business forward. If you want to evolve and turn into a larger, more successful company, you must push through the uncomfortable parts, have difficult conversations, and make hard choices. To make it easier, find a mentor who’s achieved what you want to achieve. This was crucial in helping me find my way through the jungle when I had no idea which way was north.
