This article was written by guest contributor Reed Warren, CEO of iTValuations, which offers business valuation services, tax advisory, and sell-side and buy-side advisory services.
Most entrepreneurs go into business with a great idea. But an idea alone isn’t enough to make a company successful.
To scale, MSPs have to build the business itself, not just their tech stack. Here’s how small, consistent changes, scaling beyond yourself, and becoming the best leader possible can give your MSP the growth you’ve been looking for.
Look for Small Changes, Not Silver Bullets
It’s really the small improvements that get your organization where it wants to go. For most fairly mature MSPs, there isn’t a single huge opportunity waiting for them—there’s lots of little ones.
There’s rarely a handful of silver bullets that are guaranteed to get you to your goal. It really is about doing a lot of things right over time. For example, you might find that you’re able to increase your effective hourly rate on your clients’ contracts by $6 a month. It’s $6 a month, not $60. But being able to discover that opportunity and execute on it long-term is critical. Each time you find a way to lower your spending or save an extra few dollars, you get one step closer to your goal.
Sometimes those changes include looking at how much cash your business actually needs to operate on a monthly basis, and the impact of shortening your receivables period and making your payables period a bit longer. Sometimes it means looking at your team’s labor efficiency ratios. It doesn’t require a massive business change, just awareness of the situation and a willingness to make small shifts.
If you can consistently execute on small changes, you can radically transform the value of your business. For an MSP that has three to five years until they plan to exit, if you make a 2% change in the growth rate and a 2% change in your profitability year-over-year, it’s going to add 50% value over what you had projected in that five-year period.
Building a Business Beyond Yourself
The classic challenge for any entrepreneur is doing less of what you love to do. You might love managing the tech or talking to clients, but you need to spend more time on developing strategy and working on how to grow the business to scale. When you start a business, you build a thing; when you build a business, you build a thing that builds that thing.
It’s a big challenge as an owner to move from having visibility on every project and client relationship to building a team that handles those matters themselves. You can’t scale a business with every client having you on speed dial. Building something that scales forces you to move out of that muscle memory and build out the processes, equip other people to do them, and let them do the work with their own personality and their own strengths. It’s not going to be the same way you did it, but in the end, if you hire the right leaders, the company will maintain the same DNA and culture, where people are invested in the company’s success. They have the same heart for it, but they’re able to go about it from a different angle, with a different perspective.
It’s humbling, but my team is able to execute portions of the business I used to do well even better than I did. That’s a privilege. Now, as a leader, the conversation has become, “What does iTValuations need from me?”, instead of “What do I want to do?”
Qualities Every Great Leader Needs
It’s not enough to just work on your business; it’s also essential to continue growing your leadership skills to become the best leader you can be. There are two qualities that are critical differentiators between good leaders and great leaders.
One is decisiveness. Typically, whatever the length of time it takes for you to make a decision, it’ll take you twice as long to unmake that decision. Decisive leaders will make bad decisions just like everyone else, but they will also recognize it was a mistake and adjust accordingly, rather than sticking with it for a year or more. However, that doesn’t mean being rash; it means great leaders can make a decision in a timely way and execute on it.
The other quality is humility. Hand-in-hand with decisiveness, great leaders also need to be humble enough to admit when they’ve made mistakes. On the transaction side, I see leaders that are unable to show humility; they blow up phenomenal deals because their pride got in the way. And I can’t say this enough: People follow humble leaders. People don’t follow arrogant leaders other than for personal gain.
Building a business takes know-how, determination, and grit. But building a business that can run without you pulling the strings takes more than that; it requires the ability to objectively look beyond yourself and assess what the business needs. That’s why when in doubt, it’s wise to consult an expert to get their unbiased opinion on your MSP.
For more articles from Reed Warren, check out his advice on why a culture match is so critical to a smooth acquisition.
