Should You Outsource for Your MSP? #49

Justin Esgar:

So I found, this is going to sound really weird, but I found this really cool trick to get people to actually respond to my emails. As many of you know, I'm not a religious person in any way, shape, or form, but I started to write, thank you and have a blessed day instead of just thank you. And weirdly, my rate of a reply has gone up and also the replies are much nicer.

Eric Anthony:

That is an interesting dynamic.

Justin Esgar:

I wonder how it would change

Eric Anthony:

If you put Thank you and bless your heart.

Justin Esgar:

Oh yeah. Well, I'm Jewish, so I would've to write thank you in Shalom, and then they would never reply.

Justin Esgar:

What's up everybody? Welcome to the All Things MV podcast. I'm your host Justin Esco. With me always, it's my good friend, podcast producer extraordinaire. Mr. Eric Anthony. Eric, what's up, buddy?

Eric Anthony:

Oh, just having a great day.

Justin Esgar:

For those who don't know, the way Eric and I film these is we literally are on a Zoom call for three hours and then we film these. So by the time you hear me saying, Hey, what's going on? I already know the answer.

Eric Anthony:

We've already done all of the updates,

Justin Esgar:

The

Eric Anthony:

Familial updates.

Justin Esgar:

Yeah. It's not like we just jump in. We're starting start the podcast and we just start talking as if we haven't been speaking for the last six hours. So we wanted to talk today a little bit about outsourcing and this, look, it's a broad topic. We we're going to dive a little bit into it because I know for us personally, there are things we can do and things we can't do. And there are plenty of you who are out there listening, who are watching that are not understanding where your playground ends and where it should end. And I feel like y'all need to learn. Y'all need to be schooled in how to play in the playground the right way.

Eric Anthony:

Well, and it's not just that, right? For me, it comes down to operational efficiency and what should you be doing and what shouldn't you be doing to maximize profitability in your business?

Justin Esgar:

Yeah, right out of the gate, I want to talk a little bit about one. Well, now I'm backtracking out of the gate. You should know what you're good at and know what you're not good at. And what I was going to go with out of the gate was immediately, if you're not already, you should sign up to be partners with a company like RIS or Sandler and Partners and mention Eric and I's name. Because when you do that, you now have access to a breadth of knowledge and vendors that you never had access to before. And I'm finding that especially on the Apple side, a lot of Apple based consultants are not partnered with these companies and should be because there's so many more things you can do that you never thought you could. And I know from our side of things, and I'll let you speak on the pc, PC side, Eric, but a lot of Apple consultants only want to play again in their playground for just Apple things.

But then that makes the playground really, really, really tiny. And I feel like whether you're Apple or pc, you can't do just the computer itself. If you're going to do business to business, you need to talk about all the other pieces of the infrastructure and you can maintain the computers and the network and then outsource the telephony, the VoIP, but manage it. Or you can outsource the printing but manage it, right? Whereas too many consultants I'm finding nowadays they want to niche in so bad and I'm only going to do the computer. And if it's networking related, I don't want to touch it. And I'm like, you can't do that because you're going to walk away from a computer that's not working because the network's not working. Oh, that's not my thing. You know what I mean? That's not what we're talking about here. I think you need to expand your playground, but then when the client's like, Hey, what do you know about failover internet? Or what do you know about IOT devices to control the temperature in my walk-in refrigerator or something like that. You don't need to know that stuff. That's not what you're expert in. That's when you can go to a company like Dolores or Sandler Partners. But there's a lot more we could talk about in terms of outsourcing, but I'll shut up now.

Eric Anthony:

So a lot of that is extremely relevant. When we're talking about outsourcing, we're talking about making sure for number one, that you are managing. You said those words, you're not doing the work, but you are managing the work to be done. And to me, that's a really critical distinction. And especially when you have things like alarm systems, right? Alarm systems today, all of them have to be connected to the phone system unless they have a cellular connection. But even then you should know exactly how that's working. But let's talk about the telephony and alarm systems for a second.

Justin Esgar:

Okay?

Eric Anthony:

There's a little bit of wizardry that happens with hooking an analog alarm system or an elevator phone to a voiceover IP system.

Justin Esgar:

For sure,

Eric Anthony:

It can be done. It's not extremely difficult, but it's not in your wheelhouse. And so is it efficient for you to do even if you can figure out how to do it? No, it's not. So make sure you are managing them because the management piece, by the way, is most important because so many of us got displaced by a managed print provider who suddenly decided to start doing it because they already had their foot in the door with print services. And so you have to make sure that as a managed service provider, critical using that term, managed that you are managing all of their, all of their technology so that nobody else has the opportunity to get a foothold on that client

Justin Esgar:

When it comes to VoIP. I think the funny thing when it comes to VoIP is I've had friends in the past be like, dude, you got to sell voice. And I'm like, I do. I use phone.com or I use bvoip or I use Vonage or whoever, and they're like, no, no, no, you got to sell it. You got to sell it yourself. And they were trying to sell me on spinning up my own sip trunk using some provider. I'm not going to mention who as my backbone. And two things that came to mind was, one, the person who was calling me telling me about this had the worst phone connection ever. The conversation I had with him was so choppy. I'm like, are you on that service now? He's like, yeah, it's awesome. I'm like, no, it's not. It's not. But that aside, the second thing is billing.

Because especially with voice more than anything else, there's a lot of taxes and rules that have to be applied when it comes to voice. So you may not need to be the VoIP provider. We have VoIP providers you can talk to. We know George over at B VoIP, I know andy@phone.com. We know Elise over it Advantage. We have people that you can talk to, but you need to be able to that system. We manage all of our clients' phone systems. They have a problem with their phone system. They're not going to the VoIP provider. They're coming to us, Hey, someone's leaving. We need to change the IVR. Hey, this call routing isn't working. Hey, we need a new phone number because again, like you said, we have our foot very promptly placed on the ground there and everything comes from that. So outsourcing it doesn't mean completely losing control.

You have to remember that. So the voice thing is tricky. I think some of the other ones are not as tricky. If you really want to do it, like wiring is a good example. Our team in Columbia, Missouri, we do so much wiring down there. We just did a big job in Austin, Texas, or sorry, Houston, Texas, I apologize, and we did all these runs, but in New York City, my wiring guys cannot touch anything. It's all union controlled buildings. So we can't come in and do stuff. However, we will manage that project and we want, if there's a problem with the wiring, they got to come to us and we go to the client, right? Again, managed service partner, but we're not going to do wiring in New York. It's just impossible. And so we're going to have to outsource that, and that's okay. We're okay with outsourcing that thing.

So again, it's one of those, what is it? You need to outsource a great, another example for outsourcing beyond technical for a lot of listeners or all the business aspects that you're not doing, you all became MSPs or ITPs or whatever you want to call yourself because you're not good at finance, you're not good at the maths, you're not good at marketing, you're not good at drawing pictures. You never colored within the lines, right? Those are things also you should be looking at, outsourcing, for sure. All of the programs we've ever written at Virtua, I'm not a coder. I could barely speak English. You've listened to. However, number of many podcasts of this, you really think that I can grasp the English language, let alone like Swift or Java or c plus plus. No way. We've outsourced everything. We've outsourced all of it. Even back when we had semi pad, when we had atri, it was completely outsourced. And that's okay. You're allowed to do this, but that's what it's there for. Use those things. I'm a big believer in outsourcing financial piece as also, have you ever used a fractional CFO before?

Eric Anthony:

I have not. But one of the things that I had down here was finance, accounting, billing, because those are things that, let's face it, a lot of MSPs don't have experience doing it. They are highly, I don't know, I don't want to say regulated, but if you don't get it right, you can be noncompliant and the fees and

Justin Esgar:

The tax man coming,

Eric Anthony:

The tax man cometh, right? So yes, you want to outsource some of those things. Now I break down outsourcing for an MSP into two general categories, deliverables, things that the client is going to see. And then number two, internal processes. So we've talked a little bit about both, but to clarify it a little bit, we talked about things like wiring and telephony. We talked about software development, and that could carry over to website development as well. Here's a big one. D-N-S-D-N-S is always a problem. You should never allow anyone else to touch DNS of one of your clients because too much relies on it. It's not just the website, it's not just the email server. There's so many things that could rely on DNS. That's one thing that you absolutely should not give up.

Justin Esgar:

You shouldn't let your clients touch their DNS. Either of times. We've had clients like Squarespace. For the record, Squarespace is the worst. We have a client who has a Squarespace site. All their DNS was with Squarespace, and they wanted to update their website, so they built a whole new website. And in Squarespace, it's very easy to go make this the new website for the domain. And what it does is instead of making the new website the DNS entry for the domain, it just moves the domain to the new website and it foregoes all the existing DNS records. So at six o'clock at night when they were like, we're flipping the website and didn't tell us, and then all of a sudden stopped getting email because all their MX records went away, that was a fun day.

Eric Anthony:

Yeah, no, that kind of stuff just doesn't need to happen. And they can be very, I don't want to say catastrophic, but disruptive is probably the better term for it. And so there's those kinds of things, but then there's also cybersecurity and soc. Do I think that every small business needs a security operations center? Maybe not, but it's not going to hurt to have some type of outsourced cybersecurity so that you are not having to watch those logs all the time.

Justin Esgar:

Internal processes, deliverables to customers, the deliverables. Customers, I think is a pretty flat level here where you know what the customer needs, you get it for them. A lot of clients that we need backup internet, we go to tolos or Sandler, we get the backup internet, we need iot. We go to them and do that kind of stuff, fine. Move that aside. The internal processes, having a SOC external, having a fractional CFO, which I have done, I'll tell you sorry about that in a minute. Having a fractional bookkeeper, fractional marketing, by the way, I'm using a fractional, fractional virtual outsource. It doesn't matter. It's all the same thing. But having the right tools in place, and again, these are things that when you're outsourcing these things and you're going to me, Justin, but how am I paying for this stuff? You should be baking the costs of this into your billing to your client.

So if you are going to have an outsourced security operation center watching your logs and watch and doing all your cyber and they're charging you $10 a seat, you're charging your client $20 a seat. You have to be doing that. I think a lot of people, they don't understand how to price it, and that's another conversation, and they don't know how to build the margins on it. And again, part of that conversation, but know that all of these things that we're talking about are other add-ons to your regular, hourly, monthly, whatever service. You want to charge somebody to increase your profitability and your revenue. It's the same reason why you're selling Microsoft 365 licenses now, right? You're making a dollar, but you're doing it. Why? Because you're holding the client. You want to make that extra revenue, but you're using it to hold the client. Same thing here here, great. Here's a great example. We resell veon. We're very public about this because veon doesn't make it. It's not a white labeled service, but we sell it at veon prices and we get it through PAX eight at a very good discount. Thanks PAX eight.

But we're very clear with our clients, this is what we're selling it at, this is the price done, and we're making like 50% margin, but we're managing that entire infrastructure for them. And that's email security, anti phishing, anti whatever, and whatever you're using, have it on Proofpoint. I don't care what you're using. But the point is that I can go to my client and say, Hey, we have a product we use, not a product we built from the ground up or a product that we, no, it's a product that we use and we manage for you that does phishing and DLP and URL rewrite and shadow IT and whatever. I just rip it off of their website and tell 'em exactly what they want to hear and sell it. Here's the price. There's their price, our price, same price. So there are ways to make money on that stuff. So you should be baking all of that stuff in, even the stuff that you're using internally. So I'll tell you the fractional CTO story and how we actually made money on the fractional CTO.

There's a lot of people who do this. They're fractional CTOs. They're not always accountants, or sorry, not cto, I apologize a fraction. CFO, I apologize, CFO is what I meant to say. Big difference between two. There's a big difference, which weirdly enough, I have a client where the CFO is managing it. They don't have a CTO, and I've asked them to be their CTO, and they keep saying no because they have internal it and they're like, we can't give an external MSPA higher position than the internal people. Whatever long story it's called VCIO or comit. No, they're not. Trust me. The amount of Tom foolery that has happened there because of trying to get titles in place is beyond me, so I don't even care anymore. The fractional CFO, there's a couple of services you can use that are online. You can Google them, find somebody, get a referral, whatever.

I went to them, I went there and I said, listen, I need you to run my numbers and make sure that, because I was in my head and in my heart I was like, I think there's something wrong with my numbers. No, we were fine. But I was like, I think there's something wrong. I was like, tell me. And they went back to, she said to me, she goes, well, what do you want me to tell you? And I said, I want you worst case scenario to tell me that there is nothing wrong and that it's in my head. And best case scenario is I was right. There was something wrong. We need to fix it. And those are the two scenarios I gave her. I said, either there is something wrong and I'm not crazy or I am crazy.

And she ran through my numbers and she said, you're crazy. Your numbers are perfectly fine. And they built out these models for me and they showed me what it looks like if I want to increase my profit margins and how I can do certain things. And if I adjust, if I cut 10% of my software usage or if I add 5% to payroll or if I remove 10% from payroll or whatever I use, I just gave 'em an output from my QuickBooks from the last two or three years, and they went through it all and it wasn't expensive. I think I paid probably 2000 ish dollars for this couple hours of work with this person. A couple of emails back and forth. It was a first call, couple emails back and forth, and then the call to show me everything that they had done and that $2,000, I immediately said, okay, cool.

I'm crazy. There's nothing wrong. I am profitable, but now how am I going to make my $2,000 back? And I use that to light a fire under my butt to go sell something that day to do it. I was like, if my numbers are right and I've now gotten myself in a mental good state by this person telling me, no things are good, go with it. Keep doing what you're doing. And I'm like, okay, things are good. I'm going to make them better now. Right there I was like, I need to make $2,000 to pay for this person. And so I found something we can sell to a client. I think it was probably Aon or oh, maybe it was the SPFD, cam D mark stuff that we're doing for clients, whatever it was, I was like, I'm going to buffer that out because I got into a mentally good state. So I know it doesn't translate, but there are things you can do if you do outsource marketing and you capitalize and you put a cost per new incoming lead, right? Because that's a little bit more of an easy math transition for you.

Eric Anthony:

I mean, there's a reason why big companies do that, right? There's a reason why there's a client acquisition cost that most SaaS companies use to figure out whether or not if they spend X on marketing, are they going to get Y in revenue and is that at the proper profit margin? And as a small business owner especially who's a technical business owner and doesn't want to do finance type stuff, you can get these fractional CFOs to come in and do that type of work and provide you with that type of what I'll call business intelligence to either confirm that you're crazy or puts you back on the right path to generating the profit that you need to fuel the business.

Justin Esgar:

Yeah, it's about staying on that path, right? I mean, no matter what you outsource, staying on that path to make sure that that you're not crazy or that you are crazy in this example allows you to, what's nice about it is also is that if I'm freeing up the, because I'll tell you why we went with this was that I was thinking about this for so long. I had been thinking about this for weeks, if not months before I hired this person. I found this outsourced fractional CFO to go through this, and it became such a relief because I couldn't do it, I couldn't do it myself. And that's what we're trying to get at is if there is something that you can't do yourself from internal process, yes, you can build an asterisk server and run VoIP don't, but you might not be good at finance, you might not be good at marketing, you might not be good at sales or creativity or content creation or whatever.

Knowing your own limitations is a huge, first off, if you know your own limitations, kudos from the bottom of my heart. I'm being serious here that knowing that is such a step up above so many people, load that and then find the people that you need to make the rest of that fall into place. Because you can always make more money if you have a clear head about the fact that your company is profitable because a $2,000 fractional CFO told me so, or alternatively, another big example we use all the time is if you got a fractional bookkeeper, means that's one less thing you're doing. And if you're paying them $40 an hour and they're spending five hours a week, let's say that's 200 bucks, and you can rack up two hours of billables at $200 an hour, you've now made money and you still have three hours left to catch up on Netflix, which by the way, if you haven't watched it, it's an amazing show.