25% Growth Per Year with No Sales Team, with Sarabjit Singh

[00:00:00] Guy in my early years told me something, never run after money, just do a good job the best you can and money will run after you.

[00:00:08] From myself to last employee in my company, everybody's focused on doing a good job.

[00:00:14] I tell all my engineers that all of you are our sales team, because what you do this month ensures the next month contract.

[00:00:26] Hey guys, Damien Stevens, host of MSP Mindset.

[00:00:30] Today, we have a special edition where we recorded at Build IT Live 2024 in Orlando, Florida.

[00:00:38] Special thank you to Sonny and to Calm for allowing us to show up and interview such amazing MSPs.

[00:00:44] And thank you to the whole IT by Design team.

[00:00:48] And today, I get the pleasure of speaking with Sarab at Five Rivers IT.

[00:00:53] Enjoy our conversation.

[00:00:55] So let's kind of start there, Sarab.

[00:00:57] So tell me about your MSP.

[00:00:59] So our MSP is Five Rivers IT.

[00:01:03] We are based out of northern New Jersey.

[00:01:06] We primarily service clients in New York City metro.

[00:01:10] That's for our managed services that require on-site.

[00:01:15] We do have clients all over U.S. where we provide cloud management services, compliance services, staff org services, which don't really require on-site presence.

[00:01:26] Okay.

[00:01:27] So you're in a lot of different things, compliance and staff org and all kinds of things.

[00:01:30] Yes.

[00:01:31] You're not your typical MSP in that way?

[00:01:34] Correct.

[00:01:34] Yes.

[00:01:35] Okay.

[00:01:35] And about how many folks do you employ?

[00:01:38] A little over 60.

[00:01:40] Okay.

[00:01:40] All right.

[00:01:41] And I hear that you just, or it's been announced that recently you just did your first acquisition from, I don't know the right way to call it.

[00:01:50] I call it Sunny's.

[00:01:51] But IT by Designs MSP, I guess they're out of that business.

[00:01:54] And you were the acquirer.

[00:01:56] Is that right?

[00:01:56] That is correct.

[00:01:57] Yes.

[00:01:57] In May this year, they divested the traditional MSP business, which we acquired.

[00:02:05] So how did that happen?

[00:02:06] Well, so I know Sunny since college.

[00:02:09] We went to college together.

[00:02:11] So I was looking for 24-7 operations, meaning offshoring to follow the Sun model.

[00:02:21] And I spoke to Sunny that, hey, I need some people.

[00:02:27] And, you know, we kind of did a profile, how many people we need, et cetera.

[00:02:31] And then he said, hey, listen, I'm looking to do this.

[00:02:36] You're looking to do that.

[00:02:38] Why don't we solve, you know, kill two birds with one stone type of thing.

[00:02:45] So actually at this conference last year is when we started formulating this idea.

[00:02:52] And we went through some due diligence, et cetera.

[00:02:57] And in May, we closed the business, the acquisition of those assets, those contracts.

[00:03:04] And with that, we got the team that was servicing those clients from India along with it.

[00:03:10] So that filled the gap we had of operating 24-7 with an offshore team.

[00:03:17] That's awesome.

[00:03:19] So it's hard to replicate knowing Sunny since college.

[00:03:22] Yes.

[00:03:23] That's awesome.

[00:03:24] And you got to not only acquire some clients, but gain the 24-7 operation at the same time.

[00:03:32] So that seems like a total win-win.

[00:03:35] Yes.

[00:03:35] It was a very, I would say, safe step that I took.

[00:03:41] It's my first one.

[00:03:43] I, you know, it's a privately owned business.

[00:03:47] I have to be very, very careful.

[00:03:50] And I am somewhat risk averse in most cases.

[00:03:54] So this was a very super low risk.

[00:03:57] And our relationship is continuing.

[00:03:59] Now we are a client of IT by Design.

[00:04:04] And they're providing us offshore resources.

[00:04:06] We've already expanded our team beyond what we acquired.

[00:04:11] So the relationship, this acquisition, so to say, is not ending.

[00:04:18] There's no end date.

[00:04:19] It's a continuous relationship.

[00:04:21] We just moved some contracts around.

[00:04:24] So it's very easy.

[00:04:26] You closed the acquisition in May.

[00:04:29] May, right.

[00:04:29] And we're speaking in September.

[00:04:31] And you're already adding people because you're growing.

[00:04:34] That's amazing.

[00:04:35] Yeah.

[00:04:36] Do you see organic growth or also M&A in your future?

[00:04:40] Both.

[00:04:42] So we, again, I, we're not a roll-up or anything like that.

[00:04:47] It's not, acquisition is not our top of mind type thing.

[00:04:52] Again, this thing just happened to be, as I mentioned.

[00:04:56] I think going through the exercise, I've learned a lot.

[00:05:02] And I have my parameters a little bit more defined on what I can potentially acquire.

[00:05:11] I don't want to do a lot, you know, small bites.

[00:05:14] It's, we've been very fortunate with organic growth.

[00:05:18] It's, you know, 25% average for many years in the past.

[00:05:27] Even during COVID year, 2020, we actually inched up, not as good, but we inched up for sure.

[00:05:35] And then, and then 2021, we had a good amount of backlog that just came through and we had explosive growth, which we been trying to keep up with that.

[00:05:48] And, you know, so with the acquisition, especially, it's, it's been phenomenal.

[00:05:54] This year has been phenomenal.

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[00:06:32] What do you attribute your strong organic growth to?

[00:06:35] Because a lot of MSPs struggle with that.

[00:06:38] Yeah, I wish, no, I think delivery, very strong delivery.

[00:06:45] I am personally very averse to letting clients.

[00:06:51] We have not been fired in our entire history by any client.

[00:06:58] 16 years.

[00:06:59] 16 years and you haven't been fired by a client.

[00:07:02] Yeah.

[00:07:02] And we have lost clients, but it's purely for reasons not in our control.

[00:07:09] They went out of business or financial reasons.

[00:07:14] Some couple of COVID casualties we had.

[00:07:18] But otherwise, no.

[00:07:19] I am a strong believer in one in hand is better than two in bush.

[00:07:25] So we focus most of our energy in retention.

[00:07:32] And that just grows over time.

[00:07:36] Clients grow.

[00:07:37] They refer you.

[00:07:38] You know, I heard this term referral dries up.

[00:07:43] I don't think it does.

[00:07:45] Maybe slows down.

[00:07:46] But at some point, it actually accelerates.

[00:07:50] We have, because we have a lot of clients now, so just the sheer, the percentage goes down, I believe.

[00:07:57] But the actual volume goes up.

[00:08:00] And so we still grow by referral quite a bit.

[00:08:05] So that's, I think, number one.

[00:08:07] Do a good job.

[00:08:09] There's a guy in my early years who told me something.

[00:08:13] Never run out of money.

[00:08:14] Run after money.

[00:08:16] Never run after money.

[00:08:17] Just do a good job the best you can, and money will run after you.

[00:08:22] And I took that to heart.

[00:08:23] So from myself to last employee in my company, everybody is focused on doing a good job.

[00:08:31] And, in fact, we hired our first sales guy about a year ago.

[00:08:35] We did not have sales team.

[00:08:38] So we really were, hey, how do we keep up with delivery situation, which is great.

[00:08:48] So, and again, I tell all my engineers that all of you are our sales team.

[00:08:55] Because what you do this month ensures the next month contract.

[00:09:00] So that's my formula.

[00:09:03] I will, you know, work with clients.

[00:09:06] Sometimes go below, you know, expected margins.

[00:09:11] You know, do things that all the peer groups will tell you not to do.

[00:09:17] In terms of, you know, skinning your margin.

[00:09:22] What's an example of that?

[00:09:24] I will sometimes, like, I will get a referral or a bigger client.

[00:09:29] And it's a shoehorn, right?

[00:09:31] The first one, especially.

[00:09:34] We will, let's say, sell them.

[00:09:37] It's a large subscription of Office 365.

[00:09:39] We'll sell it at 10% margin, 7% margin.

[00:09:45] Which is considered terrible in channel.

[00:09:49] We'll do it.

[00:09:50] Because you take a little hit there.

[00:09:53] But once you get in, you know, now you're selling higher margin services.

[00:10:00] The next product order, you can go with normal margins, etc.

[00:10:04] So we do that quite a bit.

[00:10:08] Again, a lot of people, including people within my company, frown upon it.

[00:10:12] But I believe in acquiring logos, getting in with clients.

[00:10:21] And land and expand is a real thing.

[00:10:25] It's very real.

[00:10:26] And getting on to their vendor list, getting an MSA in place, getting, you know, the beak wet, as they say, is very important.

[00:10:36] Just get in somehow and do a good job and it will follow.

[00:10:42] 100% it works.

[00:10:44] There is no doubt in my mind.

[00:10:48] And how many salespeople do you have now?

[00:10:50] We have two.

[00:10:51] Two salespeople and about a 60-person organization.

[00:10:55] Yes.

[00:10:56] And we hired them in last year.

[00:10:59] So does that mean before that that you were the primary?

[00:11:02] Yes.

[00:11:03] I guess I'm the sales guy, yes.

[00:11:05] But I'm also, you know, I'm an engineer.

[00:11:08] I started my career while I was still in college as a tier one customer service rep for an internet provider in New York City.

[00:11:18] Answering calls, you know, telling people to reboot their modems, which would solve 90-some percent issues.

[00:11:25] Still works till this day.

[00:11:28] And so I've done, you know, I'm an engineer by education, by profession.

[00:11:34] And somehow I became a sales guy, an accountant.

[00:11:39] And that's another thing, you know, keep an eye on your finances.

[00:11:45] That's very important.

[00:11:47] We were never, thank God, in a cash crunch or how am I going to make payroll?

[00:11:56] I've never borrowed money.

[00:11:59] All these years.

[00:12:00] We were very conservative in our approach, extremely conservative.

[00:12:05] Like I'm very risk averse.

[00:12:07] We did not overhire.

[00:12:09] We didn't even have a bookkeeper until about seven years ago.

[00:12:14] Everything was highly automated.

[00:12:18] And my payables are almost all, the only company our size, we only send out checks.

[00:12:26] Actually, wire transit, no checks, but maybe three vendors.

[00:12:30] Everything else is automatic.

[00:12:32] And we have millions of dollars in cogs that we pay out.

[00:12:37] Everything is very automated.

[00:12:40] We kept overhead very, very low until, like I mentioned, about seven years ago.

[00:12:46] We hit inflection point where we started hiring employees who don't generate money.

[00:12:53] I guess that's the best way to put it, right?

[00:12:55] All the techs generate money.

[00:12:57] Then we started a bookkeeper, an account manager.

[00:13:01] Then I got a part-time controller.

[00:13:04] Then we hired, during COVID, a director of operations.

[00:13:09] So we started building a middle management.

[00:13:14] But be mindful and cognizant of your finances.

[00:13:20] Do not put yourself in a financial stress.

[00:13:25] You know, the only time it happened to me a couple times was end of year, where everybody would buy stuff and not pay us till January.

[00:13:37] So a very good problem to have.

[00:13:40] But it put us in a...

[00:13:41] But again, we have credit lines with distributors, etc.

[00:13:47] Manageable.

[00:13:48] But never with payroll.

[00:13:50] You know, we never got into that...

[00:13:52] Never put us in that situation.

[00:13:55] We never did the build it and they will come type thing.

[00:14:00] You know what I notice?

[00:14:01] A lot of...

[00:14:02] I go to peer groups.

[00:14:04] I'll see a 5% MSP or 10% MSP where they have two engineers or three engineers.

[00:14:13] The other 70% or 60% of their company is non-revenue generating people.

[00:14:21] Yeah, they survive.

[00:14:22] They make money and potentially grow.

[00:14:26] And they probably can grow faster than how we did.

[00:14:30] But again, they...

[00:14:32] And I don't know for sure, but I have a good idea that they get into these stressful situations with finances.

[00:14:38] So keep your overhead low and make sure that your revenue can do your payroll plus some.

[00:14:48] It's very, very important.

[00:14:50] When I think conservative, which you mentioned multiple times, because you were so measured in your growth, I think kind of restricted growth.

[00:15:01] I think slower growth.

[00:15:02] But then you said you had been averaged maybe something like 25%.

[00:15:06] Yeah.

[00:15:07] Those don't almost go together.

[00:15:08] Like that's pretty amazing to have such conservative hiring.

[00:15:12] Because sometimes when you grow fast, it feels like you can't ever keep up with the hiring.

[00:15:16] So how did you manage to balance those?

[00:15:20] Yeah.

[00:15:21] We are going through this right now.

[00:15:23] This year, I don't have the exact numbers yet, but it's way higher than our normal growth levels.

[00:15:30] Even without the acquisition we did.

[00:15:34] So we have a lot of recs open right now.

[00:15:38] We are hiring, hiring, hiring while keeping up with what's happening.

[00:15:41] We can't stop sending proposals out.

[00:15:46] You know, it's happening.

[00:15:48] Clients get on the phone.

[00:15:49] You got to send proposals out.

[00:15:52] So we are now...

[00:15:53] My sales guy makes fun.

[00:15:55] He's like, oh shit, they said yes.

[00:15:57] Right?

[00:15:58] So we have a few of those happening right now, which is great, but it's a challenge nonetheless.

[00:16:08] So one other thing we try to do, we're not always doing it, is staying a little bit overstaffed on the tech side.

[00:16:18] So it's, again, same theory.

[00:16:20] Don't extend yourself on middle management or sales.

[00:16:26] Again, everybody runs their business how they want.

[00:16:28] I'm not telling anybody what to do, but this is kind of my opinion.

[00:16:35] But stay a little bit ahead on the engineering side.

[00:16:39] There's a couple of things.

[00:16:41] It helps you in those growth periods.

[00:16:43] And B, it keeps their stress level low.

[00:16:47] So it helps with retention.

[00:16:48] We also have excellent employee retention.

[00:16:53] And if you ask me, one key factor of our success will be that.

[00:16:58] The team.

[00:17:00] Retaining the team.

[00:17:01] You know, we got lucky with the first few hires we had who are still with us.

[00:17:09] And so there's a little bit of luck and a little bit of how we did what we did to retain them.

[00:17:16] And I think that really, again, leads to better service delivery, better client retention, and sustained growth.

[00:17:25] So you don't get into stressful situations.

[00:17:29] What's the thing you see or what have you learned about making sure you retain your people?

[00:17:34] There's no silver bullet, I guess.

[00:17:38] Sometimes you just can't.

[00:17:40] But I think being engaged with them.

[00:17:44] I mean, this whole conference, there's so many sessions about how to do what, you know, to answer the question you asked.

[00:17:51] So it's a complicated answer and it's an individualized answer.

[00:17:58] The pointers I can share are be involved with them.

[00:18:05] Not even a personal life involvement, yeah, that helps as well.

[00:18:10] But at least at work level.

[00:18:11] What's going on with this client?

[00:18:14] You know, learn their struggles at work.

[00:18:18] Whether they're dealing with personalities at clients' offices, workload, co-worker situations.

[00:18:27] And be very transparent.

[00:18:30] And also communicate growth, business with them.

[00:18:35] This client is very profitable.

[00:18:37] This client is not profitable.

[00:18:40] We want to retain this client even though they don't pay as much because he gave us four referrals.

[00:18:48] So collectively, whatever.

[00:18:50] Whatever it might be.

[00:18:52] If you're thinking it, they need to know why you're sending them to this client that nobody likes to go on a Friday evening.

[00:19:03] You know why.

[00:19:04] But they need to know why as well.

[00:19:06] And they need to be on the same page.

[00:19:07] Which will avoid frustration and again lead to good retention.

[00:19:14] So keeping them in the know.

[00:19:16] We are doing actually last staff meeting we re-announced it.

[00:19:22] We regurgitated this all the time.

[00:19:23] That hey, we're going to...

[00:19:24] Even what we're doing now is our sales people and account managers.

[00:19:30] When they're sending proposals to existing clients.

[00:19:33] They are running it by the text that service that client.

[00:19:38] Hey, we're about to propose this.

[00:19:40] What do you think?

[00:19:41] And that's one problem.

[00:19:43] And when you start to grow, start to come to our level.

[00:19:45] The sales people kind of just sell whatever.

[00:19:48] Or upsell.

[00:19:50] And it's not a great idea.

[00:19:53] And then you can manage, yes.

[00:19:55] But it's better to have engineers involved in selling, in account management.

[00:20:04] And that also helps retention.

[00:20:06] They know what's going on.

[00:20:08] They feel involved in growth.

[00:20:10] And finally, share your wealth with them.

[00:20:14] They're there to make money as well.

[00:20:17] Just like you are.

[00:20:19] So I was talking to somebody yesterday that everybody works for two things.

[00:20:25] Boil down.

[00:20:27] Money and career satisfaction.

[00:20:32] Career satisfaction has nuances.

[00:20:34] Personal satisfaction, work, whatever.

[00:20:36] But it's really, they want to be happy and satisfied.

[00:20:40] And they want to make money.

[00:20:42] And everybody has a sliding scale.

[00:20:44] Some want one more than the other.

[00:20:46] And you kind of need to know that.

[00:20:48] And cater to that.

[00:20:51] So it's knowing your people, keeping them engaged, retaining your employees.

[00:20:57] That will, if you ask me one thing, that would be the silver bullet to sustain growth.

[00:21:04] It's a little longer road traveled.

[00:21:06] But, yeah.

[00:21:08] You know, we have an employee here who worked at a larger MSP.

[00:21:14] And they were burning, churning.

[00:21:16] They did not care about customers.

[00:21:18] Their sales team was half the size of the company.

[00:21:21] It was sales.

[00:21:22] Sales.

[00:21:22] And they were writing contracts all the time.

[00:21:24] But on the other side, they were losing contracts.

[00:21:28] So I guess that's an approach.

[00:21:30] But not my approach.

[00:21:32] It seems like you care very deeply about your team and your clients.

[00:21:36] Yes.

[00:21:36] And I think it's easy to say that.

[00:21:39] And it's hard to put that into action.

[00:21:42] You know, I think everybody, most MSPs I know, at least.

[00:21:45] Maybe not all of them.

[00:21:46] Most of them, they feel that way.

[00:21:47] But getting that across to your client or to your team sometimes can be a struggle.

[00:21:53] Is there a particular lesson you went through as you were growing into kind of middle management,

[00:21:59] past the direct layer of management,

[00:22:01] to make sure that your team still knows that you care or that your managers care or whatever that may be?

[00:22:12] Yeah.

[00:22:13] So we do a monthly staff meeting where I do bring this up.

[00:22:20] It comes from my mouth.

[00:22:22] And then they have individual managers doing one-on-ones and whatever, day-to-day interaction.

[00:22:29] And we have a management meeting as well every other week at least where we reiterate all this.

[00:22:37] So we make a conscientious effort in saying this and following through and really honing in on these things for sure.

[00:22:48] You have to do it.

[00:22:50] If you're just thinking it, it's not true.

[00:22:54] It's not happening.

[00:22:54] How does this focus on the team translate into hiring?

[00:22:58] You mentioned you have a bunch of open requirements.

[00:23:02] How does that shape what you're looking for when you're looking to add to your team?

[00:23:05] Because when you grow fast, you could be tempted to skip things and just hire maybe the wrong fit people.

[00:23:13] But I'm curious, how does that shape how you hire?

[00:23:17] So we have core values.

[00:23:22] And we are constantly refining those.

[00:23:24] But we have an idea.

[00:23:26] We know what it is.

[00:23:27] And we were recently having this discussion that our interview process should just stem out of our core values.

[00:23:34] So this is obviously technical talent.

[00:23:38] But we also check on soft skills, their attitude, all that.

[00:23:43] And we interview people against our core values.

[00:23:48] And if they don't fit in, then they're not going to be hired.

[00:23:56] What you did bring in is a very interesting point that when you are hiring a lot of people, you...

[00:24:04] And yes, you have to compromise.

[00:24:06] I am not going to sit here and lie to you.

[00:24:08] You have to compromise on some of those values simply to put bodies in place.

[00:24:18] Again, there are some obvious absolutely not situations.

[00:24:24] What we do in those cases is we find potential.

[00:24:27] Does this person may not be fitting into all the categories, but do they have potential to be that person?

[00:24:37] Or can we train them or mold them into how we want them to be?

[00:24:45] And then within your core values...

[00:24:49] Well, not the core values.

[00:24:51] You don't compromise on core values, but they are adjacent.

[00:24:55] And okay, if you know, the B-level values.

[00:24:59] Okay, if they don't have this, it's fine.

[00:25:00] It's mostly on technical side.

[00:25:04] We...

[00:25:06] My best hires were actually not good, technically.

[00:25:12] But I saw potential.

[00:25:13] I remember my first interview at the ISP job.

[00:25:16] They asked me all these questions.

[00:25:18] I answered zero questions.

[00:25:19] I did not know anything.

[00:25:22] And I told the guy, I'm like, listen, hire me.

[00:25:24] You won't regret it.

[00:25:26] And I was supposed to be there three months.

[00:25:30] I stayed there about seven, eight years.

[00:25:34] So I look for that.

[00:25:37] We had a recent hire.

[00:25:39] He was pivoting career from one track to another.

[00:25:46] And he was making good money in this track, but he wasn't worth that much on this track.

[00:25:54] So he said, listen, okay, what's your budget?

[00:25:57] Okay, I'll take it.

[00:25:59] But in six months, I will ask for what I want to ask for.

[00:26:03] And I like the confidence and the attitude.

[00:26:07] And we hired that person.

[00:26:09] And they're doing very well.

[00:26:12] So I like that.

[00:26:13] And they at least gave you the gift of telling you where they want to be.

[00:26:16] Yes.

[00:26:17] Being specific about that.

[00:26:18] Yes.

[00:26:19] Confidence and people who have the fire in them, make things happen.

[00:26:25] That's very important.

[00:26:27] Hiring is tricky.

[00:26:29] And everybody says slow hire, fast fire.

[00:26:34] We also haven't fired many people.

[00:26:36] I think I've gone on one hands in all these years.

[00:26:40] So we, you know, we try to follow it.

[00:26:43] But right now, like I said, we have almost 10 wrecks.

[00:26:48] And some of them we are like, okay, which one is acceptable?

[00:26:55] Because we just need people right now.

[00:26:57] And that's okay.

[00:26:59] You don't have to die on that hill.

[00:27:01] It's okay.

[00:27:03] It's not going to get all perfect employees.

[00:27:05] Especially if your numbers grow.

[00:27:08] You got to have the first few perfect.

[00:27:10] I think that's important.

[00:27:12] Well, Sarah, considering how fast you're growing, this is just a total gift to take your time to,

[00:27:19] out of the busy schedule at BuildIT Live to speak with me.

[00:27:21] Thank you for being here.

[00:27:22] And thank you for being on MSP Mindset.

[00:27:24] Thank you.

[00:27:25] Thank you.