His "Secret" to Growing a $35M MSP with No PE

[00:00:00] Hey guys, Damien here. As I continue to interview the top MSPs in the world, one thing has become incredibly clear. It's time that we let go. Even more than that, every time I focus on my zone of genius and get out of the way and do the very few things I'm good at and delegate to others, I'm ready for that next level of growth.

[00:00:23] So if you're ready for that next level of growth, one way that I could help you is with Servocity. We co-manage your backups and disaster recovery so you can focus on what you do best, let us do the rest, and then what we do is we test the backups every single day so you never have to worry. If you'd like to learn more, click the link below.

[00:00:44] You know, you believe the stories you tell yourself about yourself, about the world, and then, you know, kind of like the vision, it's like it manifests. So unless you can actually see a different version of the company, then the pathways that get you there will not emerge. You won't be able to see them.

[00:01:01] Hey guys, Damian Stevens, host of MSP Mindset, founder and CEO of Servocity. Today, I continue my mission to interview 100 of the fastest growing and most interesting MSPs on the planet. Today, I'm blessed to be joined by Mike Shaput of Insight. And he went from bankrupt to best in class margins and growth.

[00:01:29] He's managed to build a $35 million MSP with 150 employees and margins near 20%. How did he do it? He boiled it down for us. It all comes down to vision. Can you really describe where you're going to be, what the org chart needs to look like, and most importantly, who you need to become as an owner to make that change?

[00:01:53] If you want to make sure you don't miss out on all the details of how to change to achieve the growth that you really want, don't miss out on our conversation today. Mike, let's start at the beginning. I'd like to not only ask how you started at EndSight, but also why. So, Damian, thanks for having me on the show.

[00:02:19] So, I have kind of an interesting story because when I was 24 years old, my business partner and I bought a kind of a small regional value-added reseller or systems integrator in the Bay Area. And it was literally January of 2000. You were 24 years old. I was 24. 24 years old.

[00:02:42] And right after we took this systems integrator over, the dot-com bubble burst. And so, we had this scenario where we just had an inversion of supply and demand. And so, what I mean by that is the people requesting technical consulting and systems integration and stuff just fell through the floor. And as a value-added reseller, you made margin by selling stuff.

[00:03:07] But there was like an abundance of that stuff that you made margin selling just in industry. So, we immediately had to pivot our business model to go in and picking through auction houses and trying to buy stuff off the auction houses so that we could make margin on it. And we were totally undercapitalized. But what was worse is we just really had no leadership skills or managerial skills and very little sales skills, no operation skills.

[00:03:34] In fact, our technical skills were pretty – I had a technical degree, but it wasn't like in the electrical engineering program at Michigan State that they taught you anything about how to configure a Cisco router. So, the technical skills weren't there. And we were just upside down from day one. And somehow, we managed to pay bills and all that stuff for about four years. And we had kind of an event.

[00:04:03] We had developed this little software development business on the side. And one day, the three software developers under the leadership of one guy took that business, which we had built to well over something like a third of our revenues, around $1.5 million of total sales with pretty decent margin, just walked away. That was more than we could take. And we ended up folding after that. It just took us under.

[00:04:34] So, even taking it a little bit before that, because I think it's kind of interesting. Like, I was one of these kids. I grew up with my dad. He had owned an automotive metal stamping business. And I was the youngest of five brothers. I have one biological brother and three stepbrothers. And my older biological brother had kind of showed a sign. He was already working in the family business. And it was pretty clear he was going to take leadership there.

[00:05:04] And I may have had, what would you say? I may have had like a little bit of an issue with power dynamics and didn't necessarily want to be continue to be lowest man on the totem pole for my whole life. So, I really wanted to start something on my own. And I worked at Texas Instruments for three years before I bought this small consulting business. I mean, this is like a whole crazy story.

[00:05:30] But to me, I legitimately hated working in kind of the corporate umbrella with all the shenanigans that go on inside of corporate structure. It was literally like I felt like I was living in a Dilbert comic. And so, like, you know, I put every dollar that I had into this thing, my heart and soul, you know, 80, 100 hour weeks every week in trying to make this thing work.

[00:05:57] And when it was starting to fold, I just I couldn't even imagine. I couldn't even imagine a life like where I could be happy. And I had a literally, you know, my son was born in September, my first son in 2003. So it was like not even a year later. We were we were folding up shop in this in this IT systems integration business. And my wife had quit her job and it was kind of a mess.

[00:06:25] And my business partner and I did the craziest, maybe the craziest thing we'd ever did is we decided to say, hey, you know, like, let's regroup and start again. It was kind of insane in retrospect. But we started Insight once we could figure out how to close the chapter on the bankruptcy in 2004. And and, you know, that was that was that.

[00:06:49] And it was kind of the way I describe it to some people was it was a little bit like we had trained in altitude for four years. And so, like when we were able to release a very unfavorable lease contract and debt service associated with buying the business and we could start with smaller, you know, with some of the skills we had learned in the previous years, we were able to kind of start making some progress.

[00:07:13] And one of the things that happened was we were very, very early into the managed services phase. And in September of 2004, I met kind of an industry icon. So most people watching this probably already know who Gary Peek is. But at the time, Gary was running an IT managed services provider in Philadelphia called Dynamic Digital.

[00:07:42] And I had joined this industry peer group, culture profit groups. And I remember it exactly. It was it was September. We met in Park City, Utah. And I just I looked at his, you know, financial report, the recurring revenue. And I was just kind of like, we have to build this. This is the thing. So I asked him if we could come out to Philly. And kind of like really try to understand it better.

[00:08:08] And one of the other firms in the peer group joined my business partner, Josh and I. We flew out to Philly. We met with all this team. We asked a bazillion questions. And then we came back and it was literally like we bought Kaseya. We implemented ConnectWise. Like all these tools were like Kaseya at that point in time was like six people. And we bought it directly from Gerald Blackie, the founder. And we got this like special pricing on it.

[00:08:36] I was going to say 2004 was right at the beginning. I mean, it was literally. I mean, there was there were some people who were doing monitoring with with that platform, the Canadian platform. The name is escaping me right now. But there were some people who were doing it at that point in time. And ABLE who were doing some monitoring, you know, for Philly. But it was literally like like like the pinnacle of IT managed services. It started right then in 2004.

[00:09:06] And we made kind of a big decision, which was we were going to focus our sales energy on selling managed services contracts, as opposed to what was paying the bills, you know, which was just kind of, you know, selling our time and labor. And, you know, we won some contracts through the network that we had established in the in the previous four years. And that was kind of good enough to kind of make us think we could do it. And then we kept, you know, selling one thing at a time.

[00:09:32] We were in this just really I mean, we were in this office space that was so bad in this real gritty area of Berkeley. I mean, it smelled like like like I always describe it. It's not like something between my dad's factory and a high school library. It had this terrible smell. It was tiny. And it was just like it was really weird space. And and now we just got kind of got started and we we won contract after contract.

[00:10:02] And, you know, the next thing, you know, it was like I remember we had this we had this big thermometer on the wall. We had one hundred thousand dollars in MRR. That was like the goal. And every time we'd have a contract, we kind of like level up the line. And and I was kind of the the face. So I was out there driving around every little nook and cranny in the Bay Area, every little office space from Santa Rosa, to San Jose and trying to sell these managed services contracts.

[00:10:29] But, you know, over time, just kind of started to gain some momentum. And we started to get decent at the operation side and the sale side. And and so, yeah. And then, you know, here we are. It's like. Twenty. Yeah. Years later. So. So. That's how you got started and started trying to get to this hundred thousand MRR driving around, knocking on doors. And.

[00:10:57] But if you fast forward 20, 21 years now, you're where very few people have managed to get in longer time periods, even. You guys are what? How many employees? So, you know, we're somewhere between 140 and 150 employees in any given in any given period of time. And for better or for worse, you know, it's all like onshore.

[00:11:25] So, like, I think some people, you know, have these huge number of employees and then you kind of dig below. And it's like I have 80 people from Singapore or something like that. And it's like it's like legitimately all. Now, we are trying to figure out how to how to take advantage of some of the onshore markets. But it's. And, you know, you were asking me before the podcast whether I was comfortable sharing revenue. We're in 5,000, I think, eight times. The revenue is a fairly public number.

[00:11:51] We we we kind of run a type of open book accounting for our team. So they're all aware of our margins and our revenue. And it's in that just like north of 35 million in total total revenue, which, of course, the vast majority of that is services. So especially now that our our business model really moved away from hardware. I mean, like it's like what is like PCs and Wi-Fi points and stuff like that.

[00:12:20] So it's almost all like maybe 15 percent of it's some kind of like hardware or whatever. But the best majority of it is is in the services. And most of that is recurring, although we we still have NRR clearly. But that's the and, you know, we target. We don't always hit it. But our goal is to hit 20 percent EBITDA margins, which is kind of an industry. That's like in my opinion, that's like an A.

[00:12:49] And so, you know, if we hit 17 percent, which we sometimes do, that's like an A minus. And, you know, if we get down to 15, it's like it's like B. So like but we're we're shooting for that kind of 20 percent margin. And that's what we're that's what we're chasing all the time. And to us, it's like you could look at that cynically and be like, well, it's all about profit dollars. But to me, the the margin is a measure of several things.

[00:13:16] It's a measure of how well you're managed, how well you run, how efficient you are, how much customers value you, all those kind of things. So when we see and and there's, you know, you in business, you're you're kind of competing between three essentially greedy stakeholders. Right. You have customers who would all love to pay less. You would have employees who would all love to make more. And you have a capital table of some sort, even if it's just you who would would love to have a higher return for your capital at risk.

[00:13:45] And so trying to manage and navigate and balance those things such that each one of those parties is to say equally unsatisfied because it's none of them could ever have enough is kind of the key. And so but I think when you run a really efficient machine without a lot of waste and customers will derive enough value to stick around, employees will derive enough value to be paid market ways.

[00:14:10] You're better. And the return to capital table will be sufficient such that they want to keep keep their companies like, you know, the alternative is if if my company is better run by somebody else, then ultimately that's who's going to run it. You know, you'll sell to a private equity or something like that. So you want your company to be really well run and to return well for your capital table. Otherwise, you'll cease to sometimes you cease to want to run it, even if it even if it is returning well.

[00:14:39] But, you know, you're going to want to let it go a lot faster if you if you don't, let's say, get a market return for for what that company is actually worth. And so, yeah, that's that's kind of how we're set up. So, Mike, what do you attribute to this kind of growth that nobody seems to be able to attain? Not just revenue, not just people. Right. But to all this, all these levels. Yeah. So, I mean, it's hard to attribute it to just one thing.

[00:15:06] But to me, I'll start with vision. So we had to I mean, it's crazy. Like. I can literally remember just meditating almost on like what my balance sheet could look like and what my profit and loss sheet would look like. And we used to draw out org charts, future org charts of when we could hit certain targets.

[00:15:32] So like it even now I can remember seeing the actual org chart we have now, like when we were not even close to that size and just talking to my partner and saying, man, can you imagine? How long ago did you do that? Like, I'm sure you did a lot of them, but I'm just curious. What was the last time? Like, like how long ago was that that you imagined you'd be where you are now? Yeah. So, you know, we we don't. Say we don't leave vision to chance.

[00:15:58] So, you know, we we we every year, you know, we we come back and say, what could things be like in 10 years and five years and how good could things get? And, you know, and we we try to we try to paint the vision as clearly as possible. So sometimes I use construction as an analogy because, you know, it's not just like my like I need a house and I want it to be four bedrooms and four baths.

[00:16:27] Like that's not enough for anybody to build a house. Like there's a lighting plan and there's a there's a flooring plan and there's details for plumbing and there's details for HVAC. And so it's the same with the business. It's like the nobody can build something that you can't describe. So if you're going to if you're going to ask people to, you know, come along the ride and build something interesting, then you have to tell them what you're trying to build.

[00:16:52] Another way I describe this and I've never actually heard somebody describe maybe it's because people didn't do this. But, you know, the kids my age, they used to play Minecraft. And so I spent time in a Minecraft world with like kids or whatever. And or, you know, my kids still do today. Yeah. And it's if you go into the Minecraft world and you really think about what happens, it's like, you know, like one kid will come up to another and be like, what are you doing? And the kid will be like, I'm trying to build a tower. And the other kid will be like, well, that's cool. Can I help?

[00:17:22] And it's like, yeah. And it's like, well, what do you need? And it's like, well, go get some bricks. And it's like, OK. And then the kid will just go start mining for bricks. There's like there's not even a payment. It's just like one kid had a vision to build a tower and the other kid wants to do something in the world. And so they they adopt the vision. And then then they'll start building, you know, together the tower and the visionary. The kid with the vision of the tower will be like, no, no, no, not like that. If we build like that, we won't be able to build a stairwell up to the top. And I need space on the floor. It's like, OK.

[00:17:52] So then they start. And then it's like then maybe the other kid or the helpers will be like, you know, what would be cool is if we build a fireplace. And the guy with the original vision goes, yeah, that would be cool. I never even thought about building the fireplace. It's like, OK, well, I'll start working on the fireplace. And like all this stuff is like you can't build something until somebody imagines what it is. And and there and there's a really interesting concept here.

[00:18:15] It's like most people don't think of it in this terms, but the vision or the goal or your aim, you can interchange all those words, is an act that you do before the act of perception. And that's a weird thing to say, but let me explain it for a second. So, like, yeah, this is a coffee mug here. All right. And and if I showed it to you, you'd be like, yeah, that's a vessel to hold liquid. And it's like, well, why do you think that? It's like you've assumed the aim.

[00:18:43] Like if we're in a fight, this could be a projectile or a weapon because my aim is to protect myself. And so, you know, I don't even know what an object is until I know what I'm trying to do. And so why is that important? It's because it's like the the avenues and the pathways necessary to build a company. They won't emerge to you. You won't perceive the avenues until you appropriately set the aim.

[00:19:12] Then the pathways and avenues will start to emerge. You'll be able to, you know, the things that you pay attention to and remember the conversations you have with other folks, the thing, the videos that you choose to watch or swipe up or down or whatever it is, that stuff will start to change. And and so you you you live in a world that like it's the the the the number of possibilities is infinite. Like it's just it's too complex.

[00:19:40] So what you pay attention to is your essentially your life. And that's determined by whatever you've decided to set as a target. And back to my Minecraft world, it's like, OK, well, you go you go from, hey, Damien, will you help me build the tower? It's like, sure. My my rate is ten dollars an hour. But you can also like say, hey, you want to help me build the tower? It's like, sure, because that's cooler than what I'm doing right now.

[00:20:07] And in my opinion, the best in the case of the business, like people need money. So, you know, you're going to have to pay them their X dollars an hour, whatever the market wage is. But if your methodology for enforcing that they're doing work is it's called like a hierarchical power. Like if you don't do it, then I'm going to stop paying you the, you know, the forty dollars an hour. Then you have to waste a lot of overhead in enforcement.

[00:20:33] But if they if you pay them the forty dollars an hour such that they're OK, we got the market wage thing and now I can afford my life. And then it's like and we'd like to build something cool. It's like, well, cool. That's sounds better than what we have now. Like I'm I'd rather like I want something to do as well. So let's try to build this thing that's better than what we have now. And then you you have to waste a lot less energy on enforcement.

[00:20:56] So in my mind, the vision component is so important because nobody can build something that can't be described and can't be imagined. And simultaneously, if you if you establish a compelling enough vision, then people will want to do it because it's cool. They want to be a part of building something interesting, just like the kids in the Minecraft world want to build an interesting power with a cool fire pit. And so I think the vision component is essential.

[00:21:23] And and so that that was that was kind of, you know, one of the things that that I say, how well, that was one. And then the other the other piece is values. So it's like vision and values. It's like, OK, well, let's create a stake in the ground in terms of what behaviors are desired, acceptable.

[00:21:47] And then let's commit to that 100 percent, regardless of where it takes us. And and it's like we're not that's that's unbendable. That's going to be the stake in the ground. And it's an opt in or opt out. If you don't like that, there are other places to be. And if you like that, you found your tribe.

[00:22:07] And and those two things, by the way, also remove the call to fallibility of the leader, because it's like, you know, I'm an OK person, but I'm also a person. And when when when any time a group of humans come together and you can say, hey, like there's this higher order thing that we're all going to agree to. It's not about any one of us. We're going to win a championship and we're going to sacrifice to that cause. All of us, the leaders, the front line.

[00:22:36] And if you don't want to sacrifice that cause, that's OK. But that's not you're not part of us because we're trying to sacrifice to this set of higher order principles. We're going to do this thing. And it's not about any one person. And we're not trying to. And so that's that's the other piece, like is the vision and the values. And and I kind of think all the operational stuff is is just a derivative of those two things.

[00:22:59] Set the vision, get your values right, and then let the operational steps kind of organically emerge from from the two from from those two components. Wow. So many follow up questions there. So, Mike, how often do you revisit vision? And so, I mean, like I said, when I like the most if you leave the most important pieces of your business to chance, then you don't have a great business.

[00:23:30] So if it's important, you have to have it as part of a of a standard work routine. And, you know, over the years, we've explored with a whole bunch of business operating systems. So we started out with Rockefeller Habits, Vern Harnish. And we did that like in the early 2000s. I met I met Vern when I was in YEO with my first business and he gave me a signed copy of his book. I still have it. And we read it. We're like, oh, my God, this is at the time it was groundbreaking.

[00:23:56] We had no idea that you could do like, you know, meetings to a clock and goal setting. And we didn't understand that that stuff could be so structured. And then we did that. We still actually use the one page business plan from Rockefeller Habits. But we also added a bunch of other dimensions to it. So like later on, we read we started reading the Pat Lencioni suite of books. Those those books are great. If anybody doesn't know Pat Lencioni, he's got like 10 stories.

[00:24:23] You know, like we have a we have a core value set that that's four core values. They're four letters. They follow an acronym RSVP. And the the S stands for servant's heart. And the first bullet is about servant leadership. And it's like Pat has a whole book called The Motive. So when you when you look at our core value stack, it's like and you want to know what these things mean. It's like it's all distilled. It's like there's four values. Each of them are two words. Well, that's not that's not very clear.

[00:24:53] It's very distilled. Each of the each of the values have a bunch of bullet statements. Each of those bullet statements have like a whole book that that explain what that one bullet means. So you're progressively unpacking what these ideas mean. But Pat Lencioni came out with a book called The Advantage. And The Advantage had some other kind of interesting take on business planning and vision setting. And then Vern Harners came out with Rockefeller 2.0. And then we kind of we adopted some of that stuff.

[00:25:21] And then, of course, we started reading the Gino Wickman EOS material. And that gave us a bunch of ideas. And then we got heavy into the the whole lean system of management. And so what we have now is an amalgamation of the best ideas of business planning that becomes kind of how Insight does it. So we have like level 10 meetings from EOS. But we have one page business plan from Rockefeller Habits. And we have a whole bunch of lean operational principles kind of embedded and entrenched throughout our business.

[00:25:50] So we have problem registers and A3s. These are these like one page papers where you work on problems. And so the vision setting is a component of our business strategy. And it kind of looks like, you know, we do annual strategy planning where we set five-year, ten-year targets. And we reflect on any of the higher level order principles of our business that we run on. And then we do annual planning, which is essentially the goals that we're going to work on in the annual.

[00:26:18] And then I love the word fractionated because it's to me, it's the best way of describing how goals should be. So you might start with this, you know, Jim Collins came up with this idea called a BHAG. And that's a big, hairy, audacious goal. So for Insight, we want to be the highest quality MSP in the world. It's like, OK, well, that's cool, but it's not clear. So then you have to say, what does that look like? What does the highest quality MSP look like?

[00:26:44] Well, if you're high quality, you'd probably win new clients in the marketplace and you'd keep your existing and you throw off high profit margins. Right. OK, so we know at least that. So we'd set our EBITDA goal. It's 20 percent. OK, that would be a highest quality provider should be able to do that. And you set a growth target. Well, a great MSP should be able to double every five years. So that's 14.4 percent. It's like, OK, well, what do you have to do to do that? It's like, well, if you're going to grow, you have to keep your customers. So what do customers want?

[00:27:12] Well, they're customer service scores, response times. It's going to drive that. Then then you might look at that. Well, what about new logos? It's like, well, then we're going to have to do this for new logos. And how about what about profitability? And each one of these things keep fractionating down at a lower, lower level all the way to Bill has to clear eight tickets on the help desk tomorrow. And that's the way we're going to hit these higher order goals.

[00:27:34] And people can kind of see how how each one of them, how if I hit eight targets, that's going to hit an efficiency goal and a customer service goal and all these things all the way up to the to the parental goal. We want to be the highest quality MSP in the world. So you set targets every year. You set targets every quarter. You figure out what your problems are. And really, what is the problem? You know, this goes back to my vision piece. A problem is essentially a gap between your idealistic vision and what's happening.

[00:28:05] Like we know we need to close eight tickets, but we're only closing six. Why? Well, because some of the people are taking two hours. Why? Well, because those tickets are complicated. Why? Well, because they have weird technology in their environment. Why? Well, because we're not effectively coaching them at the level of the strategy. OK, why? Well, because we don't have the appropriate training and get all the way down. We've got to train the people better.

[00:28:25] And it's like and now you're you're you're doing this five wise and you're and you're kind of understanding what you have to do to solve a gap in your idealistic vision and what's actually happening. And that goes back to my perception idea. It's like you don't you can't even perceive the problem unless you know what the idealistic vision is. Yeah. So how do you most MSPs don't grow that fast and most people would say that's their top issue.

[00:28:53] So how do you how you set that BHAG or this vision that, you know, at some point where you are seemed probably impossible? Well, as you may get you may have guessed, I think a lot about vision just in general. And so one of the things that I've just been reflecting on a lot, actually. So Elon Musk said in a podcast, I think he was like, why are you getting so involved in politics? And his answer was.

[00:29:23] We're not getting to Mars if America fails. And I thought to myself, like, oh, my gosh, like. To him, you know, making the U.S. government more efficient is a side quest. It's like going and getting a sword so he can he can defeat the big monster. Yeah. It's like it's not it's like it's a side quest to him. And like, you know, to most of us, like. Like. Fixing a big problem in government with like.

[00:29:50] And so I guess my point is, like, you know, with if you're Elon Musk and you've already, you know, created PayPal, you've made a billion dollars, you started a tech company, you've kind of intercepted what you thought was a free speech issue with, you know, the with getting Twitter. It's like your ability to imagine becomes like outrageous. Like he's imagining bringing the human making humans interplanetary. And like that's his vision.

[00:30:18] And he and he and he looked at it and thought, well, what are the steps I need to do? And in there in that steps, he saw a gap with like, man, if we have really bad governance and we're not going to be able to do it. So I better go solve that problem. Like to me, that's just mind boggling. But it's it's interesting if you if you think about your business, it's like. Like in order for you to like see a vision, you literally have to essentially imagine. This future.

[00:30:48] OK, I'm 20 people. I can imagine what would 40 people look like. OK, it's like, OK, well, what would I have to do? I'd have to keep customers and I have to win new customers. What which one of those things aren't I doing? Maybe both. OK, why am I losing customers? Well, I guess I'm not, you know, we're too operationally immature and I'm losing people. It's like, OK, I got to do a better job keeping people or motivating people. It's like, well, then it kind of comes down to the leader.

[00:31:12] It's like, well, who do I have to become such that I don't keep losing my best people? I have to become a better leader. Well, how would I do that? Well, I have to figure out who are good leaders and I have to read their material and I have to understand their philosophies. And I have to like I have to change because a lot of times with the leader, you know, with a with a business, it's like. You're whatever you have as good or as bad as it is, is a total reflection of where you're at.

[00:31:43] And and once you understand that, then you can decide like, do I really want something different? Because if I do, it means changing. I'm going to have to become a different person, the person that's worthy of the thing that I want. And that might mean that might mean change that I'm not ready to take on or it might mean change that because, you know, they probably have these identity statements. Like maybe one of their identity statements is I'm not a salesperson.

[00:32:12] So, OK, well, you know, your leadership might require a little bit of a salesperson because that's, you know, and if you have an identity statement that's in conflict with your goal, you either have to change your identity statement or your goal. And most people don't realize the identity statements that they're carrying. But whatever they are, they're be getting what they have. And so, you know, like.

[00:32:34] Like the the 24 year old version of myself that own that business with a 28 year old version of myself that went bankrupt deserve those things like the bankruptcy that beget a lot, a lack of. Good ideas, good leadership, good operational skill. I mean, there was like great business people don't go out of business like young 20s that are terrible at running business do.

[00:33:00] And so, you know, like you just have to come to terms with what you have, what your work like. You have to become something different to get something different. And and that's really where the change is needed. You need to read more. Probably, you know, you need to go talk to other people who have done what you want to do and figure out what they're doing differently and try some of those things. It's like, you know, the information we live in a world with incredibly abundant information.

[00:33:26] So there are there are books, there are groups, there are videos, there are schools. There are just an infinite number of places to go. But you're going to have to change your routines, change your habits. You're going to have to give up something in order to do something different. But to me, it's it's it's all the owners of those businesses accepting 100 percent agency for the problem.

[00:33:54] And it truly is a reflection of wherever they're at for good or bad. I mean, like to some degree, you know, if you're a 20 user MSP and you have a great cash flow business, that's a good business. And that's a reflection of a lot of hard work and growth that that person has made guaranteed. And so it's not like I'm not condemning that necessarily, except to the extent that they want to be something different than I then then I start to condemn it. If you want something different, then you have to first want to become something different. And then you can have the thing that's different.

[00:34:23] Hmm. I love that. Breaking it down, essentially, the first principles there. When did you realize you had to change? Well, the bank bankruptcy is pretty dramatic. Right. So, you know, I think I think that's for sure. You know, like it's a really unfortunate part of life. And I have I have kids now, too. And it's like you just really don't want to see him fail.

[00:34:49] But the reality is you learn a lot from your your failures. You know, you it forces the most serious type of reflection. And so and and so, you know, I really don't know how to answer that question. There's been a bunch of times in in the evolution of myself and the company where where I hit some kind of wall.

[00:35:17] And there were I don't remember the year. I think it was like 2008 and nine or, you know, like in that era, we we had hit eight million dollars of revenue, which was good. And we had good margins. They were, you know, somewhere maybe close to 20 percent, maybe 17 percent each year. And at that time in my life, I was my early 30s, maybe something something like that.

[00:35:43] And it wasn't bad, you know, like given where I'd come from and how little I made in the first, you know, when I started my the business that went bankrupt, I made like nothing. And then, you know, we went bankrupt. It was like terrible. My wife wasn't working and we were just like so poor. And so at that point in time, it felt pretty darn comfortable. Like I could pay, you know, I could I could pay my bills, had a little money left over. Work was good. Things were running relatively smooth. It wasn't it wasn't a nightmare.

[00:36:13] But nothing changed. It was like the same, same, same. And I had told myself all these stories. I I I'd made up these these narratives like, oh, MSPs can't scale beyond eight million because you can't manage the relationships more. And it's only a principal sales model. And there's this. We can't you can't scale the principle. So the sales isn't scalable. Blah, blah, blah. Like it was like and I believe the story that I told myself.

[00:36:40] So I said I even told I can't even remember how many people I told it to over the course of three years. And then I had this this peer in Jacksonville, Florida, that just was relentless. And they just kept growing. And they were like two business partners, like my partner and I. They were the same exact age and the same exact industry. And I was just like. The story I've been telling myself is like false.

[00:37:09] I can see you over there. And that was it. Then we grew. You know, so a lot of it is like. You know, you believe the stories you tell yourself about yourself, about the world. And then, you know, kind of like the vision, it's like it manifests. So unless you can actually see a different version of the company, then the pathways to get you there will not will not emerge.

[00:37:39] You won't be able to see them. You won't be able to see this, you know, as a weapon. You'll always see it as a coffee mug. You know, unless you're unless the goals change and all of a sudden you're like, what's a weapon? You look around and be like, that thing could be a weapon. But, you know, yeah. And so you have to have the you have to have the appropriate targets and. And the targets that are appropriate, you know, it's like. It's like, well, what if my vision is incorrect?

[00:38:07] Like it's almost certainly incorrect in some ways, but like you can't figure out what's incorrect about it until you put a stake in the ground. So you might say something like, well, I want to close two new accounts per month. It's like, OK, well, what do I need to do to do that? Well, I need to make I need to have somebody make 80 calls and they need to have 12 conversations. And you set up a meeting or three meetings a week. And then it's like we're not getting the three meetings a week. So why?

[00:38:36] It's like, well, I don't know. It's like, well, are the 80 calls happening? It's like, well, they say they're happening. It's like, well, can you verify it in some way? It's like, OK, I verified the 80 calls are happening. But I also listen to the conversations. I can totally see why we're not getting hit the meetings. Those conversations aren't conversations. They're terrible. We need to change what they're talking about or how they're engaging. So then you do that. And you know what I mean? You have to like you have to set something. And then when it doesn't yield what you thought it would yield, then you have to go look at

[00:39:05] it and start debugging it. And to some degree, you're like, I have no idea how to solve this problem. It's like, OK, well, then I need to find somebody who solved it or I need to find a consultant or I need to like, you know, read a book. And it's like and eventually you just keep you just keep applying persistence to the to the goal. And eventually that problem will resolve, revealing a new higher order problem. It's like, well, now I need to do this with more people. I got Bill doing it, but I can't get anybody else to do it.

[00:39:34] It's like, OK, what's different? And it's it's just part of the it's just part of the thing. And then eventually you have to teach other people how to do the thing that you were doing and all kinds of different avenues of the of the business. That's really interesting. So. For you, what is a big enough vision, right? I think I can get stuck with, oh, well, maybe the industry average is 10 or 15 percent or 5 percent or whatever growth.

[00:40:04] So that's the goal. And then but, you know, I could go to a event or a seminar and get fired up and say, we're going to grow 50 percent this year and, you know, missing I'm missing all the pathways. How do you figure out where to set the stake in the ground? Yeah. So, well, for us, it wasn't it wasn't a world domination. We wanted to roll up the whole industry and be the biggest MSP in the planet.

[00:40:27] It was really we always had a bent on wanting to do things at the highest quality. We just had a bent on it. It was like we didn't want customers that didn't align that wanted, you know, that really wanted to like the lowest possible minimum quality. We didn't like we didn't align with employees that were kind of like wanted to, you know, shortchange a solution.

[00:40:54] And and we just didn't have the stomach for the type of I.T. risk required in order to be a low cost leader. So we just like, you know, for us, it's going to be about quality. We think that there's a rich enough market in the in the sector of the of of consumption where somebody can do really well just focusing in on being really, really good. It's we don't want to be like super overpriced or anything. It's quality is really about value.

[00:41:25] It's like we want to do things really well. We want it to be incredibly valuable to the customer. So we want them to like look at their spend with us and be like, man, that drives an enormous amount of value to our business. We would never change. And so because we wanted to align on quality, our our big, hairy, audacious goal or BHAG was, again, to be the highest quality MSP in the world. And so once we set that as a target, that kind of led a whole bunch of other decisions. It's like, well, what business system are we going to use? EOS.

[00:41:52] And it was like, no, we can't use EOS if we're going to be the highest quality. We have to we have to embrace quality management best practices. And where will we find those? And so then we went into the older industries like manufacturing. We said, OK, what's what's available there? It's like Six Sigma and and lean and those types of things. And we figured out, OK, how can we apply some of these best high quality quality principles inside the service business?

[00:42:21] And, you know, so it kind of it kind of depends. I mean, some of it you got to go internally and like, what can't you stand? What what do you want to be? What's your ambition? And again, for us, it just wasn't to just be big for the sake of big. It was like if we're really high quality, there will be growth. It's going to be hard for there not to be because there's going to be a lot of people who want that. And and so that will mean client retention. And then it'll mean that we're going to find that sect of the market that's was using maybe

[00:42:50] a low cost leader or a lower cost provider with like lower maturity or lower quality. And and they're going to want to come. And so if we're going to make room for them, we're going to have to have a vision to be able to accommodate that without breaking. So that meant we had to create a vision for, well, this thing doesn't just need to be high performing now. It needs to be able to scale and be high performing as it scales at some reasonable pace.

[00:43:18] And for us, we we thought that 14 and change percentage is basically the doubling in five years was was the appropriate target for that goal. And so it kind of came from, you know, in some ways it comes from your heart. Like, that's that's what we wanted to do. And and then also it comes from what you can see. Like, I couldn't see a vision where we could be the highest quality MSP and, you know, world dominate.

[00:43:46] And also it was like, you know, because then it would be like, oh, if we were going to do the world domination, we need a capital partner. And that capital partner would focus the entire. Would focus the entire enterprise on on capital returns. And we didn't want to be 100 percent about capital returns. I mean, I think we get great capital returns. So I but it just it that needs to be a measure of like we know we're successful when we it's

[00:44:16] like it's if we're not getting good capital returns, it means we're not managing our team well and we're not providing great value to the client. And that's manifesting in client loss or employee attrition or lack of motivation and execution. And so it means we need to fix something. And so it's a byproduct. It's it's like it's a it's a it's a noise that tells us whether we're doing well or not. It's not the point. And I think that's a big paradigm shift.

[00:44:43] And it's it's one that's difficult to make when, let's say, when people are in a in a survival mode, like when you kind of get your it's easier to do when you don't have to play games with yourself. But when you get your life set up such that you're like, look, I'm fine. Like it's not like if I if I don't have an extra dollar, I'm not going to be able to pay my mortgage. Then then you can set your business up such that you can say, look, I mean, it's it's not about the capital.

[00:45:11] It's about the vision and executing towards a vision because the vision has a bunch of people who win. Right. If you can grow your company, your employees should be better off. They should have more opportunities. They should be more engaged. It should be more exciting. They should be able to make more money. And you think, why? How can the company make more money when your employees aren't they juxtaposed? It's like, absolutely not. Like the more engaged and motivated and educated your workers are, the more you're going to make and the more they're going to make and the happier the client is going to be.

[00:45:40] So you got to find that that synergistic circle where everybody where you're growing the pie. It's almost like a like a classic prisoner's dilemma. If everybody is trying to maximize that, everybody loses. But if everybody can sacrifice to the principal in a very grand, ironic way, each party is going to win. You could create this scenario where customers are very happy with the value they get.

[00:46:07] Employees have, you know, good not just good compensation because that's a requirement, but also a work environment that they enjoy coming to with people who they love to work with doing something that they think is interesting and cool in the long run. Meanwhile, capital, you know, the holder, the capital table holders of the corporation get a return. That's that's, let's say, better risk adjusted return than if they just invested in public markets, the value of their firm.

[00:46:35] So we're always looking to try to try to manage that and try to find that sweet spot. Yeah. So speaking of that, you're you've done this, I understand, without external capital. That's right. Yeah. And what about acquisitions? Is this all organic or some acquisitions? No, we've done acquisitions.

[00:47:00] So they've all been through network and and it's been so it's been a combination and it will be. So one of the you know, it's kind of if you think about the MSP business, it's like we benefit because nobody really wants to change their IT service provider that much. I mean, it happens. Maybe you mess something up that happens to everyone, even the best of us.

[00:47:28] So if it's happened to you or the listeners, it's like just know that's like the best in the world make mistakes. And sometimes the customers just can't tolerate that and they have to go start again. But, you know, more frequently for us, it's something like, you know, business related. So, you know, a company gets acquired and then you lose that customer or, you know, they have a CFO change and the CFO has a totally separate vision to in-source IT or to work with a previous provider.

[00:47:57] There are things that happen that that create churn. But for the most part, like if you do a good job, it's like nobody wants to mess with it. But on the other side, it makes it harder to acquire new logos. So it's not like you don't get it. You don't. Nothing's for free. So the stickiness of our business manifests a problem on the growth side in terms of getting new logos. And so acquisitions are kind of a great way of growing.

[00:48:29] But it has to be you have to find these win-wins. You have to find a an owner of an MSP who's, let's say, has their price right, has a vision for quality that's appropriate, has cultural norms that are close enough to your cultural norms where people aren't going to work. Your people aren't going to hate theirs and vice versa and the work environment. And where the finances make sense.

[00:48:56] Because if we're going to acquire a book of business, it has to be essentially an accretive deal for us. Meaning the money we spent for it has to create value for us. And simultaneously, the other side of it has to be like, well, it's got to be better than my alternative. So another company purchasing me or just keep running it. And frequently, those are all difficult things to align.

[00:49:26] And it's much easier if the parties have a relationship prior to the acquisition. And so in my case, that's how it's been done. So the first company we acquired was a small firm in the North Bay of San Francisco. So kind of like Petaluma was the actual city.

[00:49:53] And we had met their ownership at one of these industry venture tech things. And they had this great idea, a business opportunity that they wanted to chase. And they knew that in order to chase it, they want to 100% focus. And so we did a transaction. And then there was another very, very, very small company out of Napa Valley that came to us and said, we heard you did a deal with this. And we did a quick deal.

[00:50:22] We did another deal out of the Napa Valley where we had, there was three owners. One of them was trying to retire and the two other owners had to decide whether they were going to try to buy that one out or sell. But the other one was close to retirement. So we ended up negotiating a deal. And the other, the final one was just part of my peer group. So I had like a nine-year relationship with the firm. Wow. And we had shared financials and best practices and all that kind of stuff. So it was just an enormous amount of trust there.

[00:50:52] And we pulled in that, that was out of San Diego. And so, you know, the key on acquisitions is, for us, is like, we're not a private equity firm. We're not trying to take capital from the Harvard Endowment Fund and try to buy MSPs with it.

[00:51:14] But what we're looking for in general is a great MSP that wants to, in earnest, try to look for a win-win transaction that would consider such things as legacy. So like maybe it needs to be a great place for my customers to do business. It needs to be a great place for my employees to work. It needs to be a good return for all the work I put into building this business.

[00:51:39] But, you know, there's other elements of the deal maybe that are important to them and that could create value that we might be able to provide that a private equity company couldn't. And so that ends up being the target for us. Or sometimes if they're, sometimes private equity firms maybe just aren't interested in a geography or they're not interested in a, a certain element of the business.

[00:52:08] But, you know, so we're still out in the market looking for M&A deals, but it's, it's usually, it's usually people I know. It's people who have come to me and said, Hey, I run an MSP, you know, and I help them with pricing or go to market or, or something like that. And then over the years, they eventually hit a spot where they want to sell. Then they talk to me in private and we can negotiate something.

[00:52:37] That's a win-win. How much of your growth has come from acquisition? Well, like we're a hundred and let's just use a round number of 150 people. I want to say, so like if we add up the people, there was probably seven people that came from the planet, like four that came from facilitate, like 15 that came from

[00:53:02] Occidental and maybe I think it was like 30 that came from, uh, land. So you can kind of do the math. It's like maybe 60, like maybe 60, like, like, you know, significant number, like half of the, half of the growth was, um, um, from various M&A targets with one, one big one in there. And maybe not quite half, but it's something like that. So it's not insignificant.

[00:53:31] So given the size you are, some, a lot of it was organic. Some of it was acquisition. I'm curious how you differentiate, uh, because the typical MSP says our support is better or we're better in somehow. Right. And if you're, if your vision is to be the highest quality, I get that. But how, how do you actually to hit your growth targets and other things like you've got to figure it, you had to figure it out differentiation, differentiation.

[00:54:00] And then that's a different challenge when you're in a different city in a different culture. So I'm curious, like, what have you learned about differentiating? So we, we, in a word it's execution. Uh, you know, there's a lot of people out there in the marketplace and I mean, anybody listening knows this cause they, they, um, they compete with the same, in the same market space and they're either kind of part of the execution problem or they're, or they're competing with the people who have the execution problem.

[00:54:29] But it's like every sales meeting we get into, um, it's the, the, the people that they had didn't necessarily say much different than what we're saying. They said the same things, but they just had a hard time executing on it. So, you know, we do simple things. We do blocking and tackling incredibly well in our business. Uh, we respond every help desk ticket in five minutes. We clear those help desk tickets. We do it with more than 98% of the, you know, green smiles and the smile back.

[00:54:58] It's like, uh, and we do it, we we've had, you know, entire quarters where we haven't had a single non green smile back. It's like, it's blocking and tackling. It's like we do the mundane stuff incredibly well. So like our systems are patched really well. Um, you know, we, our backups are, are, are, are working all the time. It's like just really mundane stuff. We do it incredibly well. Like our, the way we execute on, um, on a life cycle management with our clients.

[00:55:26] It's like, they don't go without understanding the gap analysis of, you know, like it happens. It's not, we don't say it happens that it's, it's executed. Um, so it, it, it isn't, it isn't fancy. You know, it's not like, oh, if you, if you buy MSP services from insight, um, you know, we have these, this incredible features and whistles.

[00:55:51] It's like, no, we, we do the same scope of work that everybody brings to you, but we execute on it better. Um, the, the stuff that we claim happens like consistently and we, we solve the problem. It's like a workstation shows up on your desk and it has all the applications that it's supposed to have. Like that's the difference. I know it sounds like incredibly mundane, but like, that's the difference.

[00:56:19] It's like, you don't wait weeks to get the station that you request. Like we have a system that it flows and it gets on the desk and it has the applications it needs to have on it. And it's like, like, do we never mess up? It's like, well, no, like sometimes we mess up, but like it were, it's rare enough such that we can deal with those things when, when something goes wrong. It's not the, it's not the norm. And you'd be really surprised.

[00:56:48] It's like, that's actually what the client wants. Like when you get to do sales meeting and it's like the challenge they have is like, how do I trust that? Because everybody else is saying the same thing. And it's like, so what we have to, you know, so it's not like, it's not differentiated. It's not differentiated in such that like, you know, we do have a couple of verticals. So we were, we're really good in legal. Like we have a whole service pod devoted to legal and we have like a really interesting business

[00:57:16] in Napa where we deal with about a hundred Vintner clients and the entire, and the entire supply chain in the wine industry. So it's, it is hard to compete with us and, and, and, in our markets and those sects. But for the most part, our general commercial business, it's like, no, like we make the problems that you're talking about in the sales meeting go away. And when they buy from us, they actually go away as promised. And so that's, so then you have the reputational advantage and the referrals and the, and the, and the benefits of actually executing.

[00:57:44] But to be honest, the industry is filled with a lot of people who still struggle with blocking, tackling and rebound. You know, the systems aren't patched. Help desk tickets are lingering for forever. There's, it's taking longer than the client wants to get a response to a help desk thing. Simple things like that, that are actually complicated operationally, like making sure workstations get rolled out on time with all the applications they're supposed to have on them and the right permissions.

[00:58:13] Like that sounds simple, but, but it gets like, it's a crushingly difficult thing for an enormous number of people in our space to do. So it's execution. So does that mean you don't, you don't have an itch? You're in managed services in whatever geography you're competing in. We have, we have five service pods. So our business is broken out into five different pods. One pod is focused exclusively on legal.

[00:58:40] So in that one section, like we are truly differentiated in terms of that. We know all the legal, we know all the legal apps and everybody. That's all they work with. And we understand all the rhythms and language and, and, and, and stuff inside illegal. And we're part of a legal administrator associations. And I'd say that the service is different and specific to legal. And then we have three general commercial pods where it's basically like anybody in the,

[00:59:09] let's call it 20 to 150 users. And, and then, and then the other pod is, is really a geographical pod. That's kind of industry specific. And that's our Napa Valley pod. And it's like, it's not just wineries, but it's like wine, it's like cork and capsule companies and wine distribution and vineyard management. And it's, it's like a whole slew of, of, of firms, but we're incredibly well known. It's like a hundred thousand person city.

[00:59:37] So it's like, if you're not working with us currently, it's like probably your husband or wife works for a company that we serve. So it's like people find us and, and they know we're good. And so we get, we get a lot of calls without a lot of sales and marketing necessarily dollars. Although we, you know, like our marketing is more, what would you call it? Like community oriented. So we, we sponsor community foundations and, and, and that kind of stuff as well.

[01:00:03] But yeah, in general, you know, if you, if you look at the go to market, it's like three fifths of it is very nonspecific, you know, general commercial. And, and, and the differentiation, as you say, is it's not super specific. It's basically you're having problems with your current provider. We're going to cost a little bit more, but you won't have those problems. Yeah. And then the sales process becomes like, well, how do we believe you though?

[01:00:32] Everybody we're talking to says that. Right. And the current guy said that. Of course it's like, okay, well we can, to, to get you over that belief barrier, we can pull you into our operations and any of the given problems you have and show you our specific processes and, and how we manage problem registers and how we manage training such that this problem doesn't occur in our operation. And so the, the sales process of differentiating is kind of inviting them into the specific problems

[01:01:01] that they're having and explaining how our operations have solved these problems. And that gives them, you know, kind of faith. And of course, you know, the reference ability and, and the scale and the maturity of our service model helps a lot. So you demonstrate the quality from a sales call, perhaps by showing them your operational maturity. That's, that's, that's right. I mean, usually it's phase two, right? The first phase is like, look, assuming we can solve this belief problem because we can,

[01:01:30] then are you willing to pay the gap between what you currently spend? Because, because it isn't free. Like, you know, like to solve these problems has, have required the development of infrastructure, human infrastructure. And, and, and that, that has a cost associated with it. So it's not like, it's not, you know, like I'll frequently say, like, I can't, at that price, I couldn't do it either. Like, like the price you're paying, I don't think it's possible to do what it, what it is

[01:01:59] that, that you want it. At least that's not possible for, you know, at least it's not, we haven't found a way to do it and we've been doing it for 20, you know, for 21 years. So if, if it is possible, that person should be giant because they will have, they, they will take all the market with them. Yeah. But the reality is, you know, to, to, to create great service delivery requires budget. And so the first conversation we just have to have is, is it worth it?

[01:02:27] You know, are you a firm that if such that if you paid 30% more and the problem zone away, that would be a good deal. Cause if the answer to that is no, I want to get, you know, I want to get, have this executed perfectly and I don't want to pay a cent more. It's like, I don't have a product for that. Like, I don't know how to do it. I don't, I don't think it can be done. It might be able to be done, but that firm has a giant operational advantage and they should dominate the industry. Um, but as far as I know, they're not.

[01:02:53] So, you know, it's like, it's going to cost more to get it done really well. And we offer that product if you're interested in it, the one that's more expensive, but actually works. And, um, and so that's the kind of the conversation we have at the front end. And then if they say, okay, okay, I'm willing to pay that assuming I got past the bleep barrier. Then we have a second stage in the sales process where we kind of explain it. It's like, here's how the process works. Here's why it was developed this way.

[01:03:22] Here's how this mistake gets avoided. We had it too, you know, like this is what we had to develop in order for the mistake to go away. And, um, and then, and then people learn about our business and in general, they come away with thinking, no, you know, that's kind of smart. Like that was, those are good countermeasures to these common problems. And that makes a lot of sense. And I can see why, if you did that, the problems would go away and, and then, you know, then they'll engage.

[01:03:47] So it's, it's, it's, you know, and then some people will be like, we hear this when we lose in the marketplace, we hear things like, you guys seem really smart. It seems like a great business, but we think we can get what you offer for less with these guys. And, you know, maybe sometimes they can. But a lot of times, you know, we'll hear from them again in a year or two and they're like, yeah, we tried that.

[01:04:16] It didn't quite work or we got breached or something like that. And, um, and so sometimes our sales processes are a little longer, you know, we have to go through it once and that's impressive, but we're not ready to spend that kind of money. And then we go through it again when they're, when they're rolling. And I don't think we're super expensive, to be honest. It's like, uh, we do have to talk to customers a lot about, um, paying more than they're paying now.

[01:04:39] But when I look at it, it's, it's pretty reasonable considering how much is that risk and how much leverage, you know, you get from your technology, like how much you pay a user and how little that user can get done when their computer systems don't work. It's like, it just seems like a completely nominal amount. I mean, it's like $200 a user in that ballpark. And it's like, you pay the user or what, you know, plus taxes and they can't do anything without their computer.

[01:05:07] And like a breach is going to cost you seven figures at least. It's like, it's like a nominal amount. Like, it just doesn't seem that much to me. And I think that's part of the thing too. It's like, if you have a bunch of salespeople like, oh my God, that price is so much. It's like everybody else is charging less. It's like, like they're charging less, but like, it's still nothing. It's like, it's a, it's a nominal amount of the overall operating expense of a human who completely requires a system 1000% or they can't do anything. Not to mention the global risk of bad IT.

[01:05:37] So I, I just look at it as, as very inexpensive compared to the value. And, and I think that kind of was, you know, hopefully it just flows down. Yeah. I think I could see where it's easy to see when in the legal industry, where, you know, with the bill rate of an attorney is, and that's a lot more than what you're paying per month. One hour would probably make up for, uh, you know, a lot more than the monthly fee. You know, it's crazy though, because it's like even something like construction, you know,

[01:06:06] we're, we're seeing a lot of people in that industry, um, who were really late adopters to quality IT provider. But it's like now, like their whole business relies on pictures and images and drawings, and they're being transported digitally. And if their digital systems are down, I mean, they're like their jobs stop. And like, you know, what's, what's the loss of one day? It's like a lot, you can monetize it. It's like a lot. And, uh, it can pay for your whole, you know, your whole year of, of managed services.

[01:06:36] If you get, you know, if you get one bad IT incident, so, and you will get a bad IT incident. Like it's, you can't neglect it and not, and just expect everything to be perfect. It's like, it just doesn't work that way. And so, um, the reality is that you're right. Like with legal, it just, it's really, really obvious, but it's the same analysis holds true almost everywhere.

[01:06:58] And, uh, so, um, you know, I mean, I'm obviously like have a bias on this, but I, I don't think that the, the, it feels like to me, like the industry in large for a long, long time was, was filled with low cost leaders. Like everybody was trying to be like the cheapest per seat price. And that was what was dominating.

[01:07:23] Um, and I just, I just don't, I don't think that that creates value at the customer. Um, I think it leaves the customer very vulnerable and it creates downtime. It creates user frustration. It affects culture of the, of the end customers. And, and it's not really worth it because like when you look at what it costs to do it well and the, on the upside of, of it, it's, it's much better.

[01:07:49] Mike, what's the biggest lesson you've learned over the years, all these years? Gee, to try to sum up a lesson is tough. Um, and maybe we, maybe we got into it in the, in the other, um, in the earlier section, but you know, I guess if I, if I had to put it into one, one lesson, it would, it would really be, um, that statement I made before.

[01:08:19] It's like, you need to become as a leader, something different in order for your organization, uh, to, to get different. So I'll just put it, make it personal. So like when I first started in entrepreneurship, it's like my motive was incongruent with what I wanted to do.

[01:08:44] So, well, which is like, it sounds really naive, but I was really naive. So it was, but I was trying to, um, avoid being subjugated to a power dynamic. Like I grew up the youngest of five boys and I didn't like that. And, um, and I didn't like working in a corporate structure where I was kind of subjugated to this like long chain of management that I, I, I personally found they were incompetent.

[01:09:14] And so I wanted to not be subjugated to a power dynamic. And I thought like, well, if I have my own business, then I won't be subjugated to, you know, inappropriate power dynamics. It's like, it's so naive. It's almost like, of course you're subjugated to power dynamics. You have key staff people who you really need. You have customers who, you know, who you, who you really need, or you can't run a business and you're subjugated to power dynamics, like crazy as an entrepreneur, not to mention

[01:09:41] business partnerships or like Microsoft, like they don't have power over you. So it was really naive. And, but more than that, it's like, nobody wants to come into work every day and give a hundred percent of their effort so that, so, so that their owner does, so that their founder doesn't have to be subjugated to like, like, it's just not a motivating force at all to anybody ever.

[01:10:10] And, and so then you might say, well, what is, and I kind of already answered that too. It's like, well, the primary motivation people have in, in a capitalistic system is they need to make money such that they can provide for their family. So I go, okay. So then you might think, well, is that it? Is that the ledger, you know, payment in workout, like everything's, everything's even, everybody's happy. And my answer to that is like, no, not even close. Like people want a lot more than just money from, from their work.

[01:10:40] And, you know, just to name a couple, they want community. So as a leader, you have to create that. They want a vision, something, they want to build something that they're proud of, that they can be part of. And as a leader, you have to set the vision and then it has to be cool and interesting and exciting to the right group of people. Um, and you won't get community if you don't have the appropriate values as I, as I already, as I already found, they, they want to enter flow state when they work. They don't want to just do all grind. It's not like they aren't willing to do some, they're going to have to do tickets and time

[01:11:08] sheets and grind it out work, but they also want to practice, you know, and, and, and lose, you know, have a different state of consciousness every once in a while where they fall in the flow and they enjoy their work and they're working at their, um, and then they want growth and opportunity. And so like it, it, and so you have to like, and then you have to look at what customers want. It's like, they want to get more value from you than what they spend. They want, if they can do it themselves for the same amount, they're not going to use you. They're just going to go build it on their own.

[01:11:38] So you, so my perspective on it is like, what's, what's motivating you as a leader? And the degree that it's about you is the degree you're going to turn off everybody, all of your collaborators. And it's, and it's a grand irony, right? Like the less it's about you, the, the better off you'll do in some grand ironic way. And, but it's not a manipulative thing. Like that can't be the reason because then it's about you again.

[01:12:06] So it's like, you really have to have an authentic, you really have to change and, and, and make your reason for, for being a part of your organization about something greater. You have to really kind of say, I want to build a tower because building a tower is cool and it's going to be really fun when we build it. And, and it's going to be neat. And you got to believe that like, like it's got, you have to change and say, I really want people to thrive in my organization because I care about those people. And I want my customers to do incredibly well. Why? Because I care about the community.

[01:12:36] And when you can, uh, when you can change and really hold those things truly in your heart, not as an, not as an actor, like, uh, I'm going to manipulate all these people into my profitable end. Like, um, everybody sees through that. Um, and so that's difficult though. Like it's, you know, especially, um, in the early days of entrepreneurship where you're barely surviving and, and you're dealing with all your own, your own issues. So you do have to become something different.

[01:13:06] I mean, it's like, um, and, uh, and, and then things around you kind of transform. Yeah. If there was one thing you could do over or differently, what would that be? Tough. Um, that's a, it's a real tough question for me. I'll explain why it's like, because, um, you know, my, my temptation is to talk about

[01:13:36] um, my temptation is to talk about things that were hard, but those things are all like, they were important steps, you know, like, uh, and so I'd hate to rewrite those because they were, they were, um, uh, you know, part of the, the, the character building journey that's required to kind of become, become the thing. So maybe I'll, I'll, maybe I'll transform the question into something that I can answer

[01:14:04] authentically, which is to say like, you know, there've been several really hard things that, um, that I, that I've dealt with as an entrepreneur on the way. You know, I, I talked about early about the first business that I had where the software development team left. And it was like, okay, like that was a chess game that could have been avoided if I played the pieces differently. Um, and so, you know, we, we started building our business in a more resilient way.

[01:14:29] So this is not to be so dependent on a single individual having kind of control of an asset and that kind of the managed services model. And then we got embezzled from, uh, from a controller who worked with us for almost a decade, trusted implicitly. And like, there was, there was a temptation at that point to just be like, all right, reign in the trust. And I'll never forget, like we sat around just the sting in that.

[01:14:58] Um, and we sent out a message to the, to the team. It's like, we're double downing on trust. And, um, and so, um, and that was important. Like, like it's one thing to trust blindly. It's another thing to trust with courage. Right. Those are different things. Yeah. Like, I think in the case where we got embezzled from, it was like, it was like blind trust.

[01:15:25] We expected people that, you know, we expected if we trusted people, they would reciprocate. And, um, and it was kind of a naive trust versus courageous trust. Um, and courageous trust is we know people could take advantage and we still going to show trust. Um, I mean, we try to put checks and balances in and all this kind of stuff. So I'm not saying we didn't do anything different following it, but it wasn't like we were going to run around and assume everybody's trying to steal from us.

[01:15:54] I mean, like that would have, that would create a just horrible culture because mostly people weren't, you know, mostly people are trustworthy and they deserve to be treated that way and, and, and not, um, be subjugated to a response of one bad apple. And so, you know, so maybe I'll, I'll, I'll, I'll leave it with that. No, I can relate to that. Um, and how it's easy to overreact.

[01:16:19] And I love the, sometimes it was a naive trust that I had earlier on and, and had to decide to trust. I had to make a conscious decision, like you said, to have the courage. And that's an entirely different, um, decision that comes from a different place. What's given all that's going on, where you guys are in the world, industry, all the things we were talking about, what's something that you're looking forward to now?

[01:16:44] Well, so there's lots of reasons to be, let's say skeptical or like squeamish or scared of, of AI and it's, we'll call it, um, disruption of the job market. Uh, you know, people losing their jobs, all that. So I don't, I don't take that lightly, but there's, there's something really, really exciting

[01:17:14] to me, um, about it as well. And I'll, I'll kind of illustrate it there. I have a business school professor that has a, has an AI lab and in their lab, they, they taught AI how to read radiology imagery. And they ran experiments where they took board certified radiologists who actually get the appropriate diagnosis about 70% of the time, which probably people listening to this might be like, oh, I can't believe they get it wrong 30% of the time.

[01:17:44] That sounds terrible, but, um, I tore both my pectoral muscles and I took this like two hour tutorial on reading my MRI. Cause I, I would just, I'm just that guy and it's really low resolution and it's really difficult. And, and, and the radiologist doesn't have to be just an expert at reading. They have to know that exact part of the body and they might not see it very often. And so it's actually probably not as, um, it's probably, they're probably not quite as

[01:18:12] bad as, as the average person imagines, but the AI is getting it right. Like 98% of the time. And when you marry the human with the AI in the lab, they reintroduce the human error almost exactly. So it goes 70% without it, 70% with it. And like 98% when you just rely on the AI and I can, I can see a world where, well, so you might think, well, who cares? Like, what is it?

[01:18:37] Well, if you look at, let's say a tele, like a, if you look at a cellular phone or a flat screen TV, it's like no matter how much money the U S government has flooded into the economy, those things are way less expensive than they were, you know, a decade ago or decades ago. Yeah. Because technology has disrupted it. And if you look at inflation, like the three sectors that have just gotten that the public

[01:19:04] has got crushed by is housing, education, healthcare. And so what realistic way do we have at making great healthcare that's abundant and affordable? It's like, there's only one answer. It's AI right now. We have, um, we have a system where if we want somebody to read our radiology imagery, we have to take like, we have to carve out the top 1% of our, of our, our publics, the smartest public.

[01:19:31] And then we have to educate them for like 20 some years. Like it literally takes that long. And then finally they can read radiology imagery. It's like, well, how much will that cost then when you bake in all that time? It's like a lot. Well, AI can do it with like, cause it can image process incredibly and it can know every single part of the body perfectly and it can be trained with every single radiology imagery of all time. It's going to be much more effective and it's going to reduce the cost of getting your, your

[01:19:58] radiology imagery to cents from, you know, hundreds of dollars. And so it, it, it's quite possible that AI could make human services that, that were at one point in time, incredibly expensive, incredibly cheap, like, like completely disruptive, like even more so than flat screen TVs. And, and so the cost of it's not insignificant. I mean, people are going to lose their job and they're going to have to get repurposed, but all those same people who, who lose their jobs are also going to benefit from the massive

[01:20:28] reduction of cost that's, that's going to occur across industry. So what is going to be required to buy things that are very expensive today, like reading radiology imagery? I think it can become cents on the dollar at some point in time. And so back to, as it relates to the MSP crowd that's watching this, it's like, well, how do we get from where we are now to the point where radiology imagery is cents on the dollar?

[01:20:55] It's like, well, in the enterprise you're going to have, you know, all the big consulting agencies that are going to be, are going to be doing that. But who's going to do that for the SMB? Right. And it's like, I don't see any other place, but MSP. So like, we're the only one to have the reach and the scale and the smarts and, and, and, and, and the wherewithal to be able to, to essentially transform the entire economy to an AI economy over the next 10 years.

[01:21:24] So I think it's a, it's not going to be easy. It's going to be a ramp up and it's going to be disruptive, but I really think that there's a significant opportunity for this, for this MSP community. That's kind of, you know, new industry that started in 2004, 20 years old. It's not like auto industry or it's not like legal or medical. But we're in the heart of one of the most important changes in, in my lifetime.

[01:21:48] And we're, we have a front seat at the table to potentially be, to transform our economy. Um, and it's scary because just like, like with social media, there's going to be negative, there's going to be people who are hurt in the wake. But I think in the long run, um, it's going to make, it's going to increase the material wellbeing of, of, of humanity substantially.

[01:22:13] Um, and you know, I, this is all video and, you know, maybe 20 years from now, there's going to be an evil AI that's going to have us all locked up underground or something. And I'm just going to be like, Oh, how could I have missed it? You know what I mean? Like I, like it's a very optimistic and, uh, and, and, and at some point in time, it might be considered an incredibly naive take, but it, I don't, I don't see any other, I don't see any other, you know, pathway.

[01:22:42] It's like, I think we have to have that vision. The one that I just outlined for the same reasons I talked about in the beginning, like we're going to materialize a vision where AI is, is great for, for humanity. We're, we're going to have to have a lot of people who align around that vision. Like that's what we want. We want an AI that makes, that increases the material wellbeing of mankind and reduces the cost of basic human services like healthcare. Um, and so that it becomes more abundant, more available. And, uh, and so, so that's what I'm excited about. And I think that, uh.

[01:23:12] What's your biggest challenge currently, Mike? Yeah. Uh, I, you know, I guess I don't really have to think that hard about it. Like we spend, I spend the vast majority of my time now with my partner, uh, really trying to develop leadership, uh, internally. And, um, and that's what we think about. And, and we're really trying to, um, cultivate the next, the next group of just amazing leaders in our organization such that we can, you know, flourish going, going forward.

[01:23:42] So really that's, you know, a hundred percent of what I think about right now is just leadership development and, and trying to cultivate the skills and hand the lessons down and the tools and, and, and all that stuff to the, to the next group of, uh, people who are, we're going to lead, you know, insight into its next, to its next version. As an avid reader, I'm interested to hear what one or two books do you recommend?

[01:24:10] Boy, um, uh, so to, to give you some perspective on this, um, when I was 24 years old and I had no idea what I was doing, um, I also lived about an hour drive from my office and, um, I, I just was relentless about audio books. I'd listened to, I listened to an audio book every single day. And then also I was doing sales. So you can imagine I was driving a lot more than to and from my office. I was driving all over the Bay area.

[01:24:40] And I, it's not an exaggeration to, to, to say that the number of books that I have taken in or is in the thousands. It's not in the, it's not in the hundreds or dozens, it's in the thousands. And so, um, you know, kind of trying to pick and choose is a, it might seem like a, like a simple, like a simple task, but to me it's, it's not because

[01:25:02] many of those, um, uh, books are, are, are just indispensable, you know, sources of, of knowledge, but, um, you know, just for the sake of, of throwing some stuff out. Um, if you don't have a business planning routine at all, and you're, and you're listening to this and you haven't the simplest one. And I mean, it's, it's almost kindergarten, like simple, but it doesn't matter. Sometimes that's better because it's just really distilled.

[01:25:32] Uh, if you haven't picked up EOS by Gina Wickman and implemented some version of that, um, a big mistake, like you have to have an operating system you run your business on. And if you want a slightly more sophisticated version of EOS, then, you know, pick up, Rockefeller Habs 2.0. I mentioned those two things, um, in my book. Now those are, aren't theory, theory. They're just like, do this. And if you, they're like, well, I really want to understand why it's like Jim Collins has a suite of books.

[01:26:00] Um, good to greats, obviously incredible, but he's got five books. They're all great reads. Um, the entire suite of Pat Lencioni books, um, are, are fantastic. Um, uh, Liz Wiseman, um, has, has a great book. Her book I think is, uh, called Multipliers. There's an incredible book called, um, Radical Candor by Kim Scott. Great book. Um, let's see, there's a, I mean, I have to chat GPT the author because I can't remember.

[01:26:29] There's a great book called Conscious Business. Um, let me see if I can figure out the, the guy, uh, it's a, it's a philosophical, um, book that I, um, it's by this, uh, I don't shoot. It's not coming up. Um, and chat GPT, but it's, uh, it's by this like Argentinian guy who's, who's incredible. Um, it's great in audio because he reads it. Nice.

[01:26:55] So, you know, handful, handful of books and authors that, um, that, that were pretty important. Yeah. I love those recommendations. So, Mike, um, if people are interested, are you open to them reaching out, connecting with you online? So, yeah, if somebody is interested in, in connecting with me, um, if they want to talk about problems they're dealing with or, um, anything like that, uh, they can reach out to me.

[01:27:23] Um, it's a little hard to get ahold of me, uh, for, for, I just get hundreds of emails and unsolicited phone calls and stuff like that. I think the best way to do it is to reference MSB community and link me in first. So send a LinkedIn and, and, and reference, uh, in your, in your letter, um, that you're part of the MSB community and then we can connect there and then we can transport it over

[01:27:50] to, uh, to email or phone or, or teams or something like that, because I probably will, it'll get lost in the noise. If you just email me out of the blue, my algorithm of sorting email is pretty crude. It's like delete, delete, delete, delete, delete, delete. Yeah. We've all needed AI help with that. But definitely, definitely with anybody who's in this business, who's gone through it, who's tried to run an MSP. I mean, those, y'all are the people who I'd love to talk to and, and, and share more stories and learn from each other.

[01:28:20] And you might think like, I don't know if there's somebody out there in particular, like literally in particular, if there's somebody out there, that's like roughly our size, just know you're really hard to find. And I have a peer group who would love, love to talk to you about the peer group because we're just, we're, we're 35 million in the MSP business is somewhat rare territory. And if you're there, just call out, please connect with me.

[01:28:47] And if you're not there, you might think, well, what do I have to, to, to share or to give back? It's like, believe me, like I get a lot out of these conversations, even, even just the process of describing something that we do helps me get clarification on my own vision and I become better at communicating to my team. But a lot of times there's a piece of the problem that I'm dealing with that you might have. It might be a software that you're using or something like that. I mean, I get a lot out of the conversations I have with, with folks. So they're worth it for me to have.

[01:29:17] And if you want information about how we think about pricing and how we think about go to market, I'm happy to share that pretty much, you know, transparently. It, it never, I never thought it was like, we never, we don't, with pricing, we don't be like, try to find out what the competitor is and then price $10 lower. It's like, it's not our strategies. We have our price. It is what it is. If customers like it, we, we, we, we, we transact. So we're not, we're not against transparency.

[01:29:44] And we think it actually helps like, you know, helps people, helps the industry and helps us all. Like, I don't think the industry benefits from people under pricing. I think we all suffer from it. So. Yeah, for sure. For sure. Well, don't miss that opportunity to reach out to Mike and take advantage of that generous offer. Mike, this has been a, such a gift. If I could ask you questions all afternoon, time permitting.

[01:30:11] And just from the bottom of my heart, I want to say thank you so much for your time and for being on MSP Mindset. Well, thank you. Thank you for having me. It was a fun conversation. Thank you.