MSP Initiative Live with Rob Scott from Monjur

[00:00:02] Hello, ladies and gentlemen. Welcome to a September 24th edition of the MSP Initiative, MSP Talk. I'm live in Houston right now at the ballpark, my office for the day, but can't say that's an everyday occurrence. I feel like I'm in planes more than anything else. I've got a return guest on the show today, Rob Scott from Monjour. We'll check in with him in a second. I'm going to get some housekeeping out of the way, and then we're going to figure out what's happening. We'll talk news of the day, and we'll figure out where that lands with our guests.

[00:00:31] So here we go, MSP Initiative.com. That's where we park all the stuff that we do for you, the community. We have one more community block party coming up in Sydney, Australia in November. If you're headed to Kaseya Connect APAC, which used to be called Datacon, no more. It's called Kaseya Connect. It's in Sydney. I think it's the third or fourth year in a row.

[00:00:55] But this venue is the convention center, much nicer, bigger space than in prior years. So looking forward to seeing you guys down in Australia. Again, thank you to everybody who has come out so far for the second year of the Channel Sports Tour. We're in Melbourne, Australia for the very first NFL game. 100,000 people closed out that building, had a great group of MSPs who came out for the inaugural game.

[00:01:19] And then we started our US tour, right? We were in New York. We were in Boston for the Patriots. And so we got coming up to the next couple of games. But you can find all of those dates at MSPinitiative.com. And we're all over America. And I believe we even have one game in London. So we're trying to cover everybody wherever we can. And the NFL is popular. So put your name on the wait list.

[00:01:46] There are not unlimited tickets and tailgates and all the stuff that comes along with it, which is totally free if we can get you in as an MSP. But you got to get on the wait list. If you don't play, you can't win. So MSPinitiative.com. Find all the details there. That is all my housekeeping. Welcome to the show again, Rob. How are you doing, buddy? I'm doing great, George. How are you doing, buddy? Oh, man. What's the weather like in Houston?

[00:02:09] You know what? We're at 88 right now. I'm actually sitting outside in the ballpark area, but I'm undercover. So this is good. And the roofs are open here in Houston. It's actually my second time at this park. It'd be nice if every park was a dome, but I don't think that's a thing. No, that is not even close to a thing. Yeah, Buffalo and that new stadium up there, I'm surprised they didn't put a roof on it, man.

[00:02:37] Well, look, part of their whole shtick is we're tougher than you. We can play in the cold better than you. So bring your little, you know, Ferrari driving Miami Vice butt up here and let's go play some hard-nosed football in the snow. Yeah, but then Tampa had a game last week, Buccaneers and the Browns. I think they had a rain delay at two-minute warning in the fourth quarter. Like, that stinks.

[00:03:06] That does stink. I think the best approach is push the button. If the weather's nice, the top is open. If the weather's not nice, you push the button, you close the top. That's the way it works at Jerry World in Dallas. Has Jerry ever opened the roof since he's been at Jerry World? I feel like he never does. He does occasionally, not typically in the summertime. You know, this is the time in this market of air conditioning.

[00:03:35] You know, we don't want to be too exposed to the elements because there can be a little harsh. And so, you know, we go from our air-conditioned cars to our air-conditioned offices to our air-conditioned suites at the game. So, you know, we don't want to get too exposed to the elements in Dallas. Dallas fans are more like golf gallery than football fans. Oh, boy. And then you wonder why people in other cities don't like Dallas.

[00:04:06] Well, it's the flip side of why people in Dallas don't like people like you from Philadelphia. Whoa. I wasn't trying to shoot bullets here. Straight shot. Come on. Well, look. I mean, everyone goes with what they're comfortable with. Okay. All right. Well, I know we actually have a Channel Sports Tour game, Cowboys Niners, in Dallas in November. So, looking forward to that one.

[00:04:31] That is going to be huge because if the Niners can stay healthy, they got a team that looks a lot like the team that won the Super Bowl. Okay. Well, I'll tell you what. It was Rams Niners in Australia, and I heard all about going before, not, you know, going the day before, flying 15 hours, all this whatever, blah, blah, blah. Man, the Rams got their clock, you know, kicked.

[00:05:01] I mean, the 49ers looks good. Yeah. I think the 49ers have the potential to be really good. But, you know, in this age of marquee quarterbacks going out on injury, so much depends on who can stay healthy. You know, it's interesting. I think us in the IT sandbox or MSP world, you know, you work from anywhere, on any device, in any place, basically.

[00:05:27] You know, you don't need to necessarily – you could technically work from a hospital room if you really had to. I hope you're not in that situation. But, yeah, NFL players, you know, the best ability is availability, as they say. And, man, I feel bad for some – like, some of these guys, especially like the Giants lost their quarterback already for the season. I mean, this first month is basically the preseason, right? I mean, that's what it is.

[00:05:51] And, look, I feel so bad for Jackson Dart because here's a kid who had a reputation as being a knucklehead, a little bit reckless, and then goes out on a play where he's standing in the middle of the pocket, like did nothing reckless, winds up in a freak sort of hit situation and winds up getting hurt.

[00:06:14] I think that even as a Cowboy fan and even the pain that I endured of walking up seven flights of stairs to watch the Cowboys get their asses kicked by the Giants, my heart still goes out to the Giants fans and to Jackson Dart because I don't think he deserved to have his season ended.

[00:06:43] And the only thing I can say to the NFL teams is you could go out and spend all the money in the world on a great quarterback, but if you don't invest the money to protect them, you're never going to realize their capability because these defenses are vicious and you've got to get these quarterbacks blocked up. That's actually a great analogy for our industry, right? Like you could have best product, asset, people in the world, but if you don't protect them,

[00:07:13] then you could get your rug pulled out from underneath you, right? I mean, I guess that's the cybersecurity talk, but I got another one for you that's slightly adjacent. So me being from Philly, as you've already established, Philly Airport was ground stop for like two days this week. Just opened back up, I think partway through yesterday because they cut a fiber line and air traffic control was down. Yeah.

[00:07:39] I'm like, you know, we've heard about backup and redundancy and what's your plan if this happens? Like that was a major airport down for two days, man. I mean, that's crazy to me. Yeah. Look, I think, I think we too often take for granted things like redundancy and high availability. I think in a lot of areas we haven't been hardened for those types of outages.

[00:08:07] I think we have primitive capabilities when it comes to data backup and recovery. And a lot of cases that I get involved with turn on, you know, failed backup and lost data. It's a dangerous world that we live in for sure.

[00:08:26] And I think with the advent of AI, particularly AI in the hands of the bad guys, the stakes of the cops and robbers, good guys versus bad guys has really been escalated. And I think that the cybersecurity risk of the future have been 10xed by AI. Okay.

[00:08:55] Let me, let me go that down that road for a few minutes. So Spirit Airlines, no longer in business. I don't know if you, you know, some people are big Spirit fans. I don't know if me or you were. I think that that used to be Swamp Jet, right? Whatever it was. They had a lot of interesting airport videos, but I'll put that on the side for a second. So they're out of business.

[00:09:18] And here I read, there was a bidding war by the entity who's handling the bankruptcy, you know, like asset sales. And it originally started sub 10 million, ended up going all the way to $20 million. Google paid for the corporate data of Spirit to train their AI. We're talking emails, flight records, employee data, credit cards, you name it.

[00:09:46] The whole kit and caboodle. That's scary, brother. That's scary for the passenger. That's scary for the former employee, the ex-vendors. Like basically just took all of the filing cabinet and you dropped it into the AI machine to train it. I'm not sure any of those people knew that they could potentially be in that situation. Well, they should have had an appropriate contractual provision to preclude someone from doing that.

[00:10:13] I mean, just because there's a bankruptcy doesn't mean the bankruptcy trustee is not subject to the contractual language that was in the underlying agreement. Can't just unilaterally say, oh, I got these documents under a confidential relationship and now I'm going to sell them to Google. You can't do that. What just happened? So did they just not have that in the agreement? I can't speak to those cases because I'm involved in representing MSPs. Okay.

[00:10:42] All right. So, but let me go one step further since we're now here. Now that this is a thing, there are ads now, and I've seen them in my feed. I don't know if you've seen them in yours, where they'll pay up to $4 million for you to sell your company data to train somebody else's AI. Yes. And like, by the way, that's, you know, if somebody's in a trouble position and they're hard up for cash, they might take the, you know, the escape hatch here.

[00:11:12] No doubt. So like, I don't know that MSPs have that in their agreements. I don't think the employment agreements had this. Thinking back to Spirit Airlines, I don't think the customer agreements had this. I don't think the vendor agreements had this. Like, people are completely, probably surprised to realize that, like, data that you would think would be private got sold. Well, I do think that there are differing views of what is private.

[00:11:43] Okay. What's your view? What's private then? You know, I think it all depends on the circumstances. Okay. But in the end, you know, regulated data. Okay.

[00:11:58] Which would be data that is defined as typically personally identifiable or personally or personal information is generally, generally considered globally as protectable. Private data.

[00:12:44] Somebody goes through the painstaking process of washing the data, right? Stripping out names, numbers, phone addresses, email addresses, whatever is personally identifiable, right? But the rest of the data is still there. George took a flight on Spirit from Philadelphia to Miami, right? Like, with the AI capabilities, and I'm not an expert, but I mean, I read like everyone else.

[00:13:09] It could figure out that that was me later without that person with identical information, right? It could triangulate enough data to try and figure out what's what, right? Yeah. And the question is, does that constitute a disclosure of personal information or personally identifiable information under most privacy regulations? It would not.

[00:13:32] If it was appropriately de-anonymized and de-pseudonymized and all that shit, it would be potentially capable of being training data that theoretically an AI system could reconstruct the reality without a disclosure.

[00:13:55] And put the holder of the data in a market or other position of information that they wouldn't otherwise be able to obtain in compliance with the regulations as they're written today. Okay. So, that's a whole – this discussion right here, this whole topic, I'm not hearing anybody talk about this in our space.

[00:14:21] Like, from an MSP to MSP conversation, like, they aren't even thinking about this topic. And I don't know if they're thinking about it for their own data, the data that they hold for their customers and their employees and their documentation and their processes. But then if their customer, Rob, asks them to partake in an activity that is the customer doing this same thing, right?

[00:14:47] Taking their customer data and doing something like this with it. And they're coming to the MSP asking for their help to effectively, you know, make this transaction occur potentially. Like, I know this is a hypothetical, but I have a strong suspicion this type of scenario is not crazy. Dude, we have a thing at Montre called the brain. I would not sell the brain, right?

[00:15:16] The brain is the brand. Like, they're not, to me, interchangeable. I do think it's interesting that your training set is becoming an off-balance sheet asset that people like bankruptcy trustees are turning into cash. What does that tell you about value creation in the future market? Data.

[00:15:45] Data is king. Data is king. It's just the modern equivalent of experience. You know, you used to go to people because they had a lot of experience in whatever it is that you needed to help with. You know, MSP space, my clients that are vertically focused make the most money, sell for the most money. Why? Because they're in spaces that people value compliance and the security that's being offered.

[00:16:15] They're willing to pay premium rates for businesses that meet their regulatory needs and for whom they see as experienced people within their industry. With AI, it's the same thing. My AI is going to be better than the next guy is AI because I got 1,200 real MSPs transacting on my AI every day. So try to catch up.

[00:16:45] You can vibe code all you want. It's the actual clients that are the business. Right? And as long as companies like Monger stay focused on that priority of understanding that servicing the clients is the business and good data is just a byproduct of serving them well, then companies like Monger will have tremendous value creation in the training set. Right.

[00:17:14] Because you have macro data. Right. No, I'm with you. So let me go the other way. So I know that I brought up a topic that you probably don't hear every day. I haven't heard a lot of MSPs talking about it. So I wanted to bring it up with you to maybe start that conversation because we're here now. Right? It's not a theoretical. Like I know Google and Spirit are very big companies, but albeit it comes downstream. Right?

[00:17:37] That being said, what do you tell MSPs who adopt frontline tech? Right? That's AI powered like chats. And the chat gave the person on the other side, your customer, the wrong information, told them the wrong thing, told them the opposite of what it was supposed to say. Now, I know for a fact, I read an article, I think it was back in 2024.

[00:18:05] It was like Air Canada was like, you know, somebody was talking with the chat on aircanada.com and it literally gave them the opposite of their policy. And the passenger took them to court and won because the court in Canada said, you're responsible for the technology that you put in front of your customer and whatever it's doing. That's a scary proposition because I'm not open AI. I'm not Claude. I'm not, you know, Gemini, Google, whatever.

[00:18:32] Like I'm plugging in, but like there's a lot of things I don't control in that technology conversation. Right? Yeah. I think so much of the risks that faces MSPs are in this transition. You know, years from now, the questions you're asking will be well settled. Sure. But we're in the middle of like the wild, wild west. So we started our service attachment for managed AI.

[00:19:01] We launched it in 24. Okay. And we were of the opinion at that time that there were enough new provisions, namely service descriptions and exclusions that weren't adequately addressed in the other parts of the contracting platform. I agree. And so AI creates new risks.

[00:19:27] And if you're contracting on pre-AI paper, then your paper is not keeping up with what's going on in the market.

[00:19:36] And there's no way you could be a protected MSP, as we use that terminology at Monger, without taking a fresh look at your services, your insurance, and your service attachments for managed services to make sure that all of the appropriate risks associated with AI are adequately covered. Wow. Can I pause you for a second? Yeah. I just read two weeks ago.

[00:20:06] I do a lot. I'm on a plane all the time, I feel like. So I'm constantly reading to keep me occupied. Most of the major business insurance carriers are entirely excluding AI from coverage. Like just saying, not covered at all, period. Anything AI related. Like because they don't know how to calculate it right now, right? It's still too malleable, too gray for them to figure out what's a claim, what isn't.

[00:20:34] So how, like back to you're covered. Well, if the insurance coverage isn't there and your liability is still there and you don't close off your liability and what you're talking about, basically you're driving with no insurance. Right. Right. And what I would say to you is, although it's true that almost all business insurance will have AI disclaimers.

[00:20:57] The insurance that's most important for MSPs when it comes to this particular topic is called tech E&O or technologies errors and omissions. This is the equivalent of legal malpractice or medical malpractice insurance. This covers the MSP's customer if the MSP or its employees make a mistake. I see.

[00:21:23] And so the same issue arises in those policies. And there are some that are specifically disclaiming. And there are others that are silent on the topic. And a very few emerging handful that are focusing on MSPs now have specific AI endorsements. OK. What's so special about them?

[00:21:47] So what's special about a carrier that will give you an AI endorsement is the peace of mind of knowing that you're not going to have a claim that involves the chatbot fact pattern that you alluded to earlier. And that the carrier will say, we don't cover AI risk.

[00:22:07] These addenda that are being written in are specific for MSPs that are offering AI related services, including deploying co-pilot, HATS AI, custom applications, intelligence as a service. All of these emerging models involve agentic orchestration and management.

[00:22:33] And the key insurance addendum to secure is one that says that the MSP's agentic orchestration and managed information provider customers are covered under their E&O policy,

[00:22:54] notwithstanding the fact that they could be primarily AI services that are outside the definitions of the underlying insurance policy. So my guess, you said you have 1,200 or so MSPs right now working with you on the platform. But there's tens of thousands of MSPs out there.

[00:23:20] And I'm not sure the last time they've had this discussion on the renewal. Right. Or, you know, have they actually gone to their carrier and said, hey, we're doing AI stuff now, consulting projects, co-pilot, whatever. What do we need to do? I just don't think that they're having that conversation.

[00:23:37] I think MSPs need to introduce this as a project at their L10 because the issue of the AI transformation is a strategic business topic for MSPs. It goes into not just insurance, but think about trademark protection. You got an MSP. You filed a trademark seven years ago. You're in class 42. You can't expand the services of your mark.

[00:24:06] You got to file a new mark. Well, class 35 is the class for AI services. If you're transitioning to AI services, your old trademark isn't protecting you any better than your old insurance policy or your old customer contract. Yeah. Well, that's a good point. That's a good point.

[00:24:28] You know, it just opens up a whole new Pandora's box that, quite frankly, I mean, up until about middle to end of last year, you know, like people would still talk AI. It was still, you know, okay, yeah, I see it over there. It's not a big deal. But 2026, man, it is coming full speed. So is this your way of saying, okay, Rob, I agree. You win. You were right.

[00:24:58] I just want to point out. I said I was going to wait. I said I was going to wait and see. But I still hold true to a couple of things. I want to see if you still hold true to that.

[00:25:12] If you put more gaps between your customers, humans, and your humans, and it is harder for that communication and relationship to occur, then you wouldn't, you know, you're no different than the next guy and the next guy and the next guy. Like, I remember you told me on a, I think it was maybe a podcast or two ago. You said, you know, hey, this particular thing, well, it's a relationship business. That's how these things get done.

[00:25:38] I think the MSP business, the IT services business at this level, sub 250 employees, SMB, if that's the right definition, small, medium business is a relationship business, Rob. And so if you're going to put all this tech between you and your customer where they're struggling to get ahold of you, I think that that spells a problem. I'm not saying you can't use AI to be more efficient. I'm not saying you can't use AI to make smarter decisions, analyze things faster, all that.

[00:26:06] I mean, there's plenty of use cases in the back office, but for your front facing customer relationship, I'm not, I still on September 24th, 2026, don't think it is a good idea to completely separate yourself or make it so difficult for your customer to get ahold of you as a, as a small, medium business. That's a bad, that spells trouble, a lot of trouble.

[00:26:29] I would say that the only value that AI brings to the relationship between providers and clients is the opportunity to enhance. Sure. There's no opportunity to replace. Okay. I'm going to quote you, Rob. Yeah. Look, I'm in the business. No opportunity to replace. Yeah. I'm in this business.

[00:26:50] I, we architected, uh, mantra pilot as an attorney supervision platform with lawyers in the loop because we're committed to, uh, the ethical practice of AI. The concepts of responsible AI have been largely ignored in this agentic craziness. I mean, responsible AI, one of the tenants is humans in the loop.

[00:27:16] We have a attorney supervision platform where our lawyers are in control of what's happening with the AI. Okay. The AI, the AI is designed to give the customer greater access, not less to not change the ability to, to spend time with humans, but to give them an alternative to humans. That's extremely powerful and helps them automate workflows that they need to get. Okay.

[00:27:45] But the scenario is I need to talk to a lawyer. I think I might be getting sued. Then what? Then how do they get in touch with us? Yeah. We have a variety of ways that they can escalate to humans. I mean, that's the whole purpose of it. To me, the whole purpose of an AI layer can't be the way you describe it.

[00:28:10] The way you describe it assumes the conclusion that it's a bad idea. But there are great brands that are using a hybrid of AI delivery and human delivery to deliver a level of service that's hybrid and better. That's both AI powered, but that has a human touch. I think now we're getting to a better place. Okay. Because I agree with the hybrid.

[00:28:38] I think you can use pieces of both sides to get to the best destination or at least the best available today. But if, just like anything else, if you do too much of anything, it could be a bad thing. Right? And so- Look, look, Art, we have the technology in Mondra Pilot to onboard an MSP onto our platform in one hour with no humans. Okay.

[00:29:04] And yet it's our standard process that the friendliest, kindless human on the planet is going to call you and give you a kickoff meeting. Okay. And our CRO would not allow that to be a group meeting. Mm-hmm.

[00:29:22] He insisted that that is a one-on-one discussion between the account executive that's going to live with that account, the customer success manager, and the customer at the outset of the relationship. And even though we have the technical capability to automate all of it as a policy, we keep that human element as part of the customer experience.

[00:29:48] And it's a non-negotiable for our customer success and revenue team. Okay. And so that's your hybrid, right? They're like, hey, it's all here. If you want to forge ahead, you can. Again, we're still going to actually get on a call with you and make sure we're all on the right road. I love that. I love that. Because otherwise, if I have a legitimate question and I'm not getting the answer, I want to know that I'm being helped. I want to know that somebody's got my back.

[00:30:15] And like, no offense to the computer, we're all on computers or else I don't think we're in this industry. I like talking to human beings. Just me. That's why in each one of our chat windows with Monitor Pilot, one of the options at the end of each response is escalate to a human. Okay. You can escalate the chat you're in to a human by clicking a button at any time.

[00:30:38] In addition, when you're in what we call open mode, which is the full power of the LLM without the gating and grounding in our rag, every chat window has a submit for review button to send that output to a human to be reviewed.

[00:30:54] So in my mind, the hybrid solution that gives the customer better service, lower wait times, faster response times, low-end activity that's automated that they don't get billed for, that happens without any friction. That's where I see the opportunity for AI to deliver a greater customer experience.

[00:31:18] I think the businesses that think that they're going to automate the customer experience with AI are in for a rude awakening. Everybody, listen. I'm going to clip this part. In for a rude awakening. I agree. Let me give you a real-world scenario. I was on a trip earlier this week, not through Philly because they had a fiber cut. No planes. Went through another airport. And I was on United and I was trying to check in for my return flight. Couldn't check in.

[00:31:48] Okay. I said, let's try it. Look for giggles. Try the chat. Hey, can't check in. They're like, okay, we'll go get a human being. Human being gets on the chat. They're like, yeah, you need to call us. I was like, so why did I even bother with the chat? And I called and they fixed it and I logged in and it was a five-minute call. It wasn't a big deal. But like, it just didn't work.

[00:32:12] I think all brands of all sizes are struggling with an omni-channel service delivery model, which is a challenge for any service provider. I know at Mondra, we struggle with just the amount of incoming traffic. We get 30 to 90 incoming legal support tickets a day and they're coming from emails, texts, in the portal.

[00:32:41] It just, just this disparate channel of inbound support requests. I can see how that's challenging even for bigger companies. But I get your frustration from the customer view. It's like, you know, if you're going to give me a new tool, it needs to be competent to handle what I used to could handle with the phone call. Yeah. And it could not. So at least in my experience, that being said, I learned some valuable lessons you learn from going through what works and what doesn't work.

[00:33:10] Um, pivoting to the other side of this, um, there's been a lot of fanfare. I want to take your opinion on a couple of topics, you know, why topics, the SAS again. And for anybody who hasn't heard this, right? It's like, oh, well, AI can build anything overnight over the weekend, vibe code or heaven. You know, all SAS companies immediately devalued because anybody can build whatever they want. No, no gates.

[00:33:40] Uh, I think my opinion is, you know, I have my opinion. You know, I want to hear yours. You believe this is true or is that a little crazy? Well, look, I don't think that there's any way to, um, deny the factual data that exists that correlates to the launch of Anthropics, co-work and other vibe coding solutions and the

[00:34:06] multiples at which both private and publicly traded SAS companies trade. I mean, I don't think there's any way to even argue that. I think the more definitely happening then, or is it overstated? Well, look, these companies are trading at, at, at numbers that are low. The interesting thing is that SAS is no longer a real thing. SAS is becoming fragmented.

[00:34:35] SAS is becoming, you know, is it AI powered? Is it AI native? Is it agentic? Um, but the real question is how fast does it grow? Mm-hmm. Um, if you can't grow three X, you're not an AI platform. Mm-hmm. Um, and so what it is to be SAS and what it is to be AI and what it is to be AI powered

[00:35:01] services is becoming a more fragmented question. And the truth of the matter is AI powered services firms are trading at multiples higher than SAS companies. Okay. So what does that mean for the valuation of the MSP? Traditional MSP versus AI powered?

[00:35:22] Well, look, MSPs are trading in today's market, um, for a, a, a, a, a PE sellable, um, uh, company, you know, take 800 to a million in EBITDA or more. Um, this is a business that could trade for eight times, uh, EBITDA cash could trade up to 11. So if I was doing a million dollars in net EBITDA net, I just call it adjusted EBITDA.

[00:35:52] Yeah. So you're telling me that could go for up to 8 million. No, I'm saying everyday deals are going for eight times in this market. Yeah. So, but if I'm doing a million net and eight times, eight times a million is 8 million, right? Yeah. I just wanted to be clear on the certainty with which I think you could get that. Okay. I tell MSPs today that I could sell their business faster than they could sell their house. Is that true? Yes.

[00:36:22] The reality of the MNA world and managed services today is if you have a PE buyable MSP, uh, you could sell your business in four months. Wow. Okay. That fast. That fast. So, okay. Can I, can I ask what did you define as PE sellable? Like what ducks are in a row for that transaction? Yeah. So, you know, one of the biggest hurdles you'd be shocked that I would say this is legal maturity.

[00:36:52] Okay. You know, if you don't have the contracts that PE firms would expect you to have that are going to shield lock and grow your MSP, then you're not going to do that well in MNA. So I would say good customer contracts and good, just legal maturity is going to be necessary to get a seat at the table. Okay. Okay. The other thing, the other thing, the other thing that you need to have is enough revenue

[00:37:22] to be interested in to them. Okay. So enough revenue and enough EBITDA to be on their radar. I would say 800 K minimum to be in that top 10, you know, radar screen. 800 K not in. Adjusted EBITDA. In net, net EBITDA. Yeah. Adjusted EBITDA. So this is, uh, net profit adjusted for owner benefit. Okay.

[00:37:50] And so, so, um, so, so a company that has 800 K in net is probably what? $5 million MSP. Yeah. I mean, if you think about on average, MSPs make about 15 to 18 points net profit, a really profitable MSP will be, you know, over 30. Mm-hmm.

[00:38:17] Uh, and, and a really strong one will be at 20. Okay. Um, but the percentage of the percentage of revenue is less important than the EBITDA itself. Okay. So when you say percentage of revenue, you're talking about your categorization of revenue? Services? I'm saying, no, that matters a lot. Okay. Numbers I'm talking about are on recurring, not project. Okay.

[00:38:47] Uh, project revenue commands very little in the M&A market. Mm-hmm. Um, mostly what gets valued in a customer contract is the recurring revenue. I had a growth equity investor tell me recently, he said, Rob, you may convince me that Mondra should burn some money in year one and year two, but by year five, I'm selling on future cash flows. Mm-hmm.

[00:39:17] And the same is true with MSPs. Okay. And so, and so. Taking away project, we're taking away hardware, one off. Yeah. What about reoccurring, not labor services, right? The office 365s, the security. I think that counts as recurring SAS revenue, I think is recurring. Okay. Right now. So you can put together that and labor reoccurring into reoccurring. Yeah.

[00:39:46] If it's subject to a managed services contract where the customer is paying every month over a long-term period of time, that would be recurring revenue for purposes of this discussion. Okay. You could bundle projects on top of that. You could sell voice instead of taking agent commissions to accomplish that. So there's a number of ways that that can be influenced.

[00:40:11] But in the managed services business, unlike in SAS, you know, our bankers tell Monger, the number one factor in growth at Monger in terms of value creation is growth rate. Yeah. You know, if you grow over 100%, your business is worth way more than if it grows 80%. Yeah. And so growth rate is what is heavily focused on.

[00:40:37] For managed service providers, adjusted EBITDA is the North Star metric. It's not the only thing that matters, but it matters the most. Okay. So let me go another topic. Leave out the names, right? Not trying to, you know, you got attorney, client privilege, all that good stuff. But like, generically, things that you've seen blow up these transactions, these MNA deals.

[00:41:06] Well, look, bad paperwork, bad accounting, bad compliance. In general, just the inability to withstand public private equity type due diligence. Okay. You know, a lot of these MSPs started as technicians. They had a huge commitment to just helping customers. They grew through word of mouth in the community.

[00:41:37] They're really good at keeping computers running. They're not that great at paperwork and filings and making sure all their documents are where they're supposed to be. And sometimes that can become a problem when bad things happen in the interim. Like no one was paying attention. You know, negative things could happen that get revealed for the first time in due diligence.

[00:42:01] You know, it could be things like off balance sheet liabilities that get discovered. It could be negative sentiment. Every PE buyer does their own independent investigation on your reputation. If you've treated people poorly in the past. If you've exercised poor judgment in the past. There's a good chance that PE firm is going to know.

[00:42:31] You know, we're talking about very sophisticated buyers. And so those are the types of things. Things that come as a surprise that aren't addressed up front and early can erode trust and kill deals. You have to imagine these PE firms have hundreds of companies to look at. Yeah. The last thing that they want to do is deal with someone who at best is negligent and at worst is nefarious.

[00:43:02] And so the things that we see that kill deals are lack of sophistication in the financials and in the documentation that constitutes a deal room. Because that's the foundation upon which the due diligence occurs. And if you can't survive due diligence, you can't get the check. Okay. Well, listen to a guy who's in the room.

[00:43:29] It's probably not a good thing when this, you know, throws a wrench into the conversation. And then, you know, time matters, right? Let's say you're in the middle of a conversation and this is moving into this very fast four month conversation, you know, period. And, you know, now you run into an issue and you have to rectify that issue. I don't know how long that takes. Guess it depends. And then you come back later on and maybe that deal is not there anymore. Look, there's always a deal to be had. Sure.

[00:43:58] What I would say is the reason that you hire advisors with experience and not just vibe coders is because they're there to help you avoid those problems. You know, we only work with a select handful of MSP focused M&A advisory firms. If you're not a customer of one of those firms, we don't help you.

[00:44:25] Because we know that those firms are not going to take you to market unless you can survive the due diligence. They do that work. When they do their own independent valuation of the company, they get all the data. They make sure you can be sold before they agree to sell you. And the reason is they have to be very selective because they get paid a percentage of the deal.

[00:44:54] So if they bring a deal that doesn't go through and you back out, it hurts them. Exactly. Exactly. So I don't get that worried that when a very experienced M&A advisory firm represents a monitor subscriber and says, this is a clean company. We can get it sold quickly. I have 10 customers that I work with that are interested in buying companies like this.

[00:45:21] Because they have not only the buyers, but they represent both sides, the M&A advisors. I don't do that. As a lawyer, I pick one side or the other. But advisory firms, and it's perfectly legit and above board, they have buy-side and sell-side advisory services. Okay. Good to know.

[00:45:43] And so what that means is if you can get a free evaluation from a very experienced M&A advisory firm, and they tell you a number that they think that you could sell for, there's a pretty good shot that you could sell your company for that number. Okay. Because they already represent the buyers. So they know what they're looking for, right? It's like, hey, this is the picture. If I can get you close to this picture, we have history to back.

[00:46:13] I got you. I'm following you. Let me flip. I know we got only a little bit of time left, but I'm going to loop back around to this theme and see what your advice is. So, you know, we talked about the weekend vibe coders, and I guess it's the weekday vibe coders, and it's the 365-day-a-year vibe coders, and they're burning credits, credits, credits. And I believe those credits get more expensive, but that's okay. We'll move that topic to the side for a second.

[00:46:38] So what do you tell your MSP customer who now thinks that they're in the software business? Or maybe they don't realize that they're in the software business, but in reality, they are because they've built software. Look, I think a software business is a much different service than a managed service. The key difference is ownership of IP. Once you start writing code, you now own IP. You need to be thinking about how to protect that IP and how to license it. It's not like a services business like you were in before.

[00:47:08] It's a completely different animal and, frankly, opens up a lot of new channels. For example, as an IP holder, you could host applications on Microsoft infrastructure as a unified solution. If you didn't own any IP, you couldn't do that. You'd be relegated to SPLAR or CSP. So just in general, being an IP owner is a much different business than being a managed service provider.

[00:47:37] It requires different contracts. Think license agreements versus service agreements. And ownership of that IP, if you're doing it as a work for hire, becomes a question in terms of development. Are you building these for clients or do you own them? If you're customizing them for clients, does the client own the customization or do you own it? Who owns the learnings? Who owns the training materials?

[00:48:03] These are all unique topics for the AI world and why your old contracts won't protect you in this new era. What about if, I mean, I'm not a bi-coder, Rob. I don't know how much time you spend trying to do that. I hope not much because you're a busy guy already.

[00:48:21] But what happens if your AI coding tool effectively built a cheap copy of a copyrighted or already existing solution, but it doesn't tell you, hey, by the way, this is copywritten, right? It just builds it.

[00:48:38] Look, the copyright risk in coding with AI is the same as the copyright risk that was evident in the Wall Street Journal versus Google and New York Times versus Google and what constitutes fair use and what doesn't. Okay. And that same issue will be in the coding.

[00:49:01] I assure you, if someone could show that Claude Code copied a proprietary software code that was on file with the U.S. Copyright Office and put it in, distributed it widely to third parties who unknowingly adopted it. Number one, those who unknowingly adopted it would not have a defense.

[00:49:26] And number two, the company who distributed it would be in a lot of trouble if that were the finding. So the same concerns about copyright in AI that have existed around newspapers and books and so forth apply equally under the same rules as relates to copyrights involving software.

[00:49:50] So even if they've had Claude Code build something, they're using it internally and they're not necessarily charging people for this new software. They're just using it as part of their service delivery. Still a problem. Yeah, because the standard for copyright infringement is copying, not use, not profiting. Although those are separate elements of recovery.

[00:50:17] Whereas if they were selling to somebody, the copyright owner could cause them to disgorge all their profits. The core copyright infringement claim is one that said my code was protected. You copied it. Whether you knew or didn't know doesn't matter. If you recklessly deployed a coding tool where you couldn't validate that it was free from infringement, that's a risk you took.

[00:50:47] Now you're infringing. You have to pay. So let me put one I see come up all the time. Hey, I decided to Vibe Code my own PSF. I'm like, how did you know what to tell it to do? What are you building? Oh, well, stuff I'm using now. I just don't want to pay XYZ company. I'm going to pay to build my own. It's just basically a copy of it. Yeah. Sounds like copying to me. Okay.

[00:51:15] I haven't read those copyright, those licenses, but any license that I write would have anti-reverse engineering provisions in it, which that clearly sounds like reverse engineering. I think so. Probably. Yeah. So, hey, public service announcement. Vibe coding a copy of your existing software probably isn't okay. Yeah. Better double check your contract before you do that.

[00:51:46] Yeah. And like you're going online saying, ah, I just canceled so-and-so. I built my own. They can go kick rocks. But you just put that out into the world. I mean, pretty clear to start knocking on your door. Yeah. Then aside from the infringement concerns. Yeah. I have concerns about security and hardening and, you know, those types of concerns.

[00:52:10] You know, these platforms are not 100% hardened for enterprise risk. And as an MSP, you're engaging in enterprise risk. And I would just be very careful not to suggest that nobody has the capabilities of delivering a hardened system because it's possible. But that's an important element. It's not just about the risk of getting pursued as an infringer.

[00:52:36] It's also the potential to harm customers inadvertently because a platform that you're relying on may not be as secure as you might think. Another PSA. You might want to make sure you're okay. Just saying. Just saying. So I want to thank you for taking an hour of your life, which I'm sure has a rate. You know, if I was your client, I'm sure this would be a very expensive hour. Yeah.

[00:53:05] So I appreciate you, you know, giving some wisdom during this hour. And thank you also for helping on some of the community efforts like the Channel Sports Tour. Really appreciate you for, you know, making that possible. And where can people find more information about the program, platform? Maybe ask for a call because you still do that, right? You have human beings, human beings. We do. Where do they go? Yeah. Yeah.

[00:53:33] I think you can learn more about what we do at monjour.com, M-O-N-J-U-R.com. Some people say monjour. That would be French. We tell people it's Latin, not French. Although we do have a translation of our contracts in French under Quebecois law, for those of you in Canada. Monjour is available in all provinces in Canada and the United States. Coming to Europe, maybe in 2027.

[00:54:03] And so if you're interested in learning more about Mondria, you can check us out online. Or we travel, as George says, very heavily connected in the community. We're probably sponsoring a local show that you'll be at. And we'd love to meet in person and learn more about what you're doing in the space. Awesome. Not French. Latin. I like that. Yeah. Although I think French is based off of Latin, no? Sure.

[00:54:28] Well, I think in some ways all languages are based off of Latin, right? I think you might be right. As a guy who picked Latin as his high school language to learn. Dead language. Is it that dead? Guess that's why they still offer it. Thank you very much for coming. Hope to see you on the road soon. Safe travels. And hopefully you don't get stuck anywhere unexpectedly. Like seven floors up. Yeah. Yeah. Yeah.

[00:54:58] I'm not looking to get, to get stuck anywhere. You know, I may have to file some ADA requests. May need you to help me with that, but we'll keep showing up and look forward to seeing you. Next stop for me is San Diego at Scale Con. Okay. Yeah. So, going to be out there with the boys, Nigel and Tahir and the crew. So, looking forward to that. And then just moving around. You know how we do it. You got a lot of people to see.

[00:55:28] Busy guy. I love it. Thanks a lot for watching, guys. This was a pretty informative session. And, hey, you know, talking from a guy who's been in the room, right? We could talk hypotheticals all day long. I like to inject real world big hypotheticals, Google and the airlines and stuff. But Rob's like in the room in a business like yours, right? I think that brings a lot of practical knowledge that, you know, or more expert practical knowledge

[00:55:54] that you're probably not going to get from just asking your favorite AI chatbot what the right answer is. Well, the humans are not giving up just yet. I agree. I'm with you. Hybrid. That's what I got. Hybrid from this call. Hybrid. Let's see you, buddy. You'll find this session on MSPinitiative.com. Like, download, subscribe, share. Catch you on the flip side, guys. See ya.