Episode 28 - Profitable Packaging: Fueling Predictable Growth (w/ Guest: Brian Hoppe) - The MSP Sales Podcast

Episode Transcript
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(00:00):
Do you ever come across somebodywho has a wake behind them
of people who are better off?
Huh that's my favorite way of describing.
I think.
My guest, today's name is Brian Hoppe.
He is an executive andstrategic coach for MSPs.
He has a financebackground, MSP background.
You'll hear all about that kind of stuff.
But I actually found this guy on, Ithink we met on LinkedIn and we had

(00:22):
like one of those virtual chats orsomething, but he, his name kept coming
up because all of my most successfulclients were also clients of his.
And so I reached out to him andrealized, "Hey, I don't know what
you're doing, but it's workingand I wanna know more about it."
And that led to us scheduling theinterview for today's podcast episode.
We start the conversation about pricingand packaging, and then it turns into

(00:43):
a little bit of finance conversation,but all through the lens of selling
and packaging your product well.
So especially if you are like inan evolution of any kind of how you
wanna make more money in your MSP.
This conversation I think is gonnabe super, super helpful for you.
Hopefully you can tellthe two Brian's apart.
I'll get outta the way.
Let's do it.

(01:20):
Brian Hoppe, thanks forbeing here with me, man.
Well, thanks Brian Gillette yougot, we got two Brian's the best,
the, and the best spelling as well.
Yeah the right spelling of Brian.
That'd be hilarious if we refer toeach other as our full first and
last names, this whole interview.
We were just talking a little bit beforewe jumped on the recording and we were
starting to get into some juicy stuff,so I decided to save it for a hot mic.

(01:42):
But I'm really glad you're herebecause you, to me, represent sort
of this magical in between land inthe MSP landscape between there's
all of these like operations slashservice delivery resources out there.
Mm-hmm.
And then there's guys like me who arelike, how you sell all of it, who have

(02:02):
like no real formal technical knowledge.
Mm-hmm.
And then there's guys like youin the middle where you're kind
of, you create this like holytrinity between those two extremes.
Where you're helping MSPs actuallydo something with the technical
stuff and ground all of thesales and marketing stuff all

(02:23):
in service of making abusiness more profitable.
Mm-hmm.
So, even though I basically just explainedwhat you do, why don't you tell the
people, why don't you tell the nationswho are listening to this podcast a little
bit about just kind of who you are andwhat you're doing right now for MSPs?
Great.
Yeah.
Thanks for thanks for teeing thatup and, you know, I mean, magical.

(02:43):
I don't know that I've ever been calledmagical before, but, I guess I'll take it.
I don't know.
But no, yeah it's an interestingand different thing than I
think a lot of people are doing.
So I mean, I come from thebackground of an MSP owner, right?
So, I've been in the shoes of allthe people that I serve, and I think
that's a, you know, that, that'sa relatively unique space as well.

(03:06):
But but yeah, so I sold my MSP.
A few years back.
And and then, subsequent to that,worked for the buyer for a little while
and then you know, decided, hey, it'stime for me to kind of, to jump out
there and see where I can help in alot of the ways that I have been helped
along the way when I, you know, whenI was learning how to do this thing.
And so yeah, I think I kind of, am inthe space of where I guess strategy

(03:31):
and leadership and and running afinancially successful MSP come together.
And those are a lot of the thingsthat I work on with my clients
as well as, you know, as well asworking on themselves as leaders.
Because I still, you know, I thinkit's extremely hard to, for your
MSP to go further than you have as aleader, as an individual, as an owner.

(03:54):
And so, you've gotta grow inorder for your MSP to grow.
Otherwise you're gonna end up prettystagnant and kind of in a space where
it's like, man, I don't know whyI'm not getting to the next level.
Right.
Not sure if that's the exact questionyou asked, but that's kind of-
No, that's fantastic.
'Cause we have, 'cause I just wannadive straight into something you talked
about, like a financially successfulMSP is like, it means you have to know

(04:20):
how to sell and get customers, but youalso have to know how to deliver that
service efficiently and profitably.
But how, let me just ask it this way.
As a guy who built an MSP thatsomebody was willing to buy, you
had to have figured out somethingabout running an MSP profitably.
What tell me how that cameabout, if you don't mind.

(04:42):
Like how did, what was the journey foryou of running an MSP and then maybe even
a little bit of the story of like, thedecision to sell the MSP and what that was
like, if there was lessons that you hadto learn along the way to become more like
of a fiscally viable acquisition target.
Mm-hmm.
Oh yeah, for sure.
Yeah, and a lot of that, a lotof that experience came from

(05:03):
buying MSPs as well, right.
So knowing what a buyer is looking for.
But yeah, I mean, I'llkind of back up a good bit.
For, you know, the part of the story, partof my story is I was on a leadership team
of an MSP that I did not own.
I was kind of the second guy in there.
We had built the m we had builtit to like maybe 15 or so people.
We were in a place where we were like,okay, what do we do with this thing?

(05:25):
Like, what's the right way to grow it?
What's the right way to move it forward?
We ended up doing three things, and I canonly tell this now, like in retrospect.
First thing that we did waswe joined a peer group, right?
An MSP specific industry, peer group.
That was a really big thing for us,seeing what other people are doing,
learning from people who have gone before.
As part of that, we also got a lotof well, we got a lot of insight from

(05:49):
specifically from service leadershipwho does benchmarking on the industry.
Thousands of IT providers put in theirnumbers every quarter so you can see what
other people are doing on key metrics.
That was a huge part ofmy financial learning.
I eventually was CFO of that MSP.
So I have a relatively heavyfinance background now as well.
And so back to the three things.

(06:11):
So first one was peer groups.
Second one we implemented EOSor business operating system.
That was that was key for us.
And the third thing is that wegot an executive coach at, for
each of us on the leadership team.
That and that last piece was like profoundfor me, not only as in business, but also
personally that I was at the time, I waslike, okay, I'm gonna do this one day.

(06:32):
This is something I'm gonna do one day.
Now, as it took about 10 years in along journey between then and when I
actually started doing what I'm doing now.
But that is what I do now.
And so those three things werelike big I guess catalysts.
And then, and what enabled usprobably I, you know, the approximate
numbers are we approximatelytripled from 15 people to 45 people.

(06:55):
And like somewhere in theneighborhood of three to four years
after kind of doing those things.
And so that was a big big piece of things.
I exited that in 2015, 2016.
I bought into a small MSP and then,subsequently did another acquisition.
And ended up selling thatyou know, end of 2021.
And so a lot of learnings in there.

(07:16):
We were buying MSPs so we did a lotof a lot of looking into the numbers,
understanding the operations, what makesa good MSP, what makes a not good target
what do you need to have in place in orderto, you know, get the highest multiple,
what do the right numbers look likeas far as what a buyer's looking for?
And so a lot of that education whatcame from, oh, hey, we're actually doing

(07:38):
this and knowing what we wanna see.
And so that really enabled me to tee myMSP up pretty well for an exit as well.
So I wanna ask you a question, Brian.
As you were evaluating these MSPsfor purchase, and you also- you've
coached, I don't know how many MSPslike you might have an answer to
this, you might have more than oneanswer to this, but what sort of

(07:59):
profitability is the average MSP running?
And I realize that's gonna change by,based on the revenue ban probably,
but like on net profit, are youseeing common trends or standards
that an MSP should be shooting for?
Hmm.
Wow.
That's a good question.
So I actually, I'm in a relatively uniqueplace 'cause I get to see the, I get to

(08:21):
see data on this on a quarterly basis.
And, you know, the average MSPactually does somewhere in the
neighborhood of around 10% profit.
And that's just, that's like the average.
And then when we look at the data on-really we're talking about adjusted
EBITDA, which is, which has somekind of you know, well adjustments

(08:43):
to it, A little bit of nuance.
But the interesting thing is that if youlook at the top quartile, which is, you
know, what we call best in class they'reon average doing something like 2.3x the
EBITDA of the median, or the average MSP.
The bottom quartile which, youknow, in any given room there's

(09:04):
always, the top, the middle,
and the bottom.
And the bottom quartile is, youknow, some quarters losing money but
generally almost just breaking even.
And so, the interesting thing is, andbecause you mentioned, it depends on size.
Well, what we find across the data isthat it actually doesn't depend on size.
In any given size band of MSP, there'salways gonna be the best in class,

(09:26):
the median and the bottom quartile.
So no matter what size you are asan MSP, you have the opportunity
to make best in class profit.
Which by the way last quarterwas something like 22.8%.
And this is all according toservice leadership, by the way.
But over the last many years it,it hovers somewhere around 20%.
When yeah, when we look at many,many years you're earning a lot

(09:48):
more in profitability if youare in that best in class band.
Sure.
So what does good look like?
Right?
Well, if I'm an MSP I wanna win.
I wanna be best inclass for goodness sake.
And, and that 22 ish percent is actuallythe midpoint of the top quartile.
There's plenty in making a goodbit more than that as well.
Yeah.
I'm really glad you said thatbecause for a couple reasons.

(10:09):
First of all, I talk to a lot of MSPswho just very clearly do not actually
know the answer to that questionbecause I'm like, what's your profit?
And they're like, yeah, we run like 50%.
I'm like, no, you don't.
No.
Yeah.
First of all, a lot of people justconflate markup and margin and they
use the number interchangeably, right?
Mm-hmm.
Which is not how division works.
Like it's a division and a multiplicationis literally the inverse of one another.

(10:33):
You know, the percentagesare not the same.
So, a hundred percentmarkup, 50% margin, right?
Did I did that right?
You
did it right.
So I'll often those people arelike, yeah, we're super, super,
super profitable, blah, blah, blah.
But then you go to be like, okay,well we need to hire this person.
And they're like, well,we can't afford it.
It's like, well, which is it?
Are you making money orare you not making money?

(10:53):
Right.
Yeah.
And let me ask this way, I mean, I thinkI already know the answer, but have
you cross examined the profitabilitytrends of MSPs against their average
per seat price that they charge.
Well, that's a tough question becausewhen you, when we look at per seat
pricing everybody means somethinga little bit different when they

(11:17):
give an answer to that question.
Ah.
And you have a lot of things like, youknow, and what market segment are you in?
What is full managed services mean?
Do some people include projectsin their managed services, right?
And don't charge extra forprojects other people include
a lot of a full security stack.
And some people don't.

(11:38):
And so it's really tough to say okay,here's the profitability per per seat kind
of a thing, but like looking anecdotally.
And we do have data on pricing which andI'm not, I won't share it in detail, but
like anecdotally, when we look at MSPs,I don't see MSPs that are profitable

(12:00):
charging any less than a hundreddollars per user for managed services.
And I'll use the caveat of if you'reincluding help desk and actually if
you're including help desk, unlimitedsupport essentially with a few
exclusions here and there it's very,very, very difficult to make money if
you're charging a hundred bucks a user.

(12:20):
Yeah.
The ones that are making good money areusually in the neighborhood of between
one 60 to 200 plus per user of the MSPsthat I see that are reporting a good
amount of healthy profit, like the bestin class ones that we're talking about.
And plenty of them charge a heckof a lot more than that as well.
Right.
And you mentioned, and I don'twanna open a can of worms on the

(12:41):
like adjusted EBITDA, but like
Mm-hmm.
I think a lot of times people will,an owner, if they're running an LLC or
whatever, they will not include their drawor their salary as an operational expense.
Right.
And that might be one of the thingsthat's adjusted, like, well what
does it cost at to have an operatorrunning the business versus you need

(13:02):
to subtract an operator's expense
if you are gonna sell thebusiness because somebody has to
replace you running that role.
Right.
And they're not just taking the bottom,they're not just taking the bottom line
the way you do, you treat it sort ofas this like porous bank account 'cause
it's all passed through anyway 'causeyou're a single member, LLC or whatever.
Mm-hmm.
So that's probably a one ofthe many adjustments, right?
It's as well as it as some of likeshared expenses or like, Hey, you write

(13:25):
off part of your house and that's gonnatransfer over to an office, or whatever.
You know, there's all that crapthat I don't wanna talk about.
But I think a big part of what to me,one of the things that creates the most
area of confusion when an MSP is comparingtheir quote unquote profitability to
another, is that sometimes they'reusing an adjusted EBITDA versus they're

(13:46):
not using an adjusted EBITDA, right?
Mm-hmm.
Correct.
They're not accounting for some ofthe things we're discussing, but the
bottom line is, I was just talkingto Ian Richardson and I were just
texting about this the other day.
He said, "Hey, what are you seeing forbest in class for like per head price?"
And I was like, "Man it changes a lot."
And the UK too.
The UK is like convinced you can't chargemore than 50 to a hundred pounds a user.

(14:09):
And now a pound is different thana dollar but it's also real kind
of not, you know, for them still.
Yeah.
As much, yeah.
Like, because their cost of living isconsiderably higher, but they have a
considerably, they have more value ontheir, you know, I think a pound is
right now is worth more than a dollar.
So, you know what I mean?
Like, and if you go to South Africa,it's a totally different thing.
In Trinidad, that's atotally different thing.

(14:29):
In Canada, it's a totally different thing.
Of course I recognize that, butI see that people are charging
somewhere between 75 and 275 a seat.
Mm-hmm.
Usually.
Right.
And oftentimes, like Microsoftlicensing is totally excluded.
Or it's a separate lineitem, sometimes it isn't.
So to your point, what is per seatis totally different for every MSP.

(14:50):
And so it, it's hard to get universaldata, but the case in point is the
thing I wanted to get to here is thatI think oftentimes when we have a
bottom line issue we convince ourselvesthat we have a bottom line issue
when we really have a top line issue.
You're just charging as much asit costs to deliver the service.
That's why you're not making money.
And so then we fixate on over-engineeringoperational efficiency when a reality you

(15:15):
can only spread somebody so far, you know?
Right?
You just have to, at some pointyou have to pass the expenses to
your business onto your customers.
You have to charge enough money to beable to make money for your service.
The end.
And so if you're charging, if you'reundercharging everybody else, and
that's how you think you're stayingin business, it's actually what's

(15:37):
literally putting you outta business.
Because we also have avariable cost business.
We don't have a fixed cost business.
The more managed service clients youbring on, the more staff you need.
Right?
You have hard cost with every user, butyou also have soft costs or absorb costs
that cross across different clients.
So you have to charge enough moneyto reach the next rung of the
ladder of operational expenses.

(15:58):
Right?
Yeah.
And so if you're like, man, I'msuper slammed all the time, I don't
have any profit and everybody'sworking their ass off, the answer
is you're not charging enough.
That's the answer.
Like very often, again, I don't wannapaint with too broad of a brush here,
but I think that there's a lot ofpeople out there trying to fixate on
like, how do we get more efficient?

(16:18):
And of course that's a worthwhile andimportant pursuit, but in reality,
if you just knew how to sell-
there's that old adage,sales heals all wounds.
Very good.
You know, if you can sell a reallyhigh price and keep bringing on
new clients, then you can kind ofkeep the pyramid scheme running.
You can outrun a lot of stupidityif you know how to sell.

(16:39):
It will catch up to you eventually.
But anyway, it solves alot of those problems.
I'm curious if you've seen, when you'retalking about buying MSPs, what role did
their revenue generation machine play inwhether or not they were considered viable
candidates or even how they were valued?
Yeah, that's a really good one.

(16:59):
I think it definitely plays a part.
When we look at, when welook at valuation, we most
often think EBITDA, right?
And then you get some multiple of EBITDA.
Well, yes.
And there's a lot of factors thataffect what that multiple is.
So one of the things that a lot ofpeople consider as they're buying

(17:20):
is what we call the rule of 40.
Which is essentially saying, Hey, we wantthe total of your top line growth and your
bottom line profit to equal 40, right?
So if you're growing at 20%and per year and you have 20%
profit there, there you go.
You got 40.
If you're growing at 30% top linebut only have 10% profitability,

(17:43):
I'm okay with that too.
If you're growing at 10% to the topline and have 10% at the bottom line,
your multiple's not gonna be as goodas somebody who's has 20 and 20.
And so it definitely plays a role inthe math of all of this because yeah,
I mean, if I'm buying a company, I wantto know that there's a sales engine
running that is consistently addingnet new revenue every single year.

(18:05):
And that I'm gonna be able tocount on that in the future.
And it's not just relying on one guywho may or may not stay or who may or
may not have been it, or the companyhas just been like growing by default
because the clients have been growing.
Right.
So I'm gonna, I'm gonna look at thatnet new revenue generation, and is
there an engine in place for that?
Right?

(18:26):
I love that answer.
That's the that's the finance guy answer.
Like, you just gave me theperfect spreadsheet answer of
it is worth X amount of dollars.

But you know, there's two types of value: there's financial value and there's (18:33):
undefined
strategic value to an acquisition, right?
Mm-hmm.
Yep.
And of course, like free cash flowis really what we're talking about,
because when you're buying a businesson an EBITDA multiple, sorry if this is
getting too in the weeds to the listenershere, but this is fun to nerd out about.
They love it.
That's why they come here to hearto Brians say a bunch of numbers.

(18:56):
But if you're buying, thinkabout it this way, right?
Now I'm the dumbest person toever talk about this topic.
So you fill in any cracks here, Brian,'cause you know, you've forgotten more
than I'm ever gonna know on the topic.
But if you're buying a businesswith an EBITDA multiple,
that means you are saying, I'mgoing to give you, and let's use a
number of, I'll just pick a numberout of thin air and say five.

(19:16):
Mm-hmm.
That, that's what you end up payingfive X adjusted EBITDA, right?
Mm-hmm.
Like I'm saying, if nothingchanges, I will break even on
this acquisition in five years.
Fair statement.
Okay.
Yeah.
Minus purchase costs and other thingslike that, but yeah let's go with it.
Yeah.
I mean, I'm following, I'm followingfor oversimplification, right?
Yeah.
If that's what- if the cost ofthis free cash flow that I'm

(19:39):
getting is this much money and
there's a lot of our earnouts andseller financing and stuff in our
industry, of course, depending onwho's buying, if it's an MSP buying
another MSP, they don't usually havea big pile of Saudi money that they're
shelling out the way that PE firms do.
Right, yeah.
So you maybe there's this book called 12week MBA, who has this amazing definition
of value that I'm gonna butcher.

(20:01):
But when you place a value of ashareholder or a share price value,
the value of a business is, it's adiscounted projection of its future
revenues and you discount it's, yeah.
Right.
Sorry, go ahead.
No, no.
I mean, I follow, go ahead.
And of course, what discount, thediscount that you would impute is

(20:24):
determined based off of the riskfactors of how likely the revenues are
to continue and what variables mightimpact gains or losses to the revenues
in future, against the revenues today.
So if you have a machine, if you can showme that you've brought on 12 new net new
logos a year for the last three years.
Mm-hmm.
Then I might not get to discount yourfuture revenues as aggressively as

(20:49):
if you showed me you've gotten threenew clients in the last three years.
Mm-hmm.
Right.
So because then you could actually, youcould impute some of those projected net
new revenues because you're saying, no,I will get 10 new clients a year, period.
Mm-hmm.
And you could go for more dollars'cause you can essentially sell

(21:10):
people the promise of future revenuesthat you haven't yet gained because
you have a proven track record.
At least you can pull the needleon the actual dollar amount
forward at least a little bit.
Right?
An adjusted amount without saying yeah,"Hey, pay me an extra million dollars
because I got a killer sales guy."
That's not what I'm talking about.
You can actually prove andshow this is what is happening.

(21:33):
Look at all of the data in place.
We have this revenue operationsdivision that is creating organic
revenue, and then we have this insidesales team that is expanding that
revenue and sticking that revenue.
That's how you get EBITDA multiples,is you have- you can prove that that
revenue is not one time revenue.
You're gonna keep gettingit year over year.
Yeah.
Why are we saying all of this?
That everything that imputes ahigher valuation for your company

(21:56):
are also things that will just,frankly make you more money.
There you go.
Yeah.
I mean, it's true.
Yeah and when you're, I mean, if youput yourself in that buyer's seat
that you're talking about, right?
Hey as I'm running those numbers, I'mjust trying to, I'm trying to figure
out, okay, how much value is it going togenerate over the next, how many years?
I'm, discounting it based on time,value, money, and all the other things

(22:18):
that, that you were just talking about.
So I can actually buy the numbers,justify paying you more because of
what you've been able to do in thepast, and my belief that that's
going to continue into the future.
Yeah.
And it's just a belief.
It's a guess, but it's a probablya pretty good guess if it's been
happening for the last few years.
Right, exactly.

(22:38):
But I want to, okay.
I wanna pivot a little bit and askyou some questions about I want to
ask you questions about the actual,the, we're talking about pricing.
I want to get into packaging andsort of offers a little bit because
Okay.
I think this is, to me, probably the mostimportant topic of conversation in the
channel right now, in my opinion, is theactual architecture of the offer itself.

(23:01):
I can get into the weeds of whatmy theories are because I think, as
I've said on the record many times, Ithink the MSP of the future will be a
VCSO or will be not at all, you know?
I think VCSO right now is an amazingupsell cross sell to your existing clients
who now have higher standards for likegovernance and compliance, but in the
future, when managed services eventuallyactually means something like when that,

(23:26):
the way that CPA means something, youcan't just like get a degree in economics
and then put CPA after your name,
right?
Right, makes sense.
But today you could just go to aKaseya trade show with a credit card
and then leave and put MSP on yourwebsite and no, nobody can stop you.
Right.
Because it doesn't technicallymean anything, right?

(23:46):
It just means what we decide it meansin the future, when it means something,
I think that the offer's gonnabe really, really critical.
What I'm getting at is you probablytalk to a lot of MSPs and see
what they're actually offering.
Mm-hmm.
What is, what are some of the bestpractices you're seeing for MSPs who
are succeeding not only in bottom linesuccess, but also in top line success?

(24:07):
Like they're selling well, howare they sort of positioning
the offer of managed services?
Hmm.
Yeah, I think that's good question.
And it kind of, it goes back toa little bit of what you were
talking about earlier, right?
There's, I mean, there's multipleways to price services, right?
So you can go on and find out whatyour competitors are charging and then
say, "Well, the market is chargingthis. Here's what the market can

(24:30):
bear." So I'm gonna price like that.
You can look at all of your coststhat you have to deliver the
service, including your people andyour tools and everything else.
And then say, "Well, I want to earnthis percent of margin." won't
even say the other M word.
Yeah, I want to earn this amountof margin, and so, and then you
can price according to that, right?

(24:52):
Well, those are two relatively immatureways of going about pricing your services.
The most- the best way of goingabout pricing is value-based pricing.
Because I'm talking to asophisticated buyer and if
I'm talking to a sophisticatedbuyer, they want outcomes, right?
They have outcomes thatthey want to achieve.
They want their business to grow.

(25:13):
They want their infrastructureto run like clockwork.
They want to know that they havea reasonable level of security
for what they can afford.
And they want to have a conversationabout strategy as opposed to, you
know, the nuts and bolts of thefirewall and that kind of a thing.
Yeah.
Right?
And so if I'm talking to the rightbuyer and I'm having the right kind

(25:34):
of value conversation and I've heardyou say this multiple times, you can
be the most expensive person and youprobably should be the most expensive.
If you want to have that kind ofweight when you go and talk to a buyer.
And so I am looking at, okay,how do I price it based on value?
I'm probably not gonna talk aboutper user pricing hardly ever in

(25:56):
an initial sales conversation.
I'm gonna say, "Mr. Customer thisis going to be somewhere,' during
qualification, I'm gonna say,"Hey, this is gonna be somewhere
between $7,500 - $10,000 a month.
Does that fit within your budget?" Right.
As opposed to, "Well, it'slooking like it's gonna be
about $187.50 per user." Yeah.
Well, what do I have to do that math?

(26:17):
No, I mean, so it's howyou have the conversation.
Strategically, it's how you present it.
And in general, generally speaking,save the per user for your, for
the backend or for a conversationbetween you and other MSPs.
Mm-hmm.
I like that.
So you're saying present one cleannumber with the full bill of outcomes
rather than getting two into the nuts andbolts of how you came up with a number.

(26:41):
Correct.
Yeah.
Yeah, I like that.
And that's- I think that stretches to onceagain, a sophisticated buyer doesn't want
to choose between good, better, or best.
They want a strategic advisorwho's going to say, "Hey, we've
really thoroughly evaluated yourenvironment and we understand
your strategic goals as a company.
And so us being the expert, we're saying,here's what you need." And that's,

(27:05):
and I'm presenting them one thing.
Now am I gonna say, Hey it's.
$10,000 a month and for anyadditional users, we're gonna
add those on at 200 bucks a user.
Okay, sure.
Yeah, sure.
We can do but I don't wanna, Idon't want to put, on their bill, I
don't wanna put, you know, a hundredusers at $200 per user on the bill.
I want to have a number and then you,

(27:26):
I see.
And then you do all that other stuff onthe backend of your PSA, for instance.
But that's getting into alittle bit of the weeds.
But yeah, I mean, I, I think you're,I think you're spot on there.
I like this idea a lot ofwhat you're talking about.
I mean, if I were selling managedservices still today first of all,
sometimes people, have this conceptionthat managed services like that,

(27:47):
people don't buy managed servicesor, God, what am I trying to say?
Lemme say it this way again.
What being an MSP means is not objective.
Mm-hmm.
It can actually be whatever you want.
And as I said, like I said on JeffreyNewton's podcast, like if nobody's buying
your product, sell a better product.

(28:09):
You know?
Indeed.
And it's like, okay, well theyneed network administration, they
need firewall management, they needcybersecurity awareness training.
Yeah, of course.
But it's like, if I went into agallery and I went to a painter
and I said, I want a painting.
And he goes, okay, cool.
My standard rate is 14cents per brushstroke, three

(28:33):
brushstrokes for a quarter.
It's gonna come with fivecolors on the palette.
It's an additional $150 percolor I add to the palette.
And if you want to pick the genre of thepainting, that's a hundred, that's $250.
And then I charge per squareinch of the canvas that you want.
Mm-hmm.
I'd be like, nevermind.
But you know what I mean?
If he explained how he's, if he pricedby the way he was going to deliver

(28:56):
it, then I'm not interested anymore.
Instead he goes, mm-hmm.
What inspires you?
Yeah, I want, I don't know,I love paintings of ships.
Okay.
What kind of, this is the waythat I paint, I'm an expressionist
or I'm an impressionist.
What kind of like styles inspireyou and do you have any palettes?
Is there a color palette in the spacethat you want this to sort of, live with?

(29:17):
Okay, great.
It'll be $25,000.
Mm-hmm.
Right.
And if you want a second one,this, if you don't like it,
I'll repaint it for $12,000.
Mm-hmm.
But I get to keep the first one.
And he's not gonna charge you.
This painter's not gonna charge you basedoff of how he constructed the end result.
He's gonna ask a few questions aboutcontextualizing the end result, like

(29:38):
what rooms are going in, what sortof so like what colors do you want?
What inspires you?
What genre are you motivated by?
And then he's gonna make a customartwork for you, and he's gonna
charge an ass load of money becausehe gave you exactly what you wanted.
Now, the truth is, the way that hepainted, he could go and create almost the
exact same painting for another person andcharge whatever he wants to that person.

(29:59):
So I much like you, Ididn't do three packages.
To be honest, like I just don'tactually agree with that way of pricing.
I understand the merit of itbecause it's like pri, I understand
the merit of price anchoring.
I've got some problems fundamentally withbeing like, we're gonna sell them a crappy
version of what we do, what we want themto do, and then a version of what we do
with a bunch of stuff they don't need.

(30:21):
That's what good, better,best, really ends up as.
Right?
And then everybody keeps buying thegood version and then they're like, man,
these guys, they're not security minded.
They won't buy the security package.
Well then you should have puteverything that they absolutely
have to have in the good package.
Mm-hmm.
But then that goes to show thenwhy are you, what does the other
crap that you're not including.
If they needed it, itshould be in the offer.

(30:43):
Right?
Imagine if you went to a restaurantand you said, I'll have the steak.
And they go, great.
Would you like a steak that's just cooked?
Or would you like a steak that's seasoned?
'Cause we'll charge you an extra$14 for the seasoning, and then
if you want, you know what I mean?
Like, yes, no, why would you servea crappy steak for less money?
Why wouldn't you just servea great steak for whatever it

(31:04):
costs and whatever it's worth?
That's my MO overall.
So I am always been a fan of offeringthem one package, but then modularly
building a custom, you know, it's atailor made solution, but it's modular.
You're not reinventing thewheel every single time.
There's certain things you can plug inand out based off of what their needs
are, their environment their governingbodies, whatever number of locations.

(31:27):
So that's kinda how I always didit, is I would go in and say,
they'd say, what's your price?
I go, I don't know.
I'm gonna give you, I'm gonnatailor make this to you.
It's usually ranges between, and then fora frame of reference, it's 125 to $300
per user per month is usually what's gonnaend up at, how many people do you have?
15. Okay.
It's gonna be between thisnumber and this number.
I go, well, that's a big range.
And I go, I know I haven'tdone any of my discovery yet.

(31:49):
So do you have your calendar handy?
And then I would book theonsite consultation once I
had created those bookends.
And then later when you pricethem within those bookends
and they go, that's expensive.
You say, what are you talking about?
I told you what it was gonna be.
And then we did, and then youagreed to do all this work.
So I don't know whatyou're basing that off of.
Anyway.
Now we're getting into thetactics of selling the high price.

(32:11):
But what you're saying is you'refinding that MSPs who succeed
financially are the ones who A. Cancharge a lot for their services.
But are you also seeing that there'strends in the way that they package?
What makes these more profitable onesmore profitable on the packaging or
the, you know, the offer building side.

(32:32):
I don't know that there'snecessarily any trends at that point.
So I mean, after, if you get thepricing right then what's left is to
figure out what, well, to understandwhat your costs are to deliver it.
And I find that this is one of thebiggest problems that I see in MSPs that
I first walk into is that nobody cantell me their gross margin on services.

(32:58):
And the reason is because theyhave this line on their P&L that's
somewhere kind of down near the bottom.
It's salaries.
And salaries for everybody in thewhole company, but they don't, and
so they don't actually account forthe salaries that are of the people
who are delivering the service todetermine what their actual margin is.
So it's some unrealistic number.
So, but at that point it becomes aboutmanaging efficiency and managing to

(33:24):
what you can actually spend to, inorder to deliver the service, pay for
your sales general and admin expensesand return 20% to the bottom line.
And this is fun.
This is like really simple exercise.
You ready?
Mm-hmm.
I make a dollar in managedservices, I can afford to spend
50 cents to deliver that service.

(33:47):
Okay?
And then what do I have?
I have 50 cents of gross margin, right?
If I have 50 cents of gross marginand I want 20% profit, I can
afford to spend 30 cents on sales,general and administrative expense.
And then suddenly, likemagic, I made 20% profit.

(34:09):
But the problem is that most peopledon't understand what's in that 50
cents that it costs to deliver it.
And ideally it would be less than that.
You know, I'd rather have 60%margin on my managed services,
than 50%, because then I'd havesome money to play with down below.
But not understanding that basic mathis one of the biggest problems that
I see in MSPs that I first walk into.

(34:31):
Yeah.
That's interesting.
Let me ask you this question.
Do you feel like a lot of MSPs are therefor at least financially overdelivering?
Mm. Ooh.
Are they, that's a good one.
Are they spending toomuch money and energy?
Tr obsessed with trying to offerthe best possible thing and they've

(34:53):
left nothing left for sales researchand development administration.
I mean, are theyover-delivering their service?
I rarely see that being the problem.
I see the problem being more for lack ofa better term, ignorance of what their
true costs are to deliver the service.

(35:13):
Because like you said earlier, I mean,who's the last MSP you talked to?
That's like, "We have plenty ofpeople. We're not that busy. We're
doing really well, and we're making alot of money." That nobody says that.
Nobody's ever said, my gosh, my serviceteam is like, we should probably get
rid of some people because we justhave, we don't have enough to do.
It just doesn't happen in MSPs.

(35:34):
And generally speaking, thereare one or two that I've talked
to that, that feel like that.
But the essence of that is you'vegot to figure out how to be efficient
enough with the resources that you havein order to deliver a good service,
an excellent service to the client.
And not be overwhelmed as well.
And so that's the big part of thegame is understanding how much you can

(35:58):
actually spend to deliver the serviceand then becoming the most efficient
that you can possibly be at it.
And that gets into other things likemaking sure everybody's using the
right tech stack and and having theright conversations with the client
so they actually do the projects thatyou recommend that they do, so that
you don't have to spend as much timesupporting them, et cetera, et cetera.
And that's a long that's a verylong tail to that conversation.

(36:20):
Right.
And that's sort of like a, that's likean endless pursuit of mastery, right?
In that regard, like how do youdeliver managed services at scale?
And that's where things, that's where AIis becoming that's really where people
should be spending their AI brain power.
Mm-hmm.
Right?
It's like, how do we delivermaximum quality service?

(36:41):
And spread our resources farther orincrease your revenue per technician.
Mm-hmm.
Or users per technician orwhichever metric you use.
Right?
Right.
But so there's that obviously likethe goal being that if your gross
margin is 90%, then there's a goodchance that you're not potentially

(37:01):
delivering a great product.
Is that a fair statement?
Or you just charge, or you'rea sales genius and you're
charging a thousand a seat.
There would be that as well.
I've never seen anyone'strue gross margin that high.
The usual explanation for it isthey're not accounting for their
costs in the appropriate way, andthey're just calculating it wrong.

(37:22):
But yeah, in theory, yes, if you'recharging a thousand dollars a user, then
then sure, you can probably figure out away to spend only a hundred dollars a user
supporting them and make 90% margin and.
That would be very nice.
Right.
But if, so the reason I'm sayingthat is like, when you're calculating
CAC, customer acquisition cost,
there are some general rules ofthumb and it changes by industry and

(37:45):
all sorts of things like in SaaS.
I think the average SaaS company probablyspends, definitely spends more on
CAC than they do on service delivery.
Sure, yep.
By a long shot.
Right?
Because of the nature of, that's whySaaS businesses get 13x EBITDA because
you double click and you justlaunched a new client, you know, yeah.

(38:08):
13x revenue.
Or more a lot of the time.
Yeah, exactly.
So their valuations arelike make believe yeah.
Because of the strategic value andbecause of the, frankly, the really
high cash flow, once you once youbuild the infrastructure, it's
really easy to add new clients.
But for managed services, of course, it'sjust a, it's a very complex service to
deliver and it requires expertise andthat expertise costs money, and it also

(38:31):
requires a lot of data and visibilityand tools that cost money per user.
Right.
So we gotta have a thick,really advanced stack.
We gotta have a really deepbench of experts who are
managing these clients' hands on.
That's the nature ofthe business we're in.
Yeah.
But the reason we're talk aboutthis is, if we're going back
to your example of the dollar
Mm-hmm.

(38:53):
The average, you gotta consider whatyour customer acquisition cost is
because oftentimes, I think a lot,depending on who you ask, like people
say the average cost to acquire a newMSP customer is 10 to 20,000 bucks.
Mm-hmm.
So if you've got a $2,500 a monthclient, that's probably a decent
industry standard that's 30 KA year.
I dunno what you're clearing on.

(39:14):
Let's be generous.
Let's say you- if you'rein the top quartile, you're
clearing $6,600 a year on that.
In profit.
Yeah.
Yeah.
In profit.
Mm-hmm.
But let's just say you'reclearing 15k a year on that
in gross profit.
Right?
So what I'm trying to get at is ifyou've got a dollar, you have to,

(39:37):
how much of that dollar are youleaving to go get another dollar?
Because if you're not charging enoughmoney to have money left over to
go find more money, then you willnever have linear organic growth.
Right?
Yep.
I think that's, I think that'sa fair statement, right?
That's fair to say.
Yeah.

(39:58):
Yeah.
And so, and go ahead.
Well, I just to finish the thoughtwe call it biz dev margin in Feel
Good, how much are you marking upyour product, your services to pay for
your ability to develop more business?
And also to have an R&D budget.
Like you gotta go to conferences,you gotta get certifications.
You have to keep, youhave to be researching AI.
All the stuff to stay cuttingedge costs money and time.

(40:22):
And the way I write it inmy book, shameless plug.
Oh, uh, oh.
Oh my gosh.
Look at that.
Have
you seen this yet?
I don't even have my copy yet.
Oh, man.
I thought you were gonna send me one.
Geez.
I should, I know I should have.
I should have sent you one like, "Goodknowing you, Carl. Best," anyway, the
way I put it that way is it, in order tobe an MSP, you have to keep doing R&D.

(40:46):
You have to keep evolving,honing your skills, learning new
things, investigating new tools.
Fair statement?
Yeah, absolutely.
You're gonna be obsolete if you don't.
Right,
right.
So that's essential.
It's an essential part.
Let's say this way, that is an inherentcost to running an MSP is spending money
and time doing research and development.

(41:07):
Also, if you want your MSP to besellable at all, or if you ever want
to make any money at it, you have toinvest money to getting new clients.
So you have to have- there arecustomer acquisition costs that
are inherent to running an MSP.
If you don't spend any money getting newclients, you will never get new clients.
Therefore, those are hard costs.

(41:30):
It costs you that money todeliver managed services.
Now, that is not direct servicedelivery, but let's call that ancillary
service delivery because you can't
keep good talent and pay fortheir certifications and give them
raises and give them benefits.
If you don't have a revenue generationmachine on the back end, which means

(41:51):
you're going to eventually compromisethe integrity of your service
delivery if you do not have researchdevelopment and customer acquisition.
Is that, are we fair so far?
Absolutely, yes.
Therefore, if you are not chargingenough money to cover your R&D and
your customer acquisition, you areactually doing a disservice not

(42:15):
only to yourself, but literally toyour current and future clients.
And couldn't have said it better.
Yeah, I mean, I think you'rea hundred percent right.
And I think what- a lot of times MSPsmiss it on the pricing side of things.
Then also they'll miss it on the grossmargin side of things and then they'll
also miss it on not spending money toactually acquire clients A. Not spending

(42:37):
money or, B. Not spending any time doingit and then wondering why they don't have
any new clients knocking down the door.
Right.
They just throw money at it.
Right?
Yeah.
They'll just write a check to someother agency and then think that counts.
And then they're always surprisedwhen it doesn't work for some reason.
But but yeah, that's a whole other thing.
That's a whole other story.
But I think to your, I think to yourpoint, it's like, if you're doing it

(43:00):
right and you're doing it profitablythere is room- taking your example of
a $2,500 a month contract, if you'redoing it right, you should be earning
$15,000 a year in gross margin, andover three years, if you're doing three
year contracts, which you probablyshould you're gonna earn 45 grand.
So how much can you afford to spendto acquire that, cut that 45 grand?

(43:23):
Well, probably more than you think.
You know, and so if you're not runningthose numbers and doing that, doing those
numbers in your head or well, ideallyon paper yeah you're just not gonna
know, and so you're always gonna feelbad about spending money on sales and
marketing and or spending your time, whichis again, probably the least leveraged
thing and for most MSP owners is theyjust don't spend enough time doing it.

(43:47):
And so, but I think you're, it'sa great point that you make.
That yeah you've gotta understandthose numbers and those economics.
And if you don't have the time, ifyou say, well, Brian and Brian, I
couldn't possibly spend an hour aday working on business development
because I'm so in the weeds on servicedelivery, that is another symptom
probably of a pricing issue, right?

(44:09):
If you cannot afford, like,if your time is the only thing
that keeps this thing running
Well, then you're trapped, aren't you?
You're in a Chinese finger trap.
Like you can't get out of that.
You have to charge enough moneyto pay other people for their
time to deliver the service,
so you have the bandwidthto be an executive.
You have to spend your energydoing R&D and your energy, at least

(44:32):
managing your revenue operations,
right?
You know, being your salesand marketing and of course
managing your service delivery.
It's easy to think about this in bucketswhen you get high enough where you
have a director of service delivery,a director of sales and marketing.
A CTO, but right now youstill have all those people.
It's just that you are all of them,but they all still have a job, right?

(44:54):
Like yeah.
They all those responsibilitiesdon't vanish simply because
you're under a million in revenue.
You still have the obligation to fulfillall those roles in the organization.
Thoughts?
Mm-hmm.
Yeah, a hundred percent.
I mean, I think here's, this is actually aconversation I had last week with a client
who was, who was spending about 20% oftheir time doing server install projects.

(45:17):
Or they are like actively, Isaid, "Why are you doing that?
You're CEO of the company."
"Well, there's just nobody else to doit." "Um, you're telling me that there's
nobody else in your company," anyways.
Well, I won't go into the wholeconversation, but here's what
I, here's the math, right?
So let's take the same deal.
You win a $2,500 a month deal that'sworth $45,000 over three years to you.

(45:41):
How much time did youspend selling that deal?
About three hours.
Okay.
Your time is worth $15,000 an hour.
Do you think you could find somebody forless than that to do the server work?
Right.
Oh, oh, okay.
Okay.
Yeah, so that's the, that's what is notunderstood, I mean, by most MSP owners

(46:02):
is what is the highest and best use,the most valuable use of your time.
And a lot of times it's actuallygoing out and finding business.
It's almost always, unless you have a fullsales team and you're CEO and all of that,
but then you're not probably engaging inthis particular conversation at this time.
Right.
Yeah.
So that's the thing that I thinkthe, where the mindset is off.
Is that you can't actually affordnot to be spending time doing sales.

(46:25):
And if it costs anywhere less than,let's say a thousand dollars an hour to
get somebody to do the thing that youthink that you have to spend your time
doing, well go find somebody to do that.
Yeah.
So,
period.
There you go.
And frankly, and maybe then a lotof people tell me that they have a
hard time finding technical talent.
And I recognize every marketis different on staffing and

(46:46):
stuff, but IT has had a negativeunemployment rate for like 20 years.
Like there are people whoknow how to plug in servers.
Hmm.
There are a lot of them.
And if you're not getting any ofthem, maybe you are not properly
valuing how much, like if it's wortha thousand dollars an hour for me to
do something else, maybe it's worthgiving them $10 an hour more than

(47:08):
I'm trying to, maybe they want $10an hour more, maybe it's worth it.
Yeah.
To pay them whatever it takesto get them to do the job.
Yep.
And I will say this, like it's, toyour point as well the folks who are
having a hard time finding people well,let me tell you let me just say this.

(47:29):
I could introduce you to four people inthe industry that have no trouble finding
the right people for any of their clients.
Right?
And by that I'm talking about recruiters.
They don't wanna use recruitersusually, but there's a reason that
they're good at what they do and areason why they get paid well to do it.
And so anyway, I'll leavethat one there as well.
Uhhuh, right?

(47:49):
Yeah.
There are people, yes, you can find peopleand it's probably worth more money than
you're letting, admitting to get the rightpeople in the right seats if it means you
get to put your energy on as you put itthe highest and best use of your energy.
I mean, I think this was a prettysolid rabbit-trailed masterclass
through a way of thinking aboutthe finances of the business.

(48:11):
Because, you know, when we say sale-like sales don't really heal all
wounds, good sales heal all wounds.
And if you keep bringing people on ata markup that you feel is right, but
then a 50% markup thinking that nowyou've got a 33% margin on that, right?
So if you're trying to run a high grossmargin, you need to charge enough money

(48:32):
to be able to pay yourself and everydivision of your business to do their job.
And then of course, each of thosedivisions needs to be in the constant
pursuit of getting more efficientat delivering their outcomes
without having to spend more money.
Of course.
Mm-hmm.
But if you are running into some ofthese problems where you're feeling
like there's, you're always, there's abottleneck somewhere, and you either never

(48:55):
have time or you never have any money,there's a good chance it's because you are
not getting enough money for your time.
There's a great chance of that.
Yep.
Yeah, absolutely.
Do you have any other sortof just Easter eggs here?
Just like words of wisdom?

Lemme say it this way (49:08):
if there's an MSP who's here who like really wants
to get their MSP ready to sell, orthey really wanna be ready to go buy
an MSP, let's start with the first one,
they really wanna get their MSP readyor at least able to sell, what's one
thing you wish you knew that, you knownow that you wish you knew then for
somebody trying to get to that position?

(49:31):
Yeah.
I would say always keepit ready to sell, right?
So, a lot of people will say, "Hey,yeah, I know I'm not making that
much in profit right now, but bythe time I'm ready to sell, I'm
going to start making more profit."
That doesn't happen magically.
If you think about, okay, wellwhat is all gonna need to be
in place by the time I sell?

(49:51):
Do that now and don't wait to do itlater because you don't, you also
don't know what could happen, right?
I mean, you could die and then yourspouse is gonna have to figure out
how to try to sell this business.
That's not making much money.
You don't wanna do that, right?
In bonus, if you figure out how tobe more profitable now you're also
going to make more money now and inthe future when you go to sell it.

(50:13):
So that, I mean, that's probablythe biggest thing is figure out
what the factors are that makea good business valuation of a
lot of which I could tell you.
And the biggest one by far beingadjusted EBITDA and improve those,
and your business is going to bebetter all around for it than if
you decide that you're going to tryto do that later on down the road.

(50:34):
That's good advice, man.
Okay.
How about this then?
MSP, who wants to buy another MSP?
You probably evaluateda lot of packets, right?
Yep.
What's one thing you wish you knew atthe beginning of that journey that,
you know now, maybe even a hard lessonlearned, or something you absorbed
somewhere along the way that would'vehelped you to know at the beginning?

(50:54):
Hmm.
Oh, there's so many lessons along the way.
Yeah.
So I've looked at dozens, ifnot well over a hundred deals
throughout my career for buying.
You have to have a lotof spare time to do it.
So if you're thinking, "Hey, I'mgonna go buy companies." Well, you're
gonna look at 20 deals before you findone that actually makes sense to do.

(51:16):
And then maybe half the time theydon't work out after you go to LOI.
So you've gotta have time andyou've gotta have funding.
And if you haven't done it before, thenyou probably need somebody advising you
on the buy side because otherwise you'regoing to make some mistakes, and those
mistakes can be very, very expensive.
Hmm.
I love it, man.

(51:36):
Mm-hmm.
This is a good place to endthe interview, but I'm going to
throw in one little bonus nug.
Ooh.
All right.
Let's do it.
One little nug that I'm thinkingabout right now on, we're
talking about profitability.
A lot of people are, you know, there'sthe, what's this guy name wrote
the, like profit first book, like,whatever that, and then, yeah.
Yeah.
Food for thought.
Once when you build arevenue operation machine.

(52:00):
Oh boy.
This is gonna turn into a long anecdoteactually, but I think it's worth it.
So.
I just I had an opportunity a few monthsago to invest in another, in a business.
Mm-hmm.
A small business.
A friend of mine was gonnabuy from their employer.
I had known the employer for many years.
It's a flower business that waslike, theoretically profitable, but
also very project based, you know.

(52:20):
And they did floral arrangementsfor like luxury weddings.
So big $20,000-50,000 floralarrangements, big weddings.
Okay.
In LA that's a, that'sa bigger deal, I guess.
, and they, anyway, I had thisopportunity to basically, like I
could have sunk $10,000- $20,000 intothis business to help them buy it.
And I was running all the numbers.

(52:41):
I was like, "How much money would Imake on this thing?" And I realized
as I did that, I went back toevaluate, "Well, what would I do?
What would $10,000 in my business do?"
My CAC to LTV ratio is depending on,I do, I believe in like only truly
equating, fully absorbed CAC equatingsales salary and sales commission

(53:06):
and marketing salary and marketingtool stack and advertising spend.
Mm-hmm.
Okay.
Because if you're just looking at likeone of those variables, then you get
this like masturbatory figure that makesyou sound better than you are, but it
doesn't matter because at the end ofthe day, look like the bottom line is
the only line that you get to, thatyou can write checks from, you know?
Yeah.
So anyway, my LTV toCAC is over five to one.

(53:28):
Okay.
So I have an under 20% CAC to LTV.
That means if I spend a dollar gettinga customer, I will make $5 from it.
Mm-hmm.
Yeah.
That's 500% return.
Find me any other investment in theworld that you can predict within 12

(53:48):
months, a 500% return on your dollar.
It doesn't
exist.
There's not many out there.
Yeah.
So, yeah.
And so that's, that would be theopportunity cost of you investing
that 10k in your friend's business.
Right?
Right.
So hey, I could make 30% ayear on it and have an equity
stake in this other business.
It's like, that's worth nothing.
Okay.
I make $3,000 a year, so I getmy money back in four years.

(54:11):
Why would I do that when I could get my,I could get five times my money back in
12 months in the business I already own.
But it's because I have a revenueoperations machine and I track
the living daylights out of it.
Mm-hmm.
I know how much it costsme to get a customer.
I just did an event and in one day Ijust told you before recording, like in
one day I got a 300% top line return.

(54:32):
I mean gross, let's say gross margin 325%return on that investment over a, over
the next 12 months in one day of sales.
Amazing.
So I'm going to do that event every year.
Yeah.
And I'm gonna keep doing moreand more of those events and
that's where my money should go.
And now that I have that and I've gotthe free cash flow and stuff to be able

(54:55):
to sustain the life of it, et cetera.
Once you've got this revenue operationsmachine, then you know how much of that
dollar that goes into the top of yourbusiness is it's actually worth investing.
And the reason I'm saying this, the reasonI wanted this to be in this recording is
for me right now, . Business is growing.
Right.
I just checked, I'm 150%year over year growth.

(55:16):
Amazing.
But my bottom line couldbe higher than it is now.
Mm-hmm.
If I was growing less fast.
Mm-hmm.
Like I could just keep,you see what I'm saying?
Like Yeah.
I could pull the $25,000 I spent on thatevent in as profit and I could put it in
my bank account, but I know if I don'tpull the $25,000 and I put it in an event,

(55:37):
then that $25,000 will become $125,000.
Sounds like a prettygood investment there.
Yes.
So what I'm getting at is thisprofit first thing, don't get
too fixated on your bottom line,depending on your short-term goals.
If you're trying to grow, if youreally wanna double in three years,

(55:57):
then you probably shouldn't bepulling 30% out of this business.
See what I mean?
Yeah.
You should leave it all in.
Mm-hmm.
If that's the goal.
If the goal is get this thingbigger and bigger and bigger and,
you know, 30% of a watermelon isa lot bigger than 70% of a grape.
So rather than just yanking all themoney out of your business, if you have

(56:18):
a revenue operations machine that canturn your dollar into more dollars,
then I think it's worth considering.
I'm sowing, I'm taking all of the cropsfrom this year and I'm sowing all of it
back in as I'm letting it all go to seed.
And I'm gonna get a field that's10 times bigger next harvest,
because I didn't, because I atea little bit leaner this year.
Mm-hmm.

(56:38):
So that's all I wanted to say is keepin mind that the dollars that you
spend on sales and marketing are goingto turn into more dollars long run.
So sometimes it might be worth keepinga little bit more of the money in
as expenses, if those expenses areguaranteeing future dollars, and your
future top line revenue will be higher.
And you know, I don't knowany, anything to add to that.

(56:59):
Do you feel like that's bad advice?
I don't, I think if all thosethings are true that you were saying.
Then it's perfect advice.
The problem is that most MSPs haven'tfigured out what's actually going
to generate them that new business.
Yeah.
And so you've gotta figure it out.

(57:20):
But once you figure it out, if youfind, if you can find something that
returns five to one, then go all inbecause then you know as much as you can
sustainably go on it because that's what'sactually going to grow your business.
So, but most, I would say mostMSPs haven't found that thing yet.
Yeah.
And that's why they don't do it, right.

(57:41):
Because it's like, well, they feellike they're throwing money away.
But you've gotta, and once again, you'vegotta invest the time and the energy and
the money to figuring out how to do whatBrian Gillette is doing with his business.
In your own business also.
Yeah.
Mr. Hoppe, you really every time I talkto you, I get more impressed by the stuff

(58:02):
that, you know, it's always really cool.
I like that you bring such a human,and if I can say like a likability
to the finance side of the business.
And we didn't even talk about allthe executive coaching and all
the stuff that you do as well.
Yeah.
If people wanna know more about you andwhat you're doing for MSPs, you wanna
just like give 'em a little blurb on whatyou do and how they can get ahold of you.
Oh, that's, yeah.

(58:22):
Thanks so much.
Yeah, I, well I spend mostof my time on LinkedIn.
You know, or I guess that's thebest way to get in touch with me.
So linkedin.com/in/brianhoppeThat's how you get my profile.
You can check or brianhoppe.com.
But, yeah, I'm spending a lot of mytime working through a lot of these
things with MSP owners on one-on-onebasis and really really helping them.

(58:45):
Or sometimes one-on-two orone-on-leadership team as the case may be.
So, but yeah, that's howyou can get ahold of me.
I always respond to every messageon that I get on LinkedIn.
So don't hesitate to shoot me a message.
And yeah, I always love to chat withanything MSP with Brian Gillette
or any MSP owner or anybody inthe industry really, so, yeah.

(59:06):
Yeah, man, it, yeah, Brian Hoppeis a good hang and he's a lot
of help and he's a lot of fun.
So I encourage anybody to check him out.
Brian, thank you for, we went super longtoday and I'm, it really means a lot.
Thanks for all the time.
Of course.
Yeah, absolutely.
Thanks so much for having me.
Great conversation, man.

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Episode 28 - Profitable Packaging: Fueling Predictable Growth (w/ Guest: Brian Hoppe)

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Episode 28 - Profitable Packaging: Fueling Predictable Growth (w/ Guest: Brian Hoppe)