Just an opinion. I guess I am old but I have been in business as an IT consultant since 1991. The good Ole days. For the most part I have avoided going down the msp model road with the exception of things like managed backup. However it seems like MSP’s are popping up all over the place all racing to cut each other’s throats. And the businesses they serve are becoming numbers who ultimately become dissatisfied with the service they are getting. It has become a commodity business from my perspective. If you read some of the subreddit forums such as /r/msp there are many msp employees who are burned out and hating their jobs. Obviously there are some really good MSP’s out there (like Tom) but I can not see where this business model is sustainable. Sell sell sell is not a good foundation to build a service centered business. Tom mentions a hybrid approach which I tend to agree with. I have done a couple take overs this past year from local msps who really were not cutting it for what the customer was paying. I don’t know. I have been doing this a long time and maybe I am a dinosaur but I prefer a little more personal interaction with my customers… Flame away…
The IT space is growing fast as companies become more dependent on technology and due to the all the sales training companies combined with software out there to support the MSP business model, it has become the hot new buzzword that most businesses outside of the IT space have no idea what it is. Part of it is the tech industry becoming more like other industries. The concept of fully managed fleet vehicle leasing has been around a while and lots of companies use this to get a predictable cost to applied to their transportation needs. The difference between leasing vehicles and doing IT is that tech is not as simple and changes fast. The more diverse knowledge needed to operate an IT services company is what we are seeing played out in the market and you are correct, that some places are not very knowledgeable, but there is not always a way for the client to realize it until they face a challenge with that company.
So first off I’m a complete newbie in the MSP world. I do have 10+ years of enterprise experience and I am bringing that to small and medium businesses in my area because I can’t stand the corporate world. So this comes with advantages and disadvantages for me.
- I don’t have previous MSP experience.
- But because of that I can bring a fresh approach to MSP.
So with my idea below you can take it or leave it… it’s not proven for me as I am just now starting off. I don’t mind advice from others who are more experienced.
Precursor: I’ve found hybrid approaches are almost always the best. There is a balance to everything, and it’s really challenging to find that balance but so worth it.
Here is my approach to the MSP model. I provide at the very least a basic security package. This covers my hard costs for providing it, and a small amount of labor for management. This is priced per device & type. There are a lot of reason for this:
- Scalable both in pricing and budget predictability. Doesn’t require renegotiation.
- Insures the client is covered in the area of security.
- Provides residual income for financial stability.
- And many more… just think about it.
Then for labor they can prepay helpdesk/onsite hours or just pay as they go. I do lower my hourly rate significantly (by $15/h) if they do a managed security contract to incentivize it. I don’t lose money if something bad happens that’s completely out of my control but I also get the residual income that is so important to stay in business.
This is really the best of both worlds. Pretty much pay-for-what-you-use. No minimum contract length. If they really don’t like me they can get out 5 days into it if they wanted. This holds my business accountable.
But most importantly, listening to my clients needs. If my bills are paid what am I worried about? I don’t need anymore money. Just take care of people and they will take care of you. And if they don’t reciprocate then gracefully drop them as a client.
This is really a people business. Which makes it tough for an introvert like because because I’m all hard facts and little emotion. But I’m determined to learn how to connect to people and how to communicate effectively.
Maybe I’m naive I dunno. I just want to hit that fine line called balance. The place where everyone is happy.
Edit: Clarifying rate is reduced by $15/hr, not $15/hr.
Perhaps my point is that at this moment in time (in 2019) MSP’s and the need for them is certainly evident. This explains the “gold rush” movement to start one. And the push to cookie cutter the services into some rmm platform stack. Right now this works and there is a ton of money to be made. . But Technology is moving very fast and I see a future (IMO) where it becomes easier and not harder or more complex. It is not voodoo anymore and companies like Microsoft (O365, azure, etc) and Google (gsuite, etc) have been slowly but steadily sucking up services that was an IT companies bread and butter. They are doing it in the guise of a “partner” relationship right now but over time there will be diminished need for IT services under the msp model…For example IT companies have been moving file server functions to the cloud now using technologies such as Google file stream or Microsoft one demand sync. We recently replaced 2 servers with over 1tb of data using cloud options like this. We have another customer running nextcloud on a Linux box for over 4 years and it has been solid. Right now the customer comes to us for support in this environment. But I feel that once this stuff is in their backyard Microsoft and Google will step in and offer support for an additional monthly fee and kick IT services to the curb.
So I guess what I am saying is the model I am seeing many msps fall into is per endpoint pricing and AYCE type models. This works great right now in 2019 but I think over time (near future) businesses will start to analyze the monthly fees they are paying now and question the return on investment. And then many of the msps that are out there with this MRR model might really suffer. It may certainly result in a lot of consolidation in the space. I guess a successful msp will be one that is thinking ahead and is agile to changes in the landscape. However many of the ones I am seeing are just focused on generating sales sales sales. I guess I am too much of a cynic.
Ah I see where you are coming from now. And I definitely showed my newbieness there as I have not been around to see this trend you are talking about.
But I feel that once this stuff is in their backyard Microsoft and Google will step in and offer support for an additional monthly fee and kick IT services to the curb.
I totally agree that the big dogs are going to start sucking up certain services in the IT sector. I wouldn’t expect anything less of them because there is big money to be had, and more standardization is needed to provide consistency and better experiences for clients. I personally would rather contact them an let one of their qualified engineers help me out then try to do it myself as I don’t have the time to learn all that stuff to do it right. But I would consider that Tier 3 (or 4) because I understand my clients needs and I’m just officiating that the end result meets the clients needs and they can insure it’s setup properly.
I always see a need for us. We just will be a middle man, heck I’m already there in some cases.
So I guess what I am saying is the model I am seeing many msps fall into is per endpoint pricing and AYCE type models.
AYCE is a really bad business model. Nothing in life is predicable and while it’s meant to make life predicable from a financial standpoint it’s way too easy for that pendulum to swing too far on one side or the other. It’s just too easy for it to not be equitable for one of the companies.
If a business is only MRR & AYCE then that’s a disaster waiting to happen.
Balance is key. I believe Tom has found it. I believe I have found it and I’m very certain my business will be around for a long time.
Yes it is an interesting time. Yes I completely agree in the balance factor. Every time I watch Tom’s videos (especially on business) we are so similar in our views. Kinda weird actually. Perhaps it is the generation that we both started in IT (although he is a tad bit younger and is a much better speaker.) and I run all of my business on Linux as well (although a little more cloud based as opposed to on prem). I typically run my business lean and mean almost to a fault. But this allows me to be agile and adjust to changing times. It really sounds like you are definitely making the right choices for sure and I like your thinking. Good luck.
Thanks. Yeah I do find it interesting how Tom and I think alike as far as business operations as well. That’s largely what attracted me to his channel since I’m not really a linux guy.
Mindset isn’t really an age factor… yes there are generational trends but some people just think for themselves. I think that’s the category we fit in.
I’ll throw my story.
Security background and have had a side gig for the last 12ish years. One day was asked by a Dr to assist in some office work with their server…still have them as a client 12 years later. I’m still a side gig (just with LLC, insurance, in-house data center, RMM, documentation, processess…etc) and have 7 clients. I make money and haven’t lost a client. They all know I’m unavailable during the day except during some breaks that I check in. I stop and say Hi, check to make sure things are working (I know they are but it’s a nice gesture). Sure, one day this could be an issue but in the last 12 years it hasn’t been.
I do plan on hiring but need to find someone with drive, care, and some knowledge before I’m willing to allow them to drive something I’ve built myself.
I basically like your approach but I question your $15 / hr labor rate even with prepaid hours. Getting and retaining good people requires a substantial pay rate and &15 . hr charge will not get you the quality people you need. Yes, prepaid gives room to reduce the man-hour rate but not by that much.
I feel that is why just about everyone here is here. Like minds and all! Lol
Maybe we should start a mastermind of those of us that are trying to take the MSP part to a higher level! Lol @LTS_Tom want in? I’d really love to have you as a mentor!
That is part of the reason I wanted the forums to be here before I started doing the MSP business videos. Each video will probably create some discussion that is more suited for these forums as opposed to YouTube comments.
Out of curiosity, @LTS_Tom, what are the topics you’re planning in this area? I understand if you’re not ready to say, but letting us know might help guide you on topic selection and ordering.
We really appreciate you and all that you do!
I will first start with the software we use and then move on to process and procedures and then some marketing videos as well. Because the market is always changing this will be an ongoing series of videos.
Like the shake out, consolidation of the PC industry the MSP space will, hell it’s happening now, go through the same. Many will simply vanish others will be bought and merge and still others will find a niche and grow. I’ve encountered the full spectrum of MSPs , service providers sellers of magic boxes with “blinky lights” and software wizardry and have developed a strong sense of skepticism of claims made. Folks like Tom are not the norm but should be.
Ok that makes sense, the way I read your phrasing it appeared to me your rate was $15. One question do you quote $ / man hr or just a flat / hr rate?