How GCS Built A Durable $15M MSP w/ Shane Gronniger

Welcome to the $10 Million MSP Podcast. This podcast is where I dive into the real stories of MSP leaders who have gone beyond $10 million in revenue, how they built their teams, created scalable systems, and turned their businesses into valuable wealth-building assets. I'm Brian Hoppe, strategic coach to MSPs. I work with MSPs generally in the $5 to $50 million in revenue range. In each episode, I sit down with leaders who have built MSPs beyond $10 million in revenue to unpack the inflection points that truly matter. From the personal stories behind their journeys to the fundamentals like culture, operational maturity, and driving profitability. This isn't another MSP podcast about tools and tech. On the $10 Million MSP Podcast, you'll get behind-the-scenes conversations with leaders who've built thriving MSPs, their biggest wins, their toughest lessons, and the practical takeaways that you can take back and use right now. If you're an MSP owner who knows that growth starts from within, that mindset, leadership, and strategy align to create both wealth and meaning, then this show is for you.

New episodes are released every other week. So let's jump in. All right. Welcome. Welcome back. I am here today with Shane Groninger, who is the CEO of GCS Technology in Austin, Texas. Shane and I have gotten to know each other over the last several years, and I'm really excited to, to jump in. So Shane, welcome to the show.

Thanks for having me, Brian. Pleasure to be here.

Absolutely, man. Absolutely. So, hey, just to kind of start, maybe you can share as you've, you know, you're actually, you know, not a founder, which is a unique story in and of itself. So maybe just if you could just tell us like, hey, what's the, what's maybe the biggest leadership lesson that you've had to learn stepping into that CEO role? of a company that you didn't found?

Yeah, good question.

Right.

There's a lot of lessons learned. I think maybe the first one that comes to mind is, you know, the shift in the identity and getting out of the day-to-day. Right. Because I grew up in the business and wore just about every hat. And so, you know, feeling like you're involved in every decision, being involved in every decision can feel like leadership. And You know, often or quickly becomes a bottleneck, right? So, so yeah, getting out of the way and letting people do what they do best.

Yeah, absolutely. And, and, and I'm sure we'll get a lot more into that as we chat here. Um, 'cause there's, uh, I'm sure a lot of lessons to be learned, um, in that. So yeah, and maybe you can just kind of give us an idea of your background, right? So, so the quick background, who's Shane? What's the business that you're leading today in terms of size and structure? How did you end up sitting in the CEO seat?

Yeah, it's been a long journey. It's been a fun one. Lots of twists and turns along the way, as you can imagine. Well, yeah, I'm proud to be the CEO of GCS Technologies today. We're an Austin-based MSP. We really think of ourselves more as an MSSP today, but I've been around 20 6 years now, privately held, organically grown to almost $15 million in revenue and charting a path to $20 and beyond. But no private equity, no acquisitions. We were co-founded by 2 brothers who were and still are very close friends of mine. And we were all just young technologists who didn't quite fit well into the college mold and Call it entrepreneurship or just wanting to get started on our careers, you know, and get our hands dirty. But I was one of the first employees and, you know, we slowly grew over the years, you know, got our first office, hired more people and got more and more business. And so it just kind of snowballed from there. And now here we are 26 years later with this big machine we've built.

Yeah.

And so, so yeah, along the way, you know, we, we kind of carved our own path. One of the founders officially exited the business about 5, 6 years ago to seek new venture. And our other founder, you know, is chairman of the board but hasn't operated the business day to day, you know, in probably 5 or 6 years. And so went through some leadership changes there, you know, some identity shifts, had to do a couple curve jumps, right?

Mm-hmm.

And yeah, so I took over the CEO role in early 2021.

Okay.

And really around that time positioned, you know, reshaped our managed security offerings to be security forward and really positioned around the Microsoft stack, which has been, you know, it was a leap of faith, but it has also been a good decision and differentiator for us. And so, yeah, I would like to say I'm somewhat unique. or at least hopefully provide a unique perspective. Somebody who came up in the business, like you said, I'm not a founder. I do have equity skin in the game, but, you know, I'm an operator now. And I think wearing all those hats in the business gives me a pretty wide perspective. And, you know, in my opinion, if you wanna be a best-in-class CEO or CEO running a best-in-class company, you've gotta have that perspective. You know, it's really hard to come in and not have swam in some of those lanes. At least that's my experience.

Mm-hmm. Yeah.

So, okay.

Awesome. All right. And so, so can you give an idea of the rough scale of the company? Maybe when, where, like when you started, you know, being the CEO and then kind of where it's, where it's come to today?

Yeah. So up till about 2021, we, you know, we went through a lot of changes. Like I mentioned, we, you know, built teams and processes and, tried to pay attention to things like operational maturity level and, and, you know, growing, building repeatable systems. But, you know, over that time too, infrastructure work was becoming more and more commoditized, right? Things were moving more into the cloud.

Mm-hmm.

Some complexity on-prem was going away. So the need for, you know, a lot of that support was also, you know, the lifecycle product, the curve, you know, was, we were on the other side of that. It was time to curve jump, right? And we were kind of stuck in that 8, 9, million range.

Okay.

And so, yeah, around that time is when we really positioned a security-focused managed service. So instead of trying to go out there and be the entire IT department for everyone, we really tried to focus on what our customers were really struggling with. And we found most of them were in that Microsoft cloud. And so we kind of met them where they were at. And And so since then, in the last 5 years, you know, and about that time we were probably in the 25 to 30 employee range. And so we're up to just shy of 40. And that number's just ebbed and flowed a little bit. And like I said, yeah, we're approaching $15 million in revenue.

Excellent.

And a lot of that's through, you know, recurring managed services and then other, you know, professional services that get spun off of that.

Yeah. Okay. Okay. Gotcha. So you're up over— so you're about 40 employees, about $15 million in revenue. So you're, you're north of $300K per employee.

Yeah.

Which is, which is great. I always use that as kind of a gauge just to kind of see like, so I'd imagine profitability is pretty strong for you guys.

Yeah.

You know, I mean, we're very margin disciplined, you know, as we should be. So EBITDA is a, is a term that we learned long ago and has been etched into into our minds, you know, for a long time.

Yeah.

And so, yeah, yeah, we, we are, you know, in that 15 to 20% range, you know, on, in most months or quarters averaged out.

Mm-hmm.

And, and yeah, we just, we keep a really close eye on the bottom line. We keep a close eye on our, you know, obviously our SG&A costs and labor costs and, you know, how we package services too, which, you know, for a big part of our history, we, we bucked the trend of, traditional managed service models, right? And kind of the all-you-can-eat model, if you will. Um, we really stuck to that hourly, you know, uh, you know, focus and T&M and project kind of focus.

So, mm-hmm. Yeah. And what, and how has that, has that evolved over the last few years or what's, what's kind of been your, your guys' posture towards that over the last several years?

Yeah, I think it has changed. We are, today we do package, but we've done it strategically and we're just primarily doing it with managed cybersecurity services. And for those that need all-in packaging, we still offer that, but we really focus more on the security side. And a lot of our customers, our best customers are co-managed environments.

Okay.

And so we do a lot of co-managed, right? They've already got the help desk need, you know, figured out and they've already got some of those on-prem functions figured out. And so we're coming in and complementary, you know, augmenting them in a complementary way. And so yeah, we weren't, you know, we weren't packaging services, you know, when the industry was really moving towards, you know, fixed fee, we really bucked that trend. A big part of it is 'cause we just didn't understand the economics of it. You know, it wasn't predictable enough.

Okay.

Yeah, we've got to package in all these third-party tools and vendors and there's a whole cocktail of stuff.

Mm-hmm.

And so that, that made it really hard, uh, or made it harder for us to take that leap. And, and meanwhile, we were growing the business through our kind of good old-fashioned hourly model.

Mm-hmm.

Um, but yeah, really positioning, you know, once the market I think was ready, once we were ready, you know, in 2021 there was a lot of remote work. Uh, the pandemic had just happened.

Yeah.

So a lot of people had adopted cloud. you know, a lot faster than we ever anticipated. And so it was an element of right time, right place too, of, you know, now's the time to really package services and let's package them in a slightly different way.

Yeah.

And yeah, it was a really easy story to tell. And, you know, it wasn't just a security conversation, it was also a consolidation play, you know, a vendor consolidation play. You know, there's 3 or 4 or 5 different point solutions that we're able to eliminate by, for example, going in with this, you know, standardized stack, which happens to be, you know, mostly Microsoft.

Okay, gotcha. Yeah, yeah. So, um, and, and do you guys, uh, well, what's your TCP like, uh, as far as the profile of your current— of your clients? Who are you mostly serving?

No, I, I mean, seat count's such an arbitrary thing, right? Um, but, you know, generally, you know, 50 to 500 seats is a good sweet spot for us. We have clients out of that band, but generally folks that are positioned in the Microsoft ecosystem, they don't have to be all in, but most clients that we find, they've got a big Microsoft tenant. They're using a lot of those services. Yes, they still may have some on-prem infrastructure and a mix of other third-party SaaS solutions, but yeah, generally those that are struggling with either capacity or complexity, Those are the 2 things we generally solve for. Okay.

Yeah. Yeah. And, and you, and you're being in Austin, it's gotta be one of the fastest growing areas of the country. So you're, you benefit also from the, from the, the economics there and kind of the, you know, somewhat more macro piece of that as well.

Yeah. Yeah. It's, you know, it's been a blessing to live here and to grow up here and to run a business here because like you said, we've had just nothing but opportunity. And it's not like we're, you know, very much a healthcare town or a military government contracting town. You know, we have a lot of different verticals here.

Mm-hmm.

And so back to our TCP, you know, we aren't really focused in one in particular. We have a lot of good clients and have had a lot of good clients over the years in just about every vertical you can imagine. But there are those that we favor, obviously, right? Like healthcare, financial services, compliance or regulatory-driven industries where IT, where security isn't really an option. You have to chin a certain bar. And obviously that drives typically, not always, but typically drives better decisions.

Yeah.

Versus the, I don't wanna say smaller shops, but just the shops that don't really rely on technology as much, right?

Yeah.

Or aren't bound by Some of these other rules and regulations. So, mm-hmm.

Okay. Gotcha. Okay. Yeah. And so I kind of want to go back to something that you mentioned earlier, which is just, I mean, that whole, the whole identity piece, because I think it's really important, um, like in the founder identity, um, versus the, um, you know, uh, versus the non-founder CEO identity. Um, and so I'll, so I'll dig into one thing, like how, how difficult did you find, uh, transitioning from the previous founder CEO, uh, to yourself? And I mean, and maybe you can read in, I happen to know, um, uh, Joe, uh, relatively well, but, um, maybe you can read into like, hey, do you think that was really hard transition for him? And, and, and how, and maybe some things that had to be overcome there. And then for you stepping into that role, Yeah, maybe you can just kind of talk through a little bit more of what that was like. Sure.

Yeah. You know, Joe and I've worked together and had worked, you know, here at GCS for the longest time. I was on the executive team. And so there wasn't a, I would say, huge leap of faith, but there obviously, there definitely were some challenges, right? And some trust that we had to build with each other. And yeah, he, prior to me stepping in as CEO, We'd actually hired a CEO from outside.

Oh.

Who's, who, you know, sat in that chair for a little while as well. And, and, and so, yeah, it wasn't necessarily his first time at placing somebody in that seat aside from him. But yeah, he and I had a lot of conversations around it, around what it would look like and what it would mean. And yeah, I think, you know, it's an interesting question because I think Was it Rashad that touched on this in your conversation with him around, you know, that kind of founder-led, you know, cult of personality, right?

Right.

And sometimes when you have a big ego, you know, and a big personality in the room, Joe's a great leader and a great founder and big personality, right? And so, you know, I think for him, you know, he was in that seat for a long time. So there was some, getting stale. He was, I think, burnt out. He was looking for the next blue ocean and that's what he found, right? As another venture. But so I think stepping out of that was probably a good move for him too because it allowed him to give others a chance to kind of put some fresh eyes on the business and a new approach. And so So yeah, you know, I, it, it, there are days when it would be nice to be the founder, the owner, right? And not have to, you know, have that accountability necessarily. Right. And I think, yeah, you and Jake maybe talked about this a little bit 'cause I, I know Jake as well and he's private equity, right? And he's got a board to answer to.

Yeah.

And so, you know, I have a board to answer to as well. I mean, it's Joe essentially and another partner of ours. And so it's pretty small, intimate, setting. But yeah, I do think it helps to have that backstop sometimes. And I do think that there are probably times in Joe's journey here as founder and CEO where it probably would've been good for him to have a backstop in certain situations. And so in my journey of becoming CEO and over the last 5 years, kind of you know, growing into the role, you know, I really try to think like a founder as much as I can. And I mean, I am an owner in this, I'm a minority owner, but—

Yeah.

But I do, you know, I think like a founder and, you know, Joe and I have had lots of conversations and we meet every week and, you know, he's a great mentor and a great backstop in that sense of the word. And so, yeah, I think, You know, it's, it's the amount of rope, right? Building that trust over time. There are certain decisions that, that I just make now kind of with that founder mentality. And he trusts me to make those decisions. And, and most of them have been, you know, good decisions.

Have been— most of them have worked out well.

Yeah.

Right.

So, yeah.

So, yeah. So, so I'm curious about the opposite or, or what, or have there been times where it was like, man, we You know, we butted heads on something and we had to, you know, I wanted to make a decision as a CEO. It didn't, it, you know, maybe wasn't seen as the best idea. And how did, if so, I'd imagine there's been some of those. What, you know, do you have any thoughts on that or examples of what that looked like?

Yeah. Yeah. I mean, you know, there's, there's healthy conflict, right? If there was no conflict, you know, something's wrong. We're not holding each other accountable.

Well enough.

And so, you know, I think, yeah, we, we see the world through different lenses, but ultimately we, we take, you know, similar paths to the same outcome. And so we complement each other really well in that sense. You know, I'd say he's more the pessimist, I'm more the optimist, right? And so, you know, I help him maybe see the business in different ways and vice versa. But yeah, you know, I think the conflict around just, you know, how we, how we manage, right, certain numbers. how we manage people, expectations, right? Metrics, things like that, that not just a founder necessarily is gonna be looking for, but a board is gonna be looking for as well.

Yeah, yeah.

Right? And so, but I had a long history and relationship working here and working with Joe and some of these other guys on the team. And so we just, We've, we've got a, a really good built-in trust and rapport that's, that's helped, I think, us overcome what otherwise might be, you know, more contentious conversations.

Yeah. Gotcha. Okay. Yeah. And, and the other thing that is, that I'm kind of curious about is I, I think you kind of mentioned there was somewhat of a plateau just shy of 10 million. Before you came on, before you were CEO, and then you guys have been able to kind of jumpstart that growth, maybe, and it could be like a lot of that is because of what you were talking about as far as kind of becoming that security-focused offering. What other things do you think had to change inside the business in order to kind of get over that, the stall, if you will, And kind of take you, you know, well past the $10 million mark?

I think discipline, you know, discipline and focus and what we're really good at, you know, the whole addition through subtraction sort of approach, right? You know, the old contracts, legacy contracts, legacy tools, you know, kind of looking at doing that top-down of your customers and looking at those customers at the bottom. that, that really don't call you hardly that often. They, they, they tend to be— you spend a lot of time with these folks, but they meanwhile represent very little part of your overall revenue.

Yeah.

Right. Uh, classic story that a lot of us are familiar with. And so just getting more disciplined about, um, you know, about focusing on, on the right clients and only the right clients.

Mm-hmm.

And then, uh, again, really standardizing around standardizing this, this, this packaged service around a stack that was predictable for us, predictable in terms of, well, just all the things, right? Being able to support it, the efficacy of it, the pricing models, all that stuff.

Mm-hmm.

And yeah, Microsoft was, you know, where we, the horse we attached our cart to. And, you know, I think we just really had to get disciplined and focused on getting good at those things and getting really good at those things. And I think also moving slowly away from the identity we had built for a long time of being hourly and contrarian to a degree and moving into a pricing model now that we could actually understand that was a little more predictable.

Okay.

So yeah, I mean, those things really were big, big contributors to our growth. That and just building up, you know, leadership within the teams. Cultivating leaders and creating space for people to innovate.

Yeah. Okay.

Yeah.

So I'm curious about that piece. How does, I mean, so let's talk about what does the leadership team look like at this point, you know, as far as the highest level and then And then kind of cascading down into the organization.

Yeah, we're pretty lean now. You know, we used to be, we've gone through various iterations of leadership, you know, teams here, and we used to be fairly top-heavy. Today it's really me, it's my CRO. I have a director of service delivery who's been with the company for 15 years, but was promoted over the last couple years, one of the leaders that we've tried to raise up.

Mm-hmm.

And yeah, and then I've, you know, director in finance, but outside of that, you know, I don't have any like by-title leaders or executive leaders.

Mm-hmm.

But if you look down within the teams, you know, there's a lot of leadership there.

Mm-hmm. Right?

There's a lot of people taking initiative. There's a lot of people leading by example and showing that curiosity and passion for learning. You know, that's a big thing that we drive here too. If you gotta have curiosity.

Yeah.

'Cause if you don't have that, you're gonna get complacent and stale. So yeah, but leadership is, you know, it's pretty light at the top.

Okay.

And, you know, there have been days, right? There are times when it'd be nice to have a proper COO or, you know, a CFO in those certain seats.

Yeah.

We get by without it. And we also look at our P&L and we just look at our overall results. And I'm not saying it's the best decision, but it's worked for us so far. But that's something we keep an eye on constantly. And it's a conversation we bounce around a lot is, do we hire that seat and what would that look like? And as those right candidates in our circles of people we know become available, You know, we've had coffee and chats and, you know, considerations.

Mm-hmm.

So, so yeah, if the right person comes around and it feels like the right time, we'll, you know, mm-hmm, we'll probably—

gotcha.

Grow, grow the team, you know, uh, down the road appropriately.

Yeah, totally makes sense. Okay. And then I, I'm curious too on that journey from, I mean, so from just, you know, $8, $9 million, um, to $15 million, what, what are the things that like, that broke as you were, as you were growing that like 50, 60%? Yeah.

Yeah. I think hero leadership, you know, just, oh, I got it, just taking over and some of the informal communication, you know, a smaller team, you don't need to have as many huddles and formal meetings and roadmaps and all that kind of structure. Pricing flexibility, you know, tends to break. Trying to be everything for everyone and price it this way for that customer, that way for that customer. Yeah. You know, those, those things compound over time and create billing, you know, and reconciliation nightmares.

Absolutely.

Right. That aren't quite as scalable. And so, yeah, I think, you know, $2 million, $3, $4, $5, you know, we survived a lot on hustle and proximity. And I think now right at $10 and beyond, it's, it's all about systems. It's about clarity. You know, we really can't tolerate B players anymore either, you know, because, you know, I think when you're smaller, you can hustle your way through a lot of that chaos, but it becomes a lot harder to hustle through it at the scale that we're at now today.

Yeah, absolutely. Well, and it's much more like it runs on system, right? As opposed to that kind of muscle and feel and, and in the hustle and, and all of that, right? It's like you have to have the systems in place, um, in order for, in order for that growth to happen. Otherwise, well, you, you end up with chaos, right? Yeah.

Yeah, exactly.

Yeah.

So creating repeatable systems, you know, where possible, um, and then really, uh, just trying to drive, you know, quality and excellence in everything we do. Mm-hmm. Um, You know, we've, we've prided ourselves in generally hiring like the best people we can find.

Mm-hmm.

And, um, when you hire people like that and, you know, they, they, they tend to spread their wings and, and impress.

Mm-hmm. Yeah.

And given the right environment. So.

Absolutely. Yeah. It's, I mean, and, and it becomes a, at that point it becomes a really, uh, right people in the right seats. kind of discussion. Do we have those A-players and people that are really well aligned with our culture and what we're trying to accomplish? Yeah.

Yeah. And, you know, one of the hardest lessons I've learned in the last 5 years is putting the right people in the right seats. You know, the whole Jim Collins thing is, you know, read it years ago. It's true. It's still true today. You know, There's a lot of people that absolutely need to be on this bus, but the seat, you know, maybe isn't the right fit. And so, you know, but putting people in the wrong seats and, you know, in some ways, in some cases, having to say goodbye to, you know, people, to friends, you know, the hard thing about hard things, the people that got you here aren't always the people that get you there, right? So.

Yeah, yeah.

So.

Yeah. And I, on that note, I feel like that for me, that was one of the hardest pieces of my journey as a leader. I mean, I still vividly remember the first time I had to let somebody go. You know, and it was really like, it was a multiple conversation thing. This was the last conversation. They knew it was going to happen. We knew, I knew it was going to happen. And I was just like, I was wrecked, right? Like, just, and, and, and I was a, um, at the time I would say naturally, um, you know, averse to conflict and all of that. So it really rattled me for like, you know, weeks.

Yeah.

Um, it, it, I've had more experience of that since then. And so it's, you know, it's not that it ever necessarily gets, um, you know, easy, but it's, uh, you know, It's a lot of times you just, well, you have to do that for the greater good of the company, right?

Yeah.

And so, yeah. So what's your experience with that?

Yeah, I mean, same, right? It's never, I remember them all vividly. Luckily there's not that many, you know, I can count most of them on one hand, but yeah, you know, it's never an easy thing to do, but you have to decouple yourself from you have to decouple the personal feelings sometimes from the business. And yeah, that's been a hard lesson for me too, because I, like you said, I don't seek conflict.

Mm-hmm.

And in fact, like to avoid it and avoiding it by just making sure the right people, you gotta take care of business. And yeah, I think talked to a lot of people, you know, in similar seats as us that made these decisions, and almost unanimously it's, I wish I'd done it sooner.

Yeah.

You know, which is easy to say in hindsight, but you're dealing with, again, you're dealing with people, and so the decisions are never made lightly. But yeah, you know, the businesses change, people change, needs change, and so, you know, Those are things you gotta always be paying attention to.

Yeah. Yeah, for sure. Yeah. And I mean, it goes back to like, well, uh, the, the saying, which is, you know, hire slow, fire fast. Right. Um, that kind of a thing. And what, what you find usually is that, um, you know, I, I, I don't think I've ever heard somebody, a CEO say, man, I really wish I would've waited longer to let go of that person that I already knew I needed to let go of.

Yeah. Yeah.

They almost always say, I, I wish I'd have done it sooner, number one. And number two, I don't think, I don't think I've ever heard anyone regret making that decision. Like, I really wish I hadn't have let that person go. Yep.

It's execute ruthlessly and, or what, decide ruthlessly, execute compassionately, you know?

Yeah.

Make, make the decision quickly, but do it right. And Do it, do it with honor. But, um, yeah, you know, we, again, you know, putting people in the right seats, hiring the right people, uh, reading the room and, and rereading the business in the right ways can help you hopefully avoid, you know, having to do that. We, we've never really been like a numbers volume game where like, hey, let's go hire a bunch of sales guys and we know, you know, half of 'em won't work out and we'll just keep the best and Um, you know, same thing with techs. Let's hire a big pool of techs and just let 'em battle it out and we'll just, you know, that's never really been our approach. And it's not that that's the, anything wrong with that approach, but it's never really been, you know, kind of our culture. So, mm-hmm.

Yeah. Yeah. Gotcha. Okay. So switching gears just a little bit, like, I mean, so at, at $15 million in revenue, I mean, you guys aren't, you're not a small MSP. Like, uh, I think the numbers are, uh, You know, I don't know, you're probably at least in the top 14%. And maybe I can't remember the chart, but it's somewhere there as far as revenue goes. So as you're thinking forward, how are you guys thinking about growth from here and what that looks like for you?

So, so far it's been organic growth. And, you know, that is a big part of our plan. Acquisitions are something that have always been on the table, but we, you know, I wouldn't classify ourselves necessarily as say empire builders.

Mm-hmm.

You know, we're more value builders and, you know, if the right, if the right opportunity, you know, came around, we would certainly, you know, entertain it. But we, we also don't want to distract ourselves by trying to go hunt for acquisition and grow that. Like, that's not necessarily the, the primary lever we'd want to pull.

Okay.

You know, looking at the landscape and what we're doing and the needs in the market, you know, and the total addressable market that we can see in our geography and just, you know, reasonably beyond. Yeah, growing to $20 million, while we'll still take a few years to do, we don't have to go reinvent ourselves. We, I'm predicting we don't necessarily even need another curve jump to hit that. that target.

Yeah.

But a curve jump is coming. And, you know, AI and this whole, you know, thing that everybody wants to talk about, that all of us MSPs are trying to navigate and figure out what that looks like, right? That certainly will be a part of our future and will probably contribute to some of our, you know, growth targets over the next 4 or 5 years. But, Yeah, we're referral-based. You know, we, we don't have an outbound sales team. That's another maybe unique differentiator with us. We're more solution architects led. Um, and yeah, you know, we had the mighty Dave Sagraves actually join our peer group, uh, for an hour, you know, in Houston, uh, a couple weeks ago. I know he was on your, your show.

Yeah, yeah, yeah. Okay.

And yeah, I mean, He just came and dropped wisdom bombs all over the, the room. And, you know, everybody's mouth was just open like, wow. And he was great. But I, you know, I think the approach, right, of, of building that sales machine is also something we, we have not really embraced. I mean, we have tried this in the past with cold callers and sales, but we keep coming back to this referral-based business. You know, what is it? Marketing is the tax you pay for being unremarkable.

Sure.

The founder of Geek Squad, I think, coined that phrase. But yeah, so yeah, our plans right now are growth through, you know, referral growth through putting ourselves out there. You know, we do a lot of local, hyperlocal, you know, sponsorships and really try to be active in the local Austin business, you know, community networking and And so word of mouth has really served us well. And so yeah, that's what we're— our conservative 5-year plan. Now there's some more aggressive levers we look at again, like acquisition, but yeah, that's kind of where we're at.

Okay. Yeah. Well, and it all kind of goes back to shareholder goals, right? Like, hey, if it was your your now board members saying, hey, we've got to get to $30 million in 3 years. Well, guess what? We have to pull some really different levers than what we're working on right now.

Right.

But if it's like, hey, I'm good with kind of the standard 10%, 11%, 12% growth, then that's different. And I would imagine You know, well, as we think about growth, it's, it's, well, whatever we can add minus whatever attrition. Um, and, and I'd imagine you guys have a very low amount of attrition based on what you've said so far. Is that right?

Yeah. Yeah. Very low attrition customer-wise and employee-wise too.

Um, yeah.

Yeah.

And, and we've had some repeat employees that leave and come back a year or two later, you know, um, after Getting experience elsewhere.

Um, grass wasn't greener.

Yeah.

Yeah.

I mean, you know, AWS will pay you a lot of money, but they'll also suck the soul out of you.

Yeah. So I can imagine that's a big thing there in, uh, in, in Austin, right? With, I mean, you've got all the big players, right? Yeah. AWS, Apple, Google, everybody has some presence there at this point.

Yeah, no, you're right. And, uh, that, that, You know, it's cooled down a little bit lately. I mean, job market now is a little bit different than certainly in 2021, '22, even going into '23. You know, it was an employee's market for sure. And yeah, I mean, there were competing with the Googles and the Amazons of the world, right? That are offering really lofty salaries and coffee bars and fancy gyms and, you know, all that kind of stuff. And, you know, here we are, a bunch of ragamuffins, you know. With our wooden swords and trash can shields going out to battle every day.

Yeah.

But I mean, some people prefer that. And the few folks that have come back from those kind of bigger enterprise environments, what they said, what they really missed was having an impact, like actually working with customers, being able to see kind of the bigger picture and what they're doing. It was more meaningful. So, Yeah. So, yeah.

Well, and you guys, I mean, you guys have gone the distance, right? Through all of those, all of the different things, you know, the booms in Austin and the downs of, you know, COVID and financial crisis and all of those kind of things. So it's like, hey, we're not going anywhere.

Yeah.

So if you want to be along for the ride, then We'd love to have you, right?

Yeah, you're right. We have weathered a lot of those storms. And in fact, some of those storms were, you know, there was a silver lining in it for us. Through almost all of those storms, there were some pretty substantial silver linings. I mean, if you take the pandemic, for example, we were essential services, right? And so, you know, we still had healthcare clients and others that had to be they had infrastructure that had to be up, you know, you couldn't just pack it up and go home.

Right.

And, uh, and then, yeah, through the 2008 financial crisis too, like there was some downsizing of IT departments, which forced some folks to start outsourcing. Uh, you know, customers who never otherwise would've been customers of ours became customers due to other economic headwinds and stuff. So you never know, right? Um, But, but yeah, generally, and, and yeah, when we look at the business and what we're building, I mean, enterprise value's obviously something we pay attention to. And we're well aware of the private equity, you know, field that, and, you know, what that looks like right now is very frothy. And, you know, MSPs are, there's not many of us. I know we're not the only one, but we're, there's not many of us at our size that have not yet been rolled up or bolted on.

Yeah.

to some bigger play.

Yeah.

And so yeah, we've certainly entertained that in the past and I think it's a good exercise for us to understand like how does private equity look at us? How do they value companies like us? And so we've gone through a lot of those motions to kind of understand what enterprise value looks like and how to create that. But we're not a, we're, We're not on a path to like, okay, we're going to hit this target and then we're exiting. You know, this is the bit number we're looking for. You know, Joe and I always say if a truck big enough, full of enough money backs up to our doorstep, I mean—

Well, then sure. Yeah, right.

That's always the joke, right? But, but yeah, we, we are— we're not necessarily building or trying to build like a best-in-class MSP with the highest enterprise value. Really, I'd say more so Uh, we're trying to build a durable asset, you know, one that, um, and sometimes that means avoiding some of the industry dogma, you know, that's out there.

Mm-hmm.

Um, and kind of going against the grain a little bit. Like if you look at some of the SLI, you know, best-in-class metrics, you know, um, you know, we, there's just, there's context, right? Um, you can't look at all those numbers and you can't look at all those models, which is kind of a black and white lens.

Sure.

There's context as to why your EBITDA might be suppressed because you're investing more into the business to do these things over here. It's not just all about positioning for that exit.

Right. So yeah, yeah. And there's a lot to be said for the data that's available. And I think even just to show what's possible, right? Like, hey, you may be purposely doing something different, But this is possible. People are doing this, right? And so, you know, and I think on my journey as I was learning, okay, what does, you know, what does best in class look like? Or how are the best people running their businesses or the best in class running their businesses? If nothing else, that helped me realize, okay, well, there's certain things that are really good best practices. Oh my gosh, I never even thought about that. And then there's other things that it's like, well, that's not right for me, that particular thing right now anyways. And so, well, we can work on something else and that's okay as well. So yeah, you guys have beaten a slightly different path and there's, I would say, I guess there's more than one way to achieve any outcome, right?

Yeah, totally. And I think I'm glad you brought that up because like we, we've gone through EOS, we've read Traction, we've attended the peer groups in the past.

Yeah.

I've been recently rejoined back in there. So we're very familiar with the SLI numbers and the service leadership kind of mantras and the OML system and the operational maturity leadership stuff. I would say, and the one thing we've learned, one of the things we've learned is there is no There is no like blueprint for all of this. Um, you, you gotta, like you alluded to, you gotta take what you need from each system and, you know, build from within. You know, I'd, you know, trust your gut, read the room, persevere, you know, but borrow from these things. You know, for some people that EOS model is everything and all they need, and that's great.

Mm-hmm.

Uh, for us, you know, a lot of it made sense. Some of it kind of fell off. Mm-hmm. And we replaced it with other things and kind of built our own. You know, operating system for the business that, that is informed by, you know, a lot of these, these, uh, kind of industry benchmarks.

Mm-hmm. So, yeah. Uh, yeah. And like, in, for instance, EOS is, uh, well, I mean, every, all, each piece of EOS came from somewhere else, right? Like, and it was all put together in something that's designed to be very easy to use. Um, and, and what I tell folks all the time is like, hey, Don't be dogmatic about it. Like if something doesn't quite work for you, then, then change it, you know?

Yeah, totally.

But have, at least have some system that you're following with regularity. Um, and, and like clockwork, because if you don't, that's what's going to end up tripping you up. Um, and, and, and kind of like, well, stalling your growth. Uh, because especially as you, like for you going from 15 to 20. You know, the more complex things get, the more process, the more system you have to have in place in order to hold that. Yep.

Yeah, absolutely. And so, yeah, I would— those systems have really helped us a lot. SLIs helped us a lot, just understanding what metrics are important to pay attention to, you know, aside from just the obvious ones like EBITDA. But yeah, but yeah, yeah, just understanding your numbers, you know, better. I think a lot of MSPs, you know, waste, especially in that $2 to $5 million range, you know, as you're approaching, you know, as you're small and you're growing and you're scaling, I think you spend a lot of time debating models. And I think you need to spend more time understanding your metrics and the economics and your leadership capacity. And if you really understand all of those and you understand your numbers and the strength of your bench, then You could adopt any model successfully, in my opinion. You'd have a really strong business. It's just you need to understand those fundamental things first.

Yeah, absolutely. Yeah, so that's an interesting thing. I mean, talk about that for a little bit as far as when you're talking about metrics and those kind of things. What are the things that you most look at? Obviously, EBITDA, we talked a good bit about, But what are the things that you're looking at to say, okay, yeah, we're, we're on track with where we need to go?

Yeah, you know, there's a— we have a bunch of different dashboards, as you can imagine. Some of the most important ones are, you know, tech utilization. That's a big one. You know, understanding that we still operate on billable hours and we need to make sure that most of those are revenue generating. And there's a lot of internal work and R&D work that gets mixed in there. And so just understanding that you're getting utilization out of those techs, you know, if that— if you're not watching that, That leading indicator, your trailing indicator is gonna be your service gross margins, right? Obviously on your P&L.

Mm-hmm.

And so, you know, there's leading and trailing indicators. We look like on the sales side, obviously we, again, we don't like heavily on outbound sales. We're not looking at like first-time appointments and things like that, like activity metrics. But we look at, you know, obviously like bookings.

Mm-hmm.

And when we look at bookings too, we've always really looked at margin and not revenue. So, you know, when we're looking at quotas for our salespeople, it's not go sell a million bucks this quarter. It's we need this much bottom line, right? So we need the right things sold and we need them sold at the right margins to make sure we hit that, right?

Yeah.

It doesn't help if you sell a million bucks, but it costs a million bucks to deliver it, you know?

Exactly.

Otherwise, what are we doing? So, yeah, those are a couple of the metrics. Effective hourly rate on agreements, you know, is a big one.

Mm-hmm.

You know, as we do more of this bundled fixed fee and around the security work, you know, just looking at, heavily looking at the agreement metrics there.

Mm-hmm.

And, and also looking, you know, with AI and automation capabilities and things that are coming into the business, being able to provide the same outcome, but with less human capital, right?

Mm-hmm.

And so that drives up margins as well and standardizes the kind of the low-tier work. And, um, you know, allows us to focus on the, the stuff, the harder stuff.

So, yeah. Uh, and all of those things I think hit on, you know, uh, on some major stuff. So like one, there's, I can't tell you how many MSPs I talk to on a regular basis that actually have no idea what their margins are. Um, and, and, and, you know, anybody listening, it's like first order of business. Fix your financials so that you can easily tell your gross margin by line of business, including all of your people costs, including all of your tools costs. That that all goes in cost of goods sold to find the right gross margin. I say that all the time. So, and then the other piece that I was thinking about as you're kind of getting into that is oh dang it! See now I'm forgetting. Oh, the as far as like understanding the The margins by client, right? Like I was talking to a guy yesterday, I think, who had been running this you know a company over a hundred million in revenue. Nobody ever thought okay let's really measure margin by client. Their single largest client, they were paying a half million dollars a year to do their service. Like they were paying the client. Right. Like, oh, it cost him a half million more, cost him a half million more than the client was paying to actually deliver the service. Right.

Yeah.

So we get, so, so that's a huge one. Um, and then another one, um, it was a, you know, Fortune 500 company, um, that they were doing, uh, that they were doing a managed service for that asked for a price concession and they said no. When they went back and looked, um, after they had already lost the client, they were making 85% margin on that client and they said no. To the, uh, to the price concession. And so huge mistake, right?

Losing.

So on, on both ends, you can be way off. Um, if you're not regularly actually measuring, okay, what does it look like on a per client, per agreement basis? Um, and, and fixing those things when they happen.

Yeah, absolutely right. I mean, that, that is, I can't say that loud enough, you know, as we, we started stacking more and more of these agreements, it's, it's really important to understand. Not what he— not just what each individual agreement looks like from a profitability standpoint, but what the overall book of business looks like too.

Mm-hmm.

And yeah, you know, we've actually had some situations where, you know, agreement was sold a year or 2 ago, the client's grown a lot, the per-user pricing economics really just don't work anymore. Like to the degree that the client's paying more than they really need to be paying. They're happy, they haven't, you know, there's no problems there. But you look at that agreement, as much as we look at unprofitable agreements, we also look at these other ones ones that are like, you know, we've gotta go in there and right-size this in their favor too sometimes to show trust, right? It's still super profitable for us.

Yeah.

Um, but let, let's build trust and make sure that, that we, we keep that client. Um, yeah, because, you know, especially in this, this, this world we live in now more and more where it's recurring agreements, uh, we've moved a client to the cloud. There's, there's not a lot of big projects left. The name of the game is not, continuing to sell and solution architect things for them. It's to keep them secure and keep them happy, retain them.

Yeah.

And of course, keep evolving and value adding around the things we're doing there. But so, yeah, so we've really pivoted a lot more heavily in the last few years into account management and kind of ECIO type services for our top set of customers that really need that.

Yeah, yeah, absolutely. Okay. So, um, another, uh, question for you, just because we kind of, as we kind of start wrapping up here, what's, um, what do you think as you, as you think back on your leadership journey, what do you think is kind of the biggest, uh, mistake? Um, or, uh, yeah, uh, yeah, I guess biggest mistake that you've made as a leader.

Man, the biggest mistake I think is, um, not closing, uh, not closing loops. Ambiguity. I, leaving ambiguity. Um, it, it does, right? It creates, it creates more problems. Um, Mm-hmm. And what I mean by that is, is inspect what you expect. Uh, maybe, uh, I have a tendency, you know, especially working with really good, smart people, people that are smarter than me, um, you know, in many cases is you have them go do something, but you don't necessarily close that whole loop. And so, uh, you know, that leads to confusion, right? And the loop not necessarily getting closed in the way you'd need it to, or even getting closed to begin with. So, um, and that's not, you know, people just not doing their job and following through. It's, it's me as a leader not being clear enough and setting— The right expectations, right? And right timelines.

Mm-hmm.

Um, and so yeah, those, those are, those are more day-to-day kind of actionable things that I'm, I myself as a leader, I'm trying to improve upon and, um, and be better about. Yeah.

So you said, yeah, so you said something interesting there, which is like, uh, hey, I, and maybe this is kind of what you're describing, I ask somebody to do something and then maybe it doesn't get done how I wanted it to get done or with the, or with the completeness, or it didn't get communicated back or that kind of a thing. And so I have to look in the mirror and say, okay, what am I not communicating clear enough in order to, for that thing to happen how I wanted it to happen? Yeah. Is that kind of what you're saying? Yeah.

Yeah. Be more specific, right? Sometimes I've got the, I've got the idea in my head. It's so simple to me, you know, just Go forth and conquer. And, and meanwhile, and you think like, oh yeah, this will be a, a, this will be a knockout of the— they'll knock it outta the park. And meanwhile, I've just gone and created a bunch of like, you know, oh man, what? I don't know where to start.

You know what I mean?

So a little more direction is sometimes is helpful. Um, and, uh, yeah, you know, you can't, um, you can't make everybody happy.

Mm-hmm.

Uh, yeah. You know, I think, um, The other lesson I've learned is, you know, make a decision and then make it right. Um, doesn't, you know, uh, you don't, it doesn't always have to be the perfect decision. Um, you don't need to go get consensus from multiple people every time. You don't need to, you don't need all the data. I mean, certain decisions, right, just are better off being made, um, than letting linger. So yeah.

Yeah. And, and yeah. And I've, I've heard it said like, hey, if you're— if you have at least 80% of the data that you need, um, it's, it's better to actually decide than to, uh, than to waffle, right? Like, make a decision, move forward with it, and, um, you know, and you can always adjust, right, going forward. So yeah. Better to decide than to, than to leave it open. Um, yeah, well, thank you for sharing that. That's, uh, you know, that's always one that I like to ask because, hey, we can learn We can learn a lot from other people's failures. And I think it's especially the, you know, the closing loop piece. It's almost like, you know, how do you delegate really well, right? Like, and if I'm delegating something, how do I make sure that I am communicating exactly what I want? I'm asking them if they understand. I'm asking them to repeat back to me. Uh, what, you know, what I want. I'm, I'm saying here's when it's due and asking them to make sure that we're, we're on the same page of when it's going to be done, what their boundaries and resources are for getting the thing done, and then having an agreement, right, of like, okay, this is what's going to happen by when, and we're on the same page, and we're going to check in at this point to make sure that we're good. Here's what you need to come back and ask me about, if anything. Or, you know, if you run into anything and, and if I'm, if I'm doing a good job with delegation and the, the, and I have good people, then actually it, everything should be good, right? Like, so usually it's probably a problem with me as a delegator and not with the person being delegated to in those situations.

Yeah. You know, delegation's one of the hardest things. What was a hard thing for me, right? Because I, I know how to go do this thing. It's easier for me to just go do the thing than explain it to somebody. And you know what I mean?

Yep.

Um, you know, and so following that whole like, I do, you watch, now you do, I watch, you know what I mean? That whole thing.

Yes.

Yes.

Um, and then I think, you know, a, a big level up, uh, for me and with some of the folks that we have here was not just delegating tasks, but getting to a point where you can delegate decisions.

Mm-hmm.

Um, and so now these folks, like the, the decision, it, it's not always coming, having to come back to me. Or to the founder, right?

Yes.

Um, that we now, we trust that there's systems in place and we, we have, obviously we, we have gates, right? And, and things, moats in place to make sure we don't fall into some huge traps. But otherwise, yeah, empowering people through delegation of just, you know, not just tasks, but yeah, decisions.

Yes.

Um, and so yeah, that, that's been, um, something that it's just a work in progress. I think it will always will be.

Yeah.

But yeah, but something I try to stay mindful of, you know, throughout my, my days.

Absolutely. Yes. Delegating decision-making authority. That's, that's a huge one as well. I love it.

Okay.

So it's time for, it's time for the lightning round. All right.

As we wrap up.

So, so we got, so we got quick ones. First thing that comes to mind. So first one is what's a belief that you've changed your mind about over the last few years? Hmm.

A belief that I've changed my mind about. I think, you know, well, one is around this fixed fee packaging of fixed fee services and that traditional model. You know, that really has changed the game for us, you know? And so I'm glad that we made that change when we did. But you know, we were always kind of naysayers of, of going down that path.

Uh-huh.

Um, so yeah, that, that's probably one, one thing I've learned. And, um, you know, another thing I've learned is, is, uh, don't, don't, don't take, don't take things too seriously sometimes. Right. Uh, humility, humility is good.

Yeah. So absolutely. Okay. Um, and then what's something that you've been curious about lately? Oh man.

Um, well, AI for sure. Uh, mm-hmm. Vibe coding, been doing a lot of, uh, you know, digging into the, all the different corners of what we can do with, with that. So, yeah. Um, so yeah, curiosity's really been, really been piqued there. Um, you know, and that, that's from a technology standpoint, it's been all-consuming.

Mm-hmm.

Um, there hasn't been a lot of time to really learn other things outside of that, but.

Right. Yeah. I mean, it's, it's a, it's definitely a, A huge thing. Um, okay. And then what's one thing that you can't live without in your daily routine?

Hmm. Well, uh, my AirPods are pretty hard to live without.

Okay.

Every time I forget them at home, I'm like, oh man, I, I don't know how I can go through my day, like holding my phone or, you know what I mean?

Exactly.

Um, so yeah, that, that is, uh, that's, and I think, um, you know, another thing I, I can't live without is, is, uh, music. I, I, I love having music on in the back. Music's a big part of my life. I, I love playing guitar.

Awesome.

So, uh, it's one of my, my hobbies. And so, uh, yeah, that, that kind of keeps me going.

Yeah. Love it. Just love it. I made it sometimes.

So good.

Okay. Um, what is your go-to way to unwind?

Uh, I love, I love hiking. I love being outdoors. I love nature. Um, And so getting outside with the dog, uh, you know, the family, taking walks, taking hikes, that kind of thing. Um, and playing guitar too, truthfully, is a very meditative, uh, sort of break from this digital world that, you know, we live in all day long. Um, so yeah. Makes total sense. I typically seek something that's either very analog or involves some sunshine.

Beautiful. Beautiful. I love it. Yeah. Okay. Um, and then, uh, last but not least, what is a book or an idea or a piece of advice that has shaped you the most?

Man. Um, let's start with a book. I think, uh, most recently I've been reading 10X Is Easier Than 2X.

Mm-hmm.

Um, that's really changing my mindset in some ways on, uh, just a lot of different things. It's, there's been some eye-opening kind of stuff in there. You know, Atomic Habits. I know that that's one that almost everyone has probably read or should read if they haven't. But, but I really enjoy a lot of the Japanese philosophy, like, like kaizen, for example. And, you know, that's in the one, you know, 1% improvement every day.

Yeah.

Basically, if you're able to improve 1% every day, well, there's 365 days in a year. Do the math, right?

Yeah.

365%.

That's a lot.

That's, that's pretty impressive to me.

Yeah.

And so I really like that approach, which, you know, is also kind of taken out of Atomic Habits. We read a book called The Phoenix Project here years ago. I don't know if you're familiar with that.

I am. Yeah, I've read it. Yeah.

A novel about, you know, theory of constraints. And that really changed our organization in a big way. You know, when we— before we had a dedicated project team and thought about planned versus unplanned work and change, That really, you know, was a big, was a big book for us, of an influential book for our organization. Awesome.

Yes.

And yeah, Six Types of Working Genius is another good one I like. You know, just all around finding, you know, finding what it is you're good at, what it, what it, what drives you, what excites you. Going back to the Japanese philosophies, another one that I really enjoy is finding your ikigai, as they call it. Which is, you know, what is something you're good at, something you enjoy doing, something the world needs, and something you can make money at? And where all 4 of those things intersect, that's your ikigai, you know?

Yeah.

What drives you when you wake up in the morning every day?

Yeah.

So, so I'm a big believer in that. And, and yeah, so, so those are— Those are some Perfect. Thoughts or books I would leave behind with you.

Beautiful. Hey, I love resources in books like that, and I especially love the ikigai concept and/or zone of genius. I talk about it in terms of zone of genius a lot, which by the way, The Big Leap is a great book to read if you haven't read that one. That kind of covers that same thing.

Yeah, I'll check that out for sure.

Yeah, yeah, it's fantastic. Man, Shane, really appreciate you, uh, taking the time to do this. This has been really fun. Um, and, uh, you know, yeah, once again, thanks so much. And, uh, man, we will talk soon.

Yeah. Thank you, Brian. It's been a pleasure being here and I always enjoy catching up with you at the, uh, the peer groups and conferences. And, uh, but it's good to kind of sit here. Yeah. In our own home bases and, yeah. And, and, uh, dig in a little bit further and, and yeah, thank you again. You've, you, congrats on your Launching your podcast, you know that a lot of great conversations I know that happen in those those peer groups and now otherwise, and so surfacing those yeah here is is is really cool. I've listened to all your episodes so far, and and yeah, you've had some titans of industry binge listening over there. All right, yeah, cool. And yeah, so so I hope that that you know little old me here and little old GCS down in our corner can. provide some, some additional perspective for those who might be walking in our shoes.

Absolutely. Absolutely. I'm sure. And everybody that's listened to this can pull out at least one thing that they could, that they could take and take back with them. So yeah, man, we will, we'll definitely see you soon. And man, thanks again.

Yeah. Thank you, Brian. As always, great to see you.

You too.

Take care.

Thanks for listening to the $10 Million MSP Podcast. I'd like to encourage you to take just one insight that you heard today and put it into practice because small shifts create big momentum. If you enjoyed the episode, make sure to rate and subscribe on your favorite platform so you never miss a conversation. Thanks again for tuning in, and I'll see you in the next episode.