Behind the Scenes of MSP Growth: Patrick Hoerter’s Story | Building a Profitable MSP with Chris Wiser

I think you actually just pin on something really key there, actually take charge of your life not being at the mercy of your clients. And it's one of the things that this entire industry has seen for a long time. One of the things that I talk about is actually you dictating how your clients should be doing things versus letting them run the show. What's up everybody? Welcome back to another episode of Building a Profitable msp. I am your host, Chris Weiser, here with a really cool guest today, Othello, Wisconsinite Packer fan Patrick Herder. What's up, buddy?

Hey, doing good. Getting cold down here. We're up here.

Let's see. I, I'm in Austin, Texas now. It's 64 here right now. This is a chili for the record. This is a chilly winter day. We're coming up to the start of winter here. It's mid December here in, in Austin, Texas. But it's 64 degrees. What do you got?

Low 30s.

That's a pretty nice day. That's actually a pretty nice day for up there.

Actually was I was standing in line for Santa Claus with the kids outside yesterday complaining it was col. Somebody said it's above freezing. Come on.

Yeah, actually I look at my parents next 10 days, it looks pretty nice. So that's not too bad.

Yeah.

Anyway, so we did not know each other pre, you know, prior to you being a seven figure MSP client, even though I was in Wisconsin, from Wisconsin. It's cool for me to actually have a fellow Wisconsinite on, on the podcast with me. But I want to talk a little bit about your journey, where you guys are at now, where you came from. Any great. I know you got a couple tips that we want to talk about to give some of our listeners and I think one of the things I will tell you, I noticed about your company, your network security. I asked you in the green room, when did you, you know, how, what was it before? And you're like, well, actually it's always been that. So you're like a little bit of a trendsetter. I like to see that. So ahead of the curve. When did you register your network security?

Back in early 2012, man.

So yeah, you were way ahead of the curve. That's 10 plus years ago. We're December 23rd right now for you guys listening and watching. How did you get the idea to do that? Because back, back in the day, that kind of, you know, security wasn't necessarily the thing. Were you going to try and be an MSSP or where was your head.

Well, if I were to go back to my first interest and, and I can't say that I started my IT career knowing that's one what I wanted to do. I was a video game addict, so I never really imagined, thought very far into the future.

But what did you, what did you play back then? When you say you're a video game addict, were you like a Halo?

Oh boy. Going back further, this is Quake mid-90s.

So that was like peace. Old school PC games.

Yep. Windows 95, 98.

Yeah, I'm with you man. I'm with you. I had Doom and Quake and all that stuff. A good time? Oh yeah, yeah, good times. I was a half life guy, so I had, I had a half life server. I was always pinging like 4 milliseconds and I would just destroy everybody because I was sitting on the land with the server. It was pretty cool.

Good counter strike.

Yep, yep. Good times back then. Okay, so you were a little bit ahead of the curve. Where do you sit now? Tell me about your MSP et cetera. Central Wisconsin, what else we got?

Yeah, so I guess I, I, not knowing what I wanted to do, I just, I just found a startup Internet service company back in the late 80s or late, late 90s rather. And they were all drunk at the fair and I said, hey, you guys need some technical support? And they said sure. So they paid me cash under the table for a while, a little while, made it legitimate. And I never used a certification the way I went and obtained them or a college education, even though I went and got it just for my own confidence sake at all from then till this day. But I always had an interest in IT security. I used to listen to like paul.com security weekly podcasts a long, long time ago. And that was just a really a big passion of mine and a previous service provider I used to work for. I always said this is what I want to do. I wanted to start a company that focuses on IT security. So ultimately that's what I ended UP doing in 2012. At that time I took a two year stint where I worked in the enterprise space and in the insurance company, in the insurance industry and wanted to see how deep I could get with my knowledge in a specific area instead of being a jack of all trades and then launched my own company, turn that enterprise into a client for short term to kind of launch everything. But then I really very quickly realized how hard it is to sell or at that time how hard it was to sell security.

Nobody really cared back then because it was Just more like physical access doors. Windows, yes. Building access.

Right.

That's maybe some cameras, but not a whole lot of actual Internet security was there. I mean I see a firewall and antivirus and I spam, but that was about it.

Right. And I guess, you know, I, I was, I had the wherewithal at that moment in time to say, well, the differentiator would be making sure, good backup, getting rid of the old tape systems and, and still making sure that there's some sort of an air gap between their live data and their backups in that way. The only thing we were worried about is if someone got ransomware, you would be able to get their stuff back without paying the ransom. It's very basic. So I said I can do that and I could at least sell day to day IT support and services through. I always was a managed service provider from day one. I didn't start out with break fix.

Cool. So let's pivot a little bit to your seven figure MSP journey. How long you been in our elite program?

What? Three months.

Okay, so that's, that's great. And you know, one of the things I notice about you is you're joining like all the calls that I'm on, you're there, which is awesome to see. So that means you're actively participating, taking in the content. Where do you see yourself from when you came in three months ago to kind of where you are now in terms of your, your evolution or your education journey?

What.

And, and I want to get into three or four tips that you'd give other MSPs. Actually, how big are you as a company in terms of people or staff or anything you want to give?

Yeah, right now it's just me. I had an employee just prior to the pandemic, but the timing of that didn't end up working out very well. So we went back to just myself and growing from there.

Okay, so single person shop. What have you learned? What has helped you evolve from day one in this program three months ago to now?

Yeah, so over time you lose, you lose confidence when you're, when you're on an island by yourself. And I was facing, I have my, my largest customer, didn't really have any interest in having it anything. He, it was a go to the best buy and buy a box product off the shelf type of.

And probably like geek squad and that kind of stuff to set it all up. Right. The typical small business or, or even solopreneur shop that wants to just go do it that way.

Right.

Okay.

Yeah. So I was facing the very real possibility that they would quit right about now for it service and just say it's just not worth it. Even though they were paying, you know, per seat was pathetic, so shouldn't have really been too much of a worry. But every dollar is important when you're not running with huge margins. And I decided when I was introduced to seven figure, I, I thought, well, I can just let this happen and have absolutely no new skill set, nothing to really guarantee or give me any confidence that I can turn that around, that loss around, or I could just leap in with both feet and hopefully gain some knowledge to be prepared for when this, this, this probably happens and actually take charge of my life for once.

Yeah, well, I think you actually just, just hit on something really key there, actually take charge of your life not being at the mercy of your clients. And that's one of the things that this entire industry has seen for a long time. I know you're, you're on our weekly calls with me specifically. I know you're on a couple others as well. But one of the things that I talk about on those calls is actually you dictating how your clients should be doing things versus letting them run the show. And I think it is such an important thing for today's world. And it's, you know, for you guys that are listening, if you think about where the MSP sits in terms of how much this industry has actually caused some of the hacking epidemic that we a little bit have, like, it's, it's a little bit taboo to talk about and I understand that. But let's be honest, if we would not be, if we've not, how do I say this? We have not been letting the client dictate the path of support due to fear of losing them. Just kind of. You were talking about, would we be sitting here in this world now? The positive thing is that times are changing. We've seen things evolve, we're seeing things grow. And the MSP starting to say, Look, Mr. Client, you need more, what are you going to do? And they're like, oh, we don't want to pay for it. Well, that's too bad. Okay, that's fine. You have to pay for it. But I'm not going to be left holding the bag because I told you this is what you have to do. How much do you think that mindset and a lot of that side note, guys that are listening, that mindset is really one of the keystones of what we build into our coaching program. Where do you see that as being a benefit or a positive piece.

It's huge. I mean, one of the things I had to admit in some of those classes, it was neat to hear that I wasn't alone in my decision making. But I think even though we don't admit it out loud, we know it, that there's huge risks that we're sitting on with our client base when we don't really push or control that conversation. And what we do, and I did this a lot, is, you realize I'm not sleeping well at night because I know in the back of my mind there's this new threat out there and all my customers are vulnerable to it. So I'm going to go get this tool, find the cheapest way of acquiring this tool that mitigates this risk. And I'm not, I'm not going to approach my customers and ask them to pay for it. I'm just going to take the hit and my profit is going to be my better sleep at night. Yeah.

Pretty important thing you just said there, too. Like, you think about where, first of all, most MSPs aren't charging enough. And I, I think based on what you're telling me, most MSPs aren't charging enough. And as opposed to the discomfort of having a financial conversation with your clients, or even worse, saying, yeah, I need more cybersecurity tools in my stack. I need to do more things. Oh, you're going to have to pay more because I can't afford them. As we sit, it's easier to just buy them and like you said, eat it versus dealing with the potential rejection or worse, the potential, they're going to leave you and go find somebody else because you're just a commodity.

Right.

So I think those are really important. Anything you want to add to that?

Well, and in the reality is in that relationship, the customer doesn't know you're doing that. So you're still a commodity even after you've done all that.

Almost worse. Because you know how much in your head you've heard me talk about our, during our coaching calls. How much do you think your existing client base fully believed you were handling, you were their IT guy and you were handling everything for them and you had them, you had them covered. You would you say that's like a 10 or like a 1 or anywhere in between that they believe that? What's your thoughts on that?

You know, it's, it's, it's interesting because probably most of them didn't even put a whole lot of a thought to it. Um, so as we. As we've been going. As we've been going through these conversations with our clients, part of that light bulb moment is them realizing, yeah, you are the only person I know that has anything to do with our it. So I guess it does make sense I would come to you if something happened.

And so it's so far, man, I didn't really think about that. So it's so far off their radar.

Yeah.

They don't even realize it. So one really important key tip coming out of this episode, and I think, Patrick, you just nailed that, is you just are, like, your clients are oblivious to. To what we see as the obvious thing, like, they're going to get hacked. What's the plan? They don't even have any. It's not even, like I said, on their radar at all that they're going to get hacked. It's just a matter of something they got to kind of plan for and deal with.

Yeah, they want simple. In fact, I had one business owner that just said, I want simple it. I don't want to pay a whole lot for it. I want to do hourly. Let's just go back to the way things were.

And HAC want that simple it too, don't they?

Yeah. And it's. It's funny because you really have to slow walk those conversations because they're so far from where they need to be. It's. It's enlightening.

Yeah. It's crazy. Okay, so that's a really. That's a really good tip. You know, so I think number. Number one out of that is make sure you're talking to your clients actively about cyber security, but almost more importantly, what's that? They're gonna get breached. They're gonna have a problem with what's your plan gonna be, Mr. Client? Because maybe they think it's you, but maybe more importantly, they don't even have it on their radar until it's a. They have a bad day.

Yeah.

Yeah.

That bad day is going to be filled with emotions, panic, and your best friend is suddenly going to turn into somebody like the drowning person when you're trying to rescue them. They're not going to be like, oh, thank you for rescuing me. And then they'll just hold on to the life preserve. But they're trying to drag you down because they're freaking out.

Yeah. Yeah. And maybe if. If they end up drowning anyway, everyone else then gloms on and blames you. Or let's say they lose somebody or lose something important to them, Boom. Then it becomes your responsibility because I will tell you and Patrick, we've seen, we've been together in the room when we've had some people that are dealing with this because we've definitely had some clients that are getting breaches at their clients and these other things. They're looking for someone to blame and I think the insurance companies are looking for, for someone to blame. Okay, that's a couple of really good tips. What would you say your dawning moment was because you just kind of talked a little. Did you have that when it was like the I'm laying in bed worrying about, you know, what ifs or did you have that was, was there one thing that made you be like, oh my God, I need help doing this?

I think I, I mean it really, you know, I was probably this close before joining. Like I said, it's subconscious and you're doing some of the things to sleep better at night. So it was really the first day just on the onboarding with you where you talked about risk that we're sitting on. What happens when a customer goes through a breach event and that relationship instantly changes from this is the computer guy who I didn't think was anything more talented than my nephew who fixes computers while he's going to college to. You should have known all this stuff. You should have protected us from this situation. And it, I could easily see that pathway in all of my customers mindsets and the way you illustrated it made it so obvious and I'm like, it just was kind of a freakout moment for me.

Yeah. So that's great. I mean that's great to hear from my standpoint I guess because I, I mean it's important to me that that message comes across and for you guys that are listening to this, I would love to have you in the coaching program but I want you to actively do something about this in your own world. If you have not the amount of MSPs that I see that are out there, that are just sitting there kind of not evolving and not changing is mind blowing. And I think it's so, so critical that you actively work on this and you don't have to have a dawning moment with me, but you better do something to evolve and change because you better have good agreements, you better have tight relationships with your vendors, you better have good cyber security insurance internally because at some point they're going to get hacked. Like I, I actively, I stood in a room last week of 45 people in Los Angeles and had everybody, every MSP in the room raised their hand. And I said, who in this room can prevent all hacks? And all the hands went down. You were actually on a call with me this morning. I asked the same question. All the hands went down because we know we can't stop all the hacks. But your client either thinks you got their back or like you just mentioned in your. In your first point, is totally oblivious to getting hacked or. Or basically that the hackers are after their money now. So really important stuff. Okay, so next step, what big scenario would you say is. Is the next thing that you think for your clients or you and your MSP you're going to try and tackle related to, you know, growth or. Or.

Well, I had quite a bit of work that I had to get from where I was to where I need to be from a technical standpoint, but just getting confidence in selling in the first place. And one of the fears that it's so easy. I was telling a customer before this call, I was having lunch with them. And it's so easy to accidentally sell on FUD because there is a lot of fear in just the simple reality.

You guys are listening. FUD is fear, uncertainty and doubt if you don't know what that is.

So thank you for defining that. I think like probably a week ago I kept hearing it and.

Yeah, yeah, scare, scare tactics, scare selling, scare tactics, that kind of thing. We don't ever want to sell on that. Okay, let's keep going, try to find that.

Yeah, but the reality, and even just looking at the statistics do show the risk out there. And so just even becoming aware of it and walking through how to communicate that to customers. In a way, this is really key for me because most sps, especially newer startups, are so technically minded because we all come from engineering backgrounds that we get in our own way so much with selling. And the very moment some nuanced technicality comes into something we're saying in the sales process, we will undermine ourselves so quickly. And that does a disservice both to your own value and also just the customer. Just it kind of instantly you get that deer in the headlights look and you've lost your audience. So to really simplify it and bring a message clearly across doesn't take the technical prowess we think it does.

And I think you've done a good job participating and executing with us, learning that from Cindy. Cindy Phillips is our head sales coach. She's on with me not too long ago on the show. So I think a couple things that I'm hearing from you on that is Number one, don't sell on fud. I think that that fear, uncertainty and doubt don't sell scare tactics. Be very honest with your prospect. Be very honest with your client. You are going to get hacked. Here's what we have to do. And so much of this guys is establishing a pattern of behavior. We cared about your cyber security, we cared about your well being. Here's what we did.

Here's what.

Here's what we did. Here's what we did. Here's what we did. Because we can't stop the hacks. So we have to show that you as an MSP were not negligent. Next thing I think I heard there is making sure you keep your solution simple and not overly techie and commoditized. And I think that's really important. Right. Any explanation on that or further thoughts on that?

There's so many tools to choose from. I guess it is easy to get caught up in that detail and you're really not, you're not providing the tools. I like the illustration of we're a broker to our customers. Even if you have an IT team, it's a lot of work to pick out and test out each vendor for different type of security solutions and stuff. There's a ton of value in being that one that does that for your customers. Whether it's just a small business with no IT team or a medium sized business with an IT team, there is a lot of value to constantly vet and criticize and pick the best solution for the.

And so many of These vendors that MSPs have the access to, they're like, I don't care how great their IT team is, I don't care how big their IT team is. It could be one person or 15 people. They don't have the access to the same tools that the MSP industry has. That's a huge, huge advantage that this industry has now is that you're going to have access to tools that they don't have access to. What's your thoughts on that?

Oh, absolutely. And a lot of, a lot of times the MSP tools, they integrate. So yeah, you might be able to get similar tools individually off the shelf, the virtual shelf, I guess I should say. But understanding how they interplay with one another, that's a science almost.

Yeah. One other thing that I will tell you is it's pretty apparent to me that the MSP is moving away from the technical person. Not saying that you're, and I'm going to be very clear about this, that doesn't mean that you're not a service focused company and service isn't important. But you actually having the guys with the certs, you actually doing all the work on the tickets and, and not having a partner do a majority of that work, I think those days are getting numbered, which is a really, really good thing for the MSP because you move more into the profitable broker side of things versus being the one that has to employ all the experts. It's hard to find good teams. It's much lesser. Hard, less hard. Much less hard to find good MSP partners to work with and let them worry about doing all the grunt work. What's your thoughts on that?

Yeah, I would agree that, you know, as I go back to getting to the size of looking for employees and things, there's more options available when you're looking at people with good communication skills and a good work ethic. You know, the technical stuff could be trained up to the level they need, that we need for them to do their job. Right?

Yep, absolutely. Absolutely. So, okay, I want to pivot back to the sales stuff. You had a couple things that you said related to having, and you mentioned this multiple times, having a sales process and having structure around sales. What did that look like for you coming into our coaching program? I don't, I don't know this answer. So I'm asking you totally green from my standpoint. Did you have a sales process or what was it and what does it look like now?

Let's see, my sales process, it was kind of like this.

And for the guys listening audio, Patrick is currently praying.

Yeah, that's, that's pretty much it. I've, I've, I've been in a number of groups throughout the last 11 years. You know, some that sale, that focus on marketing, some that focus on, on operations, you know, specific to the MSP space. But I, I never, I never went to school or took the training on sales skills specifically. So that was seriously lacking. So even if I got a lead in, it was, it was just a prayer to whether or not I would.

Let me ask you, and this is a real question, like, how did you think you were going to grow? Like, did you, did you just start a business and be like, if they, if I build this, I'm gonna, and I'm not being critical here, I'm just, I'm legitimately asking the question because there's a lot of MSPs that build it pretty similarly to this. Like what did you like when you went into it? You're like, okay, I'm gonna build this. It company or maybe you just like it kind of happened. But how did you have in your mind that you were going to. Did you have sales planning process? Did you have a growth mindset or you know any of that or was it just like more of the prayer that you just talked about? Take a drink of water on that one. I think that was vodka.

Big, big swig. Because that, I mean boy, you might need an extra half an hour on this because for my story on how that plays out I wanted to be a multi million dollar MSP. When I first started I pictured doing that like building an asset sales and riding off into the sunset at some point. And that would be my retirement fund. I would control that. But the second year in business, you know, starting out our business, we were trying to adopt our nephew who had just been born. When I, when I was at the enterprise space starting my, my company, we wiped out all of our savings in this adoption process. It was, it was an absolute disaster.

Was it successful though? Did you end up adopting?

It was, but it started a journey that I would have never expected.

I'd like to hear that. Yeah, it's cool.

We knew my wife is, she's like Dr. Mom and we knew that we would have an opportunity to adopt him before he was born. Despite all that proactivity. It took 11 months because of interstate politics to get him into our, into our home. Then my wife noticed there was something medically off with him and it took another 11 months to get a doctor to diagnose him. And we've got a neurologist that said there's something seriously off here. Did a genetic test, found out he had a life shortening rare disease. It was like he was the 400th diagnosed with this rare, not very fancy named disease and he ended up passing away 11 months later. So it was like three 11 month periods and that was. I was, I was in my second year of business when that happened. So there was a lot of medical stuff. I was running the full time job of trying to grow the business handle the medical side.

That hits you across the face. Basically a two by four across the face, right?

Exactly. Yeah. And then I, and then in this weird stubborn fit of stubbornness with, with Wish foundation because of the time of year he died. Wisconsin ground is frozen. We couldn't, we asked was a playground related thing in our, in our yard which we asked to do and they said well we, I said well take that wish since we don't need it for us anymore. Put it at the playground across the street and Just put in a wheelchair accessible feature over there and that's not in their wheelhouse in terms of it's meant. So I said, well fine.

They can't transfer wishes.

Right? Right. So I said I'll do it. I'll. I'll design my own playground and I'll build it and fundraise for it. And I spent the next six years designing, testing with my kids from Minnesota to Milwaukee. Probably drove by your by a couple times back then, but testing out playgrounds. We ended up designing a two and a half million dollar wheelchair accessible playground called JoJo's Jungle.

Well, that's a hell of a mission though.

Uh, so. Wow.

I didn't know any of this going into that. That's crazy.

In, in that process I, I reinv. I re. Envisioned what I wanted for the business to something just smaller, you know, just almost a little more than a hobby job. You know, something that would sustain our family, but not something so complicated that, you know, I had to deal with staff and all the other things. So that was where my mindset was coming through the pandemic period and everything there. But I also realized that I was losing confidence over time in pricing things properly and it was not going to last if I didn't make a change, a serious change. And that's what ultimately ended up leading me in this direction with you guys. Because things change so quickly in this industry and if you're, if you're kind of by yourself, you're not, you're not catching it as fast as you need to.

Well, and you know, you think about what it was from let's say 2010 through 2020 didn't change a lot up until Covid.

Right.

It was pretty static, I think about, you know, 2010 to 2015. I sold my MSP mid 2015. My stack didn't change much. It was pretty much the same stuff, didn't evolve. Well, now we're seeing stack changes monthly at the minimum, if not very more often than that. There's new vendors coming out of, out of everywhere because there's so much security stuff going on. And I think it's really critical. And this is where seven figure MSP came from. It's really critical that we actually have a sales process, excuse me, that follows along with growth and evolution and having enough profit margin. And I think that's some of our messaging is making sure that you have any. Our goal is an 80 profit gross profit margin across, across the board for all of your products. And I think it's a really important piece Okay, I got a couple, couple more minutes left here. Any more? Any. What's like one final big tip that you could give the MSP that's sitting on the fence without a salesperson and I don't want this to be a 7 figure MSP thing so leave that, leave that alone. But what's one tip that you can give to somebody that's sitting out there listening saying I need to grow or I need to evolve or I don't know what to do or maybe they were in a similar spot like you. I need to do something. What's your thoughts?

You need to be open to the possibility, not that possibility. You need to be open to the reality that it doesn't matter where you are. The same thing is needed. You need to have a profitable business to deliver to your customers. And it doesn't matter if you're in Metropolis or if you're in farmland. I happen to pretty much be in farmland here. Everybody needs security. It security and you're the one that's going to deliver it. And you can't just put, let, let the, I don't let the bias or the head trash to convince you that this isn't for you or this isn't going to work in your area. Because it does. The, the threats are the same. This is a global economy. I mean everybody is equally, equally equal opportunity victims.

Yeah. Yeah. It's funny because it's. I have people all the time. MSP owners tell me all the time, well, I'm in Australia, I'm in the uk, I'm in Canada, I'm in the United States. My clients are not attack potentials or they're not at risk or they're not, you know, they think they're not at risk. They're all going to get hit guys and the money spends the same. You know, may not be a lot, but 100 grand is a lot to a hacker. It's, it's a real lot to a small business owner. Right, okay, well, really great discussion today, sir. I think. I, I had no idea about your mission with your playground. That's awesome to hear. Congratulations on that. Sorry about your. That was your nephew you said, is that right? Yeah, yeah. Sorry about your nephew. That's a tough deal. But it sounds like you made some lemonade out of lemons on it for sure. And really pleasure to have you on here. Really excited about the Packer season this year. We got, we got some good stuff going on with the packers, but great, great time talking Patrick Herder and we'll talk to you soon. Okay, guys.

Thanks, Chris.

Yes, sir. We'll see you soon.

Bye.