Why MSP SOPs Create Chaos Instead of Scale (Episode 3)

You so nailed it, in my opinion. Like, just crushed. Like, that, that's exactly how I see it. And I got— we're— I'm super— I love AI. I use it every single day. I was literally on ChatGPT Audio driving home for 4 hours. I was just crushing through a bunch of things I wanted it to research. I'm like, I love it, I use it. But I was talking to Michael Slater from, um, SureWeb last night at the after party, and he said something super insightful. He said, you know, the thing about AI, it's like there's a lot of like AI companies that are coming out, or a lot of companies that are like jamming AI AI into their product. And he said, really, I see a lot of it is like the Slap Chop of SaaS. And I'm like, wait, it blew my mind. You know what I'm talking about? Like the, like, slap, slap, slap, slap, slap, and it'll chop all your food up. And it's like, yeah, it's a cool idea, but in the end, it's just yet another thing that you've got sitting in your kitchen. And if you just learn to use a knife really well, you don't need a Slap Chop. It's ridiculous. And I, it's rent-free in my brain now, Nick. Like, that is so true on what I think. So what we're doing right now when it comes to a lot of AI is just the Slap Chop. Of the, of the MSP space. And I'm not hating because I use it all the time. I think it's here to stay.

Yeah, well, I think it's like, you know, more of it the AI slop notion, right, of, of what's coming out and is that actually good or not. I think for me personally, I, I have a natural tendency because I can geek out about it to go in and build these cool workflows, and then you reflect on it and you're like, all right, well, that's not going to help us that much, right? Or whatever the ROI might be, just because, you know, it's the shiny object syndrome and it's cool to play with. And I would recommend that, that everybody out there does that at this point in time, right? It's just experimentation, getting some reps in. Um, but certainly, you know, from a business perspective, you know, you're going to have a wide spectrum of things that people either think they want, or the most that I see today, the biggest feedback we've gotten is that most customers are coming and saying like, how can I get started? What can I start doing with this? And, you know, the MSPs are, you know, wanting to know the same thing, right? I think it's, it's like, well, what are we actually telling them besides trying to use Copilot, you know, as a, as a marketing tactic? Because Microsoft's investing so much money, even our physical keyboard now has a Copilot logo on it if you're using a Windows device. So it's like, yeah, all right, well, we need to redirect that conversation. It kind of leads, you know, nicely into our, our conversation today around like that as a, you know, specialization, or, you know, how you start to take that and be the advisor, you know.

Yeah. Companies. It does, yes. So to the crew here, welcome to Above the Stack. If this is your first time joining us, glad you're here. We are all about going above that stack. Um, we're all about, you know, at the end of the day, we security nerds love to know what's in the stack and what do you got, what are you using, what are you doing. And man, it's time for us to have a show that says let's go above all of that and let's talk about the things that matter— tools, tactics, procedures, ideas, thoughts, philosophies, processes. And so what we did in the last episode, we introduced what you just said, Nick. We introduced this idea of standardization is so important for an MSP, but at the end of the day, it can kill you. And we introduced some really interesting thoughts, and we promised that today would be the follow-up where we're going to talk about those 5 tactics that I think every MSP should be thinking about to drive some amount of customization in their service offering when it comes to security. So it's going to be an awesome talk today. And by the way, Nick, we hit— I counted up the numbers of like like your channel, my channel, um, uh, Inside of Empath, all of it. We hit almost 1,000 views on episode 2. That's incredible. This is only your second episode. That makes us like the fastest growing security podcast for MSPs out there. Isn't that awesome?

It is, it is pretty cool. But I love to see, you know, just like any participation. I appreciate you guys commenting in the chat here. Um, you know, it's, it's helpful to get the engagement and, you know, get the feedback as well too. So excited to keep going on this.

Yeah, Emily, thank you for checking in. Abednego. Oh, Josh Hobines on, and Mr. Wheeler. Hey now, you be nice. Uh, no, I'm just teasing. We all, we all love John. He's great. Okay, well cool. Um, and I realized I still have the QR code up from last episode, so I'm going to leave it there. Y'all can grab it. We did this really cool standardization worksheet that's free. In a minute, I'm going to change the QR code to— we also have another giveaway for this episode too, so we'll have that, uh, standing by as well. Um, well, Nick, go ahead and get us in to the, the, the fairway here, what we're gonna be chatting about.

Yeah, I think, you know, to, to kind of recap last week, we, we talked about how standardization, as you were just mentioning, Wes, can really put you into, you know, this, this situation with your clients where you're trying to fit them into this box. They have their own unique needs, they have, you know, their own growing pains, um, and we're not really tailoring these services because we need to be able to scale, we need to be able to teach our technicians a repeatable process. We need to have a lot of this in place just to be a profitable MSP or an efficient MSP with our customers. But where we see a lot of, you know, trends in the sense of the space is also just going way too far, you know, to that side where even everything that you're doing, you know, with the customer is starting to look cookie cutter in the sense of everything's the same, even though they may have unique reporting needs or unique ways they need to communicate with you., as part of that as well too. So today's episode, you know, we want to unpack some of the top 5 tactics of how you can actually get started with going down more of a specialization route, what that could actually mean. Because ideally, or, you know, realistically, all of us would say if we got asked the question, hey, would you rather, you know, have less clients that pay you more money and you have great client relationships and they just grow with you and they appreciate security? It's like, yeah. You know, of course I'd want that, but I also have to run a profitable business. I have to, you know, try to scale out clients. And there's a lot of things that get in the way from being every, every custom fit solution, you know, for each customer. So that's a lot of what we're going to, you know, kind of start to unpack today. I think we've got some really good tactics that you guys can leverage as well too. And like Wes mentioned, we also have some resources. That resource, you know, uh, that we shared last week actually is a great starting point for tactic number 1. Which is really around, you know, trimming the fat and niching down in your MSP. And so I think, you know, the, the resource that we provided before is really analyzing your service offerings today and taking a look at, you know, where does that fit into, you know, a differentiation for you, or something that you feel like is giving a good customer experience, you know, no matter who you're selling it to. So kind of just doing a self-scoring model around the audit. I don't know, Wes, if you have any other comments on that piece of it, but I think we're gonna head in today.

Yeah, do you want me to show that now, or do you want to hold it as we kind of get a little further in?

Uh, you could show it now. I think it's good, good, um, you know, to review here.

Yeah, let's do that. So let me share my screen, and we'll kind of go through what Nick is, is talking about here, because, uh— oh, and by the way, one of the things I did, I didn't realize this, um, but the, uh, the work that, that QR code will take you to this. So if you were not here last week, that QR code will give you access to both of the last week's worksheet and what we're showing here. But if you are new with us, or you, you were, you're coming back again for episode 3, same thing. Scan that QR and they'll get you free access to this. We're not holding it back. There's no nothing. It's just scan it and then we'll email it over to you. I think it's actually even automated, so you don't have to wait. So, OK, yeah, so let's walk through this. So this is what we're calling our Client Fit-Profit Snapshot. And what I really like about this, I've done, and I know you've probably, you know, Jesse Miller from Power Grid, um, really well as well. And Jesse does that, he's very famous for an episode or an exercise just like this. So, so let's walk through kind of what we're seeing here and what this thing is all about. So this idea of kind of matching up our clients, and then walk us through kind of these columns and what we're seeing here, Nick.

Yeah, so I think, you know, we'll unpack this more as we go throughout the entire show here, um, as well. But it's kind of doing a self-reflection on, you know, your entire clientele. What we normally would see, right, is that, you know, 80% of your revenue probably comes from your top 20% of your clientele, you know, or top 2 customers. But kind of leaning into this, you know, you might have your own metrics today that you're using to score. We certainly did between PSA tooling and, you know, Bright Gauge and so forth to measure a lot of these things like the client's effective rate and so forth. But there is, you know, many of us out there who might not be, you know, going into that deep of analytics, you know, in certain cases. But also this kind of gives you just a more of a surface level view of how can you easily, you know, start to go through and mark some clients as part of, you know, a more holistic future of are they actually, you know, really good for our business today? Or, you know, should we re-engage that relationship or is it better for us to, not do business because they don't interact with us. That's anything that we do well. They may still do break-fix with us. They may, you know, just buy cabling from us, but that's not our core competency. There's a lot of different use cases there. I don't know if you have seen, you know, other, you know, scoring models like this, Wes, in the past or anything that you've tried to use.

Well, prior to my MSP days, I came from banking. And so banking's real model is like, if you have money, we'll take it. And that's about as far as you go. But we did spend time for sure in like ICP and what we're good at.

You know, like we were very—

we're as as a bank, we were very good at ag lending, for example. We spoke it well. We understood the needs really well, all that kind of stuff, well-positioned for it. And we did a lot of mortgage lending. So we were very good at that. But, but so, so outside of the MSP space, no. And I remember the first time that I did one of these with Jesse, and it really kind of brought to light how valuable an exercise like this can be. Not just to look at and be like, oh, I don't need this, Wes and Nick. But, but like literally spend some time on doing this. Pick maybe— I would write down your favorite client, the client you like the least, and maybe just a middle-of-the-road average client. Pick them on purpose and work through those 3, because what you might discover is, uh, you, you might learn some very shocking things that come out of this. For example, maybe your favorite client is actually maybe the one of the worst clients you have, not just because they're paying you the least, but potentially because the amount of work and overhead that you spend on answering tickets and questions for them and their level of need versus, you know, what you're able to give. Or, you know, maybe it's the opposite of a client that you thought was just a pain in the rear and terrible is actually one of your best clients. Maybe because they fit, you know, your ICP really well and they're willing to pay for, you know, the tough asks that they have. And so this is not just a rank order of like who's your highest MRR. That doesn't mean that they're your best client, your most profitable, right? And so this is where kind of working through these things and really getting to, you know, understanding, you know, all those items you see here, like direct cost and how many hours a month you're spending, how many endpoints they have., and all that's really valuable. Um, walk me through though, Nick, because I think those columns are all pretty standard and obvious. Walk me through what we see here with the P score, the F score, and then the total. How about those?

Yeah, we've got kind of that, uh, you know, key in the, the bottom right corner. We didn't try to make this too complex, but wanted a good way to, you know, take a look at how you could fit in, you know, basically, you know, profitability score as a top-level metric. Might be not just MRR, um, in that particular case. But thinking about, you know, your effective rate, your service load, you know, the, you know, one-time payments you might be getting from them for project work that maybe is consistent or maybe it's sporadic, um, in nature. So you can't really forecast that well as part of it. The F score is more of the fit. Um, and this kind of comes back to what we were talking about in last episode, you know, around specialization. And if you did that, you know, first worksheet It's really about, well, what service offerings do I provide that really get into, you know, the ideal client that I'd like to have because of my strengths, because of, you know, what we've invested the most money and training into. That could be around obviously just running a really efficient help desk, but what are the other factors, you know, that you're, you're baking into that that says this is a great client for us? It might be that vertical, you know, focus that we talked about. It might be, you know, a startup, you know, type of culture. It could, could be different verticals, but very much aligned to a customer that is baked into, you know, these consistent results as part of that. Um, but it's also like, you know, what we get out of that too is just kind of, do they align to my stack? What I see most MSPs do is, you know, we, we come in and then stack is, you know, we're not talking tools in this case. In all cases, like, it's It's everything of how you would, you would see your true ICP. And we see a lot of MSPs make exceptions and exception after exception after exception gets into this place where many MSPs have reached out and say, Nick, I'm so reactive that I can't actually, you know, have, you know, growth in my MSP because I'm all I'm doing is fighting fires. I'm just responding to the next ticket. And usually in most cases, I see that the bigger clients are undernurtured. Because they're not the ones necessarily creating the noise in those cases. And so you spend the least amount of time with them. So it's kind of the opposite. But see, that I think in all businesses, but certainly this could help, you know, kind of score and rubric them, but then also give a red, yellow, green, right? Is this feeling like it's really healthy? Or, you know, is this a client we should, we should try to invest more in, you know, with the relationship or how we're interacting with them? Could we make that offering better and they value us even more. So I think there's a lot of different use cases there too.

There are. And that's why I would encourage everyone to go through this exercise. Pick 3. Like I said, just, just spot pick 3 to get started on the playing field to see what you learn out of this. And I think one of the big values of this beyond, you know, what you just explained and beyond what I just explained of like, you know, you might be shocked at what you see. One of the other big, I think, values out of this as a whole is also just starting to get a handle on some, some things. The data might start to point to something you've never seen before. Maybe you discover we actually stink at ICP and we don't know what our ideal customer is. Maybe we stink at stack alignment and, you know, it's haphazard and everywhere, right? Or you can pick some of those things. You notice that like, wow, from a pricing perspective, everyone's in line except for 2. It's really going to help you see through the weeds here and really start to understand how good are you at some of these things? I mean, the data should drive those decisions. And too often we're just anecdotal, right? We're just, oh, I think this is good. I think that's good. I think they're good. If you want your, your MSP to grow, you have to be willing to dive into the data, dive into the metrics. I mean, we do that at Empath. I'm sure you do too, Nick. There's so much data that we track every single month. And I can tell you all sorts of things like, you know, the things I guess SaaS cares about. I can tell you our average revenue per unit. I can tell you, you know, what our growth rate is typically looking at. I can tell you our cash runway. I can tell you what our ICP is, very defined what a good MSP for us is. And it's not always kind of things. So I think that's really valuable. Dr. Zoidberg checking in here, teasing me in particular. This is Dean, my colleague Dean. He's saying, Nick, why don't you have a projected background like Wes Spencer, where, where actual work happens? So let me tell you, Dean, just for a second here, buddy. Actual work was happening over in my office because my normal blue light— I came back from DattoCon and I'm getting my studio going. I got 30 minutes and that light just is dead. It doesn't come on anymore. I'm like, no! So I'm scrambling. You should see me. I was scrambling around the office digging through my supply drawer over here. You can't see finding like an old light. I just set that one up right there.

It's all I got.

So there was real work going on. He's also checking in here too, Nick, on just saying MSPs stink at ICP. Did you see that to be the case too? Not just saying we're good at it, but actually really struggling with that well-defined?

Yeah, I think, I think for sure. I mean, I think what most MSPs kind of gravitate towards is being everything to everybody, not because they, you know, really went in and wanted to do that. But it's just that natural progression of what happens over time where the client says, hey, can you fix my printer? Yeah, I can do that. And it's like, we can, you know, but does it mean we should? Hey, can you go run, you know, a fully baked Citrix environment? It's like, we could learn how to do that, you know. And so there's, there's like a lot of yes man, you know, concepts that are kind of going in there. But I also think that, you know, even at larger MSPs that I was part of, and, you know, we've I've seen both sides of the house there, 2,000+ clients. There was a lot of, you know, focus on getting those metrics really dialed in to understand, you know, effective rate of those clients. But also, we tracked a metric called REM, you know, which is reactive hours per endpoint per month, which is more of a top-level KPI, which you can do by just dividing, you know, the service ticket hours by the endpoints at the client. And that, at a macro level across your MSP, can usually tell you Well, are we just getting blown up with things like ThreatLocker, you know, just creating a bunch of tickets and, you know, doing all this, this extra work for us, which is really creating a lot of inefficiencies, you know, at the company? Should we look at fixing that? The Bash ThreatLocker, it's like a common thing with any elevation tool that you might use. But, you know, the same thing was true on clients that had really, you know, unique solutions that we didn't have. Across all of our clients, you know, that we had the support because then every time, you know, we had lateral change or we had new technicians, we're like, what's this over here? Well, it's like it's documented in IT Glue, but that might have changed already. We didn't keep up with it because we'd only ever talk about it every 6 months. So there's just these micro patterns of, you know, this, this thing compounds over time. And that's a big, you know, big focus I see where you kind of lose, lose your, your niche in that way and you, you move into just a generalist. You know, for everything that you're doing.

Yep, I love that. It's well said. And Dean checking in, one thing he said I thought was really insightful. We're going to get into the 5 tactics here in a minute for those listening, the thing we promised we would do. But finding verticalized alignment made operational challenges easier. That's exactly right, because we learned to speak and understand what our clients need, what they don't need, why they need it, how to deliver it better, how to communicate things correctly. So many examples of this, right? So we could get— I won't jump into any, but that's really well said. And then, yeah, he's also— so again, for those that are listening, Dean is not hating on Empath. He works with me. We work together. He's just talking about your channel has a bunch of good stuff on this, and I actually didn't know that. Can you tease your channel for a minute here, Nick? I mean, I'm well aware of your, your YouTube channel, but do you talk about some of this stuff?

Yeah, I mean, this is, uh, Team MSP has been running— I just passed the 6-year anniversary of doing that channel. So one video a week for the past 6 years, which is a good atomic habit. But, um, it's all about MSP education for Microsoft. So I largely, I get into the weeds sometimes a little bit too much if some people say that, but I definitely try to cover the broader scope of Microsoft 365 and then always try to be, you know, the thought leader when Microsoft drops the inevitable next big thing that crushes all of us, like new commerce experience or GDAP, you know, things that when I was at Pacsafe, you know, we were going through it, you know, because it was like everybody's trying to learn this. So it's, it's a little, you know, side habit, but it's a big focus for me. And that's kind of what I've been doing for the past 6 years.

Love it. Well, let's, let's jump into, I guess, these specific tactics, why don't we? So again, if you're just joining us, we've been really kind of teasing into 5 tactics that your MSP needs to think about and employ and really jump into when we think about about becoming a more specialized MSP. And so we showed the worksheet, the QR code's up there, so if you want it, scan it, we'll get it over to you. That worksheet can help you start to work through all this. But walk us through, um, the, the first, uh, the first tactic, Nick.

Yeah, this is really around, you know, looking at that service offering and starting to trim the fat, but also thinking about how you could niche down, you know, in certain areas. And I think two, um, you know, big portions of that that I think are key in this area is that most MSPs are more of an all-you-can-eat buffet where we try to pitch, move more to like Michelin star chef, right? Like they maybe have one dish, but it's so good and it's a premier dish and you're going to get great clientele. They're going to refer you faster. You know, they're going to, you know, have a great experience and you're probably doing less in some cases as part of that. And that's hard to think about, but it's also thinking about, you know, What 3 offers are— do you have a competitive differentiation on? Interview a lot of MSPs and talk to a lot of MSPs, and that might be they're really good at business transformation, moving people from legacy systems to cloud-based environments, or, you know, just doing more business optimization with technology. Other MSPs obviously are very focused on, you know, the security side of the house, you know, have an in-house SOC team and really want to go down that route. For specialization, but the majority do it all, but loosely in, in every area, right? So that's where I think, you know, the big, big focus is around like helping using those worksheets of how can we start to clean things up. But I would also challenge, you know, I think it's important to think about some top-level evolutionary milestones that you'd want to move into. If you think about what's your MSP going to look like in the next 5 years, your focus area, you really should try to build a bridge to meet that, especially, you know, given the macroeconomic forces of AI, you know, being infused into our businesses. We don't know what that fully means yet, but we're obviously in the hype cycle of it's going to come up a lot in conversations. Clients are going to be asking for it more and more. They're going to want this infused into their business. So what does that mean from a productivity sense or from a You know, just a security sense as part of that. So I think you could, you could try to lead with some, you know, top-level categories. Maybe you're vertical-focused like we talked about, niche-focused in that sense. Maybe you're a new evolution of an MSSP or you're an MSP now that wants to move into an MSSP. So even that, you know, is niching down and being very tactful about what your service offering looks like. Any thoughts on that, Wes Spencer? Just, you know, Um, yeah, a couple, couple things stick out to me, Nick.

Um, we, you hear this a lot. Like, I was just at a conference and talked to multiple MSPs that'll brag on this, right? Like, that's all I do, I only do this thing. And, um, you know, I hope it's true. It's, it makes a lot of sense. We shouldn't niche down just to niche down. Like, if, if you're— and I know you're not saying this, I just want to elaborate on something— if, if you as an MSP think, or it doesn't— even if you're not an MSP, whatever it is, If you niche down on something, you need to have a rationale for why you're niching down on it. What's the driver for it? Don't just do it to say you've done it. And there's so many examples. We talked about this a little bit last week. Keith Craig, our Director of Learning on our end, he used to, he built all of learning for Panera Bread. And he said one of the things they really talked about a lot is like, who are we at Panera Bread? Technically, we serve lunch. Technically, we serve dinner. But that doesn't make us Ruth's Chris. And we're not going after Ruth's Chris. That's not our ICP. People that are seeking a fine, you know, dining steak dinner is not who we are. And so making sure that when we say we're niching down, that we know why we're niching down, we have the science to prove it, and we have the offering to support it and the mechanisms in place to drive it correctly. That is what we're talking about. And, and I also want to adjust— I want to address the other flip side of this, that people might be listening today and they're like, well, wait a second, if I niche down and I start trimming out and becoming bit more selective of who I work with and why I work with, aren't I, aren't I going to lose business? And the answer is, yeah, you are going to lose business, and, and that's okay as long as it's the right thing. How many times, Nick, have we heard people say, I fired my noisiest but highest paying client, and then all of a sudden it was like the weeds parted, and all of a sudden, you know, my, my team is happier, we actually have more freedom and time to go be building other things in, in our, our MSP, and who are actually more profitable than we are ever before because profit does not equal revenue. The two are not, they're not the same thing. And so, yeah, you are going to lose some, some business if you go through this, and, and that's really okay.

Yeah, and I think that's, that's part of that worksheet effort is really to understand what, what makes up those clients, right? What qualities about that client engagement is, is it making it very good for us? It could certainly obviously be on the profitability side, but I think there's, there's a lot of factors to that about about how they actually perceive what you deliver to them, maybe on the security conversation even, right? We have— I hear it all the time, especially now at Cloud Capsule, of, you know, the biggest challenge is our clients think that everything's inclusive, you know, um, they don't, you know, think about continuous improvement for security like we do. They see security as a cost, not an investment. And so those are, you know, like the clients where you may have a, you know, two clients you've pitched the same type of knowledge to them about how this is important, how it is an investment, and they, you know, one client might perceive that value way larger than the other. But I think holistically, we can always try to uplift our messaging behind that and the resources we bring to those conversations to try to say, hey, this is, this is why we talk about this. But certainly there's going to be a lot of clients that, you know, out of the box, you know, they could be regulated, they could just be, you know, just security conscious in general, but they understand the importance of you're delivering as part of that. And those are our, you know, gold star clients. But then those are also the ones that we end up not talking to a lot because they're not asking us for things and, you know, they're not part of that conversation as well too. So I think that kind of brings us to the next tactic, um, in this regard too, which is around, you know, fewer clients with higher value, right? Because I believe if you truly do make these things more custom fit or you start to become more world-class in what you're offering, As part of that, then you can command a higher price point. The conversation isn't about cost at renewal because they see the value in everything that you're doing. And ultimately, you know, that's again where they're going to refer you to clients faster. I also see this, you know, common fallacy of like MSPs usually say to me, hey Nick, we're getting our leads from referrals. And then when I dig into that, it's usually like we get maybe 2 a year. And then when I dig into that, they're usually getting referrals from the clients that aren't so good and they referred another client that is the same profile in certain cases. So you end up kind of stacking up, um, in that regard too. I think we can all agree that we have some vampire clients, you know, that exist out there too, where they're just always calling in or their technology's always not working in one form or fashion. And it's really hard to get that in there too.

Yeah, yeah, well said. So I didn't realize there's a whole stream of chat going on here. So I'm gonna, I'm gonna open these up a little bit more just so y'all can see as it's going through. But yeah, for real, Dean and Josh in particular, anyone else, please join the conversation. Love, love both the joking and the banter and the insightful comments kind of all thrown in there together. So I love that. Yeah, so as we're kind of, you know, walking through this, you know, I think Nick, most people would say, you know, well, yeah, of course I want fewer clients and higher value. That means I make more money and I do less work. Who doesn't want that? Like, that's the most basic business question ever. That's so simple, so basic. But I think it requires some prerequisites. It requires some— in order to say that, but then also to deliver upon it, it probably requires some understanding of things you got to be good at. And the one thing that sticks out to me is this idea that we have to understand our clients are buying outcomes from us, right? They're not buying— I'm not going to go pay you $200, $250, $300, $400 a seat just because you say that you're more expensive and therefore I demand it and therefore it's wonderful. That's not necessarily going to work. When I think about all my MSP friends that are charging far above the norm, that have the ability to do very well, they have great retention, that are able to pick up new clients at that rate, one of the things that I commonly see about them is they can very much do two things. They can articulate an outcome and guarantee that outcome, and then to deliver on it. And here's what I mean by that. They're able to walk into the client, say, typically we work with a lot of clients just like you, and we're really good at this. And one of the things you're gonna see when you start coming over to our MSP, we're gonna fix this, this, and this for you. We're going to do it in this amount of time. And I don't mean just like the busted computer and like the bank, but I mean, like, really help them in where they're going. And you can say things like, you know, ooh, strategically, you know, I understand these things that you're wanting to go accomplish. And here's how we're going to help you do that. We're going to build you a technology roadmap that's walking step by step with where you're wanting to go. And this is what we do. Again, we use medical analogies often. But, you know, when I go see a specialist who understands something very specific about what my needs are, It's the same kind of thing, right? The reason they charge far more money is because they're really, really good at this one thing, and the outcome that comes out of it is I'm gonna be healed, or whatever the address— issue is addressed much quicker and much more effectively. And so I'm paying for the outcome that I'm getting out of that specialization. It's— we need to be the same thing. We can't just whip out our pricing calculator and, you know, ramjam it up by 40% and then expect that everyone's just gonna fall in line and be excited about it. We have to be able to say, what are the attached outcomes that would require someone to pay that rate for what I'm delivering. And we have to understand there's a lot of competition out here, so I'm not going to win on price. That's not what it's going to be about. You can't just throw a price out and expect it to work.

So I just—

that's one of the big things that I wanted to make sure we talked about here, because that's part of the requirement. If you're not good at outcomes, you're not going to be good at charging a higher price. You're not. You're going to become a standard commodity MSP.

ICP. Yeah, I think that's such an important point, is what Josh and Dean are bringing up too in here in the chat. It's, it's really around like, you actually know how to market directly to your ICP if you don't, you know, generalize and you start to niche down and you deliver with those, those client outcomes. You know, that's— I said before on the website, but it's like, you know, that's your call to action, is like you're literally trying to speak to your client as fast as you possibly can, your ideal client. And when you say we have the best help desk, you know, it's like you're not going to, you know, achieve the highest price point for that. You're probably not going to get, you know, the type of client you want because you really aren't speaking to anybody. You're speaking to everybody would want that, right? If it was a perfect world, we'd all have great help desk, great customer support. It's kind of table stakes to the equation versus we do this one thing really well and we do it for this type of person. And that's, you know, a big, big focus area there to then say, We came in, we had this too, you know, we had way too much of a product line card, you know, as far as the scope goes. And when clients would come in, I would get on some of those calls and you could see their eyes start to glaze over as we went slide after slide of all the things that we could do for you. You know, it's like you go to a restaurant and sushi menu and you've got, you know, 10,000 different rolls on there and you're like, okay, well, I'm going to pick these 3, but I don't know if it's going to be good or not. Not, um, as part of it. So just more of an experiment, and versus like, they— these guys, they understand my pain points, they understand where I live day to day, and they've built a purpose-built solution straight for my business. And I think that's where you can't underestimate the power of, like you mentioned earlier, the simplicity of the statement. We all like— love to be there, but doing it in practice is a lot harder to actually, you know, really focus down on what that core competency is for Yeah.

So maybe a takeaway for those listening: Bring this into your leadership discussions and ask this question: What are the outcomes that we promise? And how do we deliver on those? And if you want to take it a third step, when you talk to some clients, ask them, "How are we doing on those things? Those outcomes that we say that we are really good at, do we deliver on them or do we not?" So, so, so yeah, I would really challenge folks to not just say, You know, oh, we've got fewer clients and higher value. That's what we do. But do we deliver on those outcomes, those values? You know, I was hanging out with, um, uh, Dr. Keith Nelson, um, at a Cyberfox event of maybe 3 weeks ago, something like that. And he's notoriously amazing at this. Um, he's really good. Like, he's got specific types of clients that he works with, and he's very good at that. And he charges stupid amounts of money for it. He's never lost one of them. And one of the reasons for that is he understands very much what they're looking for, what they need solved. He is able to do it very quickly, very effectively, and understands the unique makeup of the clients he works with. He says they pay well for it. And so I love that, right? I think that is a direction that we should, should work to. Maybe one last question for you, Nick, before we move on to tactic 3 is how do you start going down that journey? Let's say someone's listening today and they're 5 employees or sub-$1 million in revenue. And they're just clawing at any revenue they can get. Any client's a good client. I understand that. I don't disagree with that in the beginning days. How do you start to kind of move and trend towards a specialization when you're still hungry and you kind of just need to get revenue? Any revenue is good revenue at this point for you.

Yeah, it's such a great question because, I mean, you can't just pick up whatever you're doing today and say like, we're, we're specialized in hospitals now. Like, we're going to burn up everything else we got going on here and just start fresh because you're not going to be viable. In that sense. But I think the one thing I would start with is trying to reframe your existing offer. I think that's always best to start to do of taking a look at what you do today and repositioning it for business outcomes versus likely you have, you know, tool solutions that I see a lot of, which is like, we sell SOC, we sell MDR, we sell XYZ, and it doesn't speak to, you know, any of those solution outcomes. So I would map that first. And then when you think about, again, that visionary perspective of what do we, what could we be really good at in the next 5 years that we want to start investing in? Maybe that's really on the security side. Maybe that's in healthcare, you know, and we want to start building assets around that. So you're kind of doing a stopgap of we're not going to, you know, lose sight on nurturing our existing clients or what we're doing today. But we started, you know, kind of more of this experimental arm, if you will. Of how can we lean into this and what's a good roadmap for us to keep improving on this and start to try to win new clients with that motion and see how that interaction goes as well too. You can certainly go back to your existing base and repackage, you know, the things that you're doing as part of that too. But I think a big focus around it is making sure that, you know, some of these worksheets that we've been building is trying to play into that too of how can you audit your existing systems today to understand, you know, where, where those competencies may live. And they might live in, in the people that you have hired obviously too, where, you know, John in help desk is like the smartest guy ever and he can go learn AI automations and, you know, that might be a competency that he starts to build and you're not going to sell that day one, but it's a good, you know, portion of like investing for the future.

I love that. So, um, here's a question. I'm going to actually show it on the screen that I would love for listeners to go ask the others in their MSP this question and, and get an answer and let us know. Email us back and give us some feedback or come join Episode 4 and give us some feedback. But what percentage of your revenue comes from your top 20% of clients? So remember, we talked about that revenue worksheet that we worked through that we showed at the beginning. We'll bring that up in a minute. We can show that again if folks want to see it. But what percent— take your top 20%— how much, what percent of your revenue comes from that? Nick, are there any alarming numbers that you would point to there if you saw something like what would you— what's healthy there? What do you think might be cause for alarm?

Yeah, I mean, I, I think you could go off, you know, some more of the industry standards there. I think your norm is going to be what I mentioned earlier of like 80% might be— 80% of your revenue might be your top 20 clients or top 20% of your clientele. I don't think that's necessarily, um, unhealthy, but if you've got obviously like one or two clients, if they left, you'd be, you know, crushed from a revenue perspective. Obviously that's You know, growing concern. I certainly see that a lot too, where an MSP might have a really, really big client, but they make up over half their revenue as an example. And that's just a scary place to be because it also makes you, you know, be more of a yes man to that client, you know, but also be very nervous about taking any other risk or doing anything else because you're so dependent on maybe this unique snowflake that is that client. Client. Maybe they're paying you a lot of money, but it's very specific work that doesn't scale to the rest of your clientele too. So trying to get out of that mentality as well. But, um, certainly see it varying.

Yeah, yeah, I completely agree. And holy smokes, we are 42 minutes into this thing. I am shocked by that. So let's— I had some more things to say. Let's jump into the next tactic because I want to make sure that we leave time for everything. And again, I'm leaving the chat up. Thank you all for joining in with this. It's so awesome to see all of that come in as well. So let's talk about tactic 3, building a dream team of partners. You know, so maybe we specialize their promise, we orchestrate, you know, all the rest of this. But you can look— the truth is, you can look like a big company without necessarily having to carry the cost of a big company. I think we're actually kind of good at that at Empath. Sometimes people are shocked, like they're like, "Wow, you're only 24 employees," whatever. I'm like, "Yeah." And they're like, "You guys talk and act like you're much larger." And I'm like, "Well, It's good team, good group of people. So walk us through a little bit more of this tactic.

Yeah, I think this is where, you know, obviously if you think about trimming the fat in your organization, you still want to have that big company feel, to your point. And so I think a great tactic is to start to try to build partnerships, you know, for people who can specialize in certain areas where this isn't trivial by any means because you're putting a lot of trust into that partner., and that relationship that's extending into your clients. Good example of this I'm seeing more and more of lately is, you know, more AI specialty shops like partnering with MSPs because they have the competency and are getting the most experience around building AI automation workflows or doing more of the discovery with businesses around business process optimization. And that's not necessarily a competency the MSPs typically hold, versus like I can come in and tell you what technology might be good, but not necessarily where I can understand you have broken processes all across your departments and we can go fix those and we can optimize them with AI. But that's not a core competency that I see largely in the space. So that might be a good example of where you find a great partner for that. You know, a partner who can build, you know, even more complex infrastructure or whatever it might be. It might be a technical complexity. It might be, you know, a partner that's more around the business process side. But I think it's a much better use and investment of time than what I traditionally see today, where a lot of MSPs spend a lot of time and training on the next EDR tool or the next, come on, insert commodity vendor, right? And not to knock those vendors at all. Like, we certainly use our own and do proper vetting and things like that. The amount of time that you're spending in that, that's just irreplaceable, that the client doesn't see any of it, you know, besides when they get the pop-up on their machine saying like, you're not an admin, you need to go talk to your, your help desk, right? Then, you know, that's the only time they're actually interfacing with those tools versus you investing your time into business outcomes that you can, you know, certainly try to go nurture or leverage new product offerings, you know, that might be something you can actually start marketing and communicating today. So I think that's the big, big delineation there is like, how are you investing that time and what does it mean to vet a vendor, you know, versus a strategic partner, you know, that has these competencies and trying to figure that out. Because then you get into the build by partner conversation, right, of should we build this competency internally, you know, should we buy a tool, right, to be able to do that because it does so much more efficiently. But then the partnering side too is just, you know, really going out and being diligent about— there's plenty of people marketing, you know, these types of services, but it still goes through a process where you need to be able to trust them at the end of the day too.

Yep, it's well said. A couple thoughts that stick out to me, I'm going to steal from Dean, uh, Dr. Zoidberg. He said Carl Palachuk, who's an awesome, awesome guy and been MSP thought leader for since I— we were babies, I feel like, but he said, you know, best in class is meaningless to client. They don't care about that, you know. And, and that's so true. I mean, they really don't. Um, one thing to think about is when I'm building the— my, my partners, and I'm thinking through who's going to help me in this MSP journey, it's not necessarily, you know, who is the one that everyone talks about the most on Reddit. Maybe it is, right? That could be great. There's— and that should hold weight when people talk well of a vendor. It should hold weight when people talk poorly of a vendor, for sure. But, but I think what's much larger about that is understanding how are we building our partner stack in a way that's going to propel our MSP forward. And one of those big things I think is important to talk about is making sure that it's done in a way that, that benefits us as the MSP, that protects our margin, that gives us the protections that we need and the guarantees that we need to make sure that we can scale this efficiently and effectively. So, you know, one of the things I think a lot of times we're not good at, uh, as MSPs is, you know, it comes down to dealing with certain things like contract negotiation and making sure that you have the protections inside of it and making sure that that they're doing all the right things when it comes to a security perspective and that you have the ability to have insight into that and you have protections in case there's an incident on their end, that everything's not just written off and you have to deal with the aftermath and you're playing the great middleman, you know, holding both, both bags of responsibility between the client and the, the, the partner that you're working with. Like, those are big things that we have to talk about and think about. And I've seen those things go wrong over and over and over. And just how are we supposed to work with that vendor? What are their processes? How do they reach out to us? How do they communicate with us? You know, what level of expectation do we have to be effective with this vendor? These are all things that we have to talk through. And this, by the way, is why so many large enterprise vendors don't work for the channel, because their processes don't actually work well for an MSP. So we should dive into that more and ask those more questions around that with, with the vendors that we work with. And so I think that's the other element of a dream team of partners is making sure that we put some good data science and rationale into who we work with and not just picking somebody because everyone on Reddit says they're awesome, right? It should be much more than that.

Um, so yeah, yeah, I think that fits nicely into, you know, kind of the next tactic too as we transition in there about, you know, reducing tool overload, um, as part of this. And I think there's obviously, like we talked about, a lot of these vendors, you know, that not only like take our margins because of just the cost that we usually are bundling into those services, but they also take a lot of hidden costs, which is our time, you know, time in training our technicians on the next tool, time in, you know, managing all the security behind access controls, being able to document and, you know, get technicians into these tools to perform their day-to-day work. And so I think, you know, a lot of the toolset cost is just driving a ton of complexity. You know, last MSP I worked for, we did a lot of M&A and we had 15 different, you know, EDR tools that were in the ecosystem. We were, you know, doing a lot of consolidation and collapsing of vendors and certainly wanted to get that lower. But it's— with M&A, it wasn't really hard or easy to rip and replace in some of these use cases, you know, from what you're doing. Especially with backup tools and things like that. But it also just drove complexity through the roof because we had to know, you know, 15 different EDR tools to be able to support our customers. And not to say that's the average, you know, with that as well too. But, you know, the big piece I think is really reflecting on your toolsets and thinking like, does the client experience any of this? Like, do they get a benefit outside of you just saying, what I always see a lot of MSPs saying is, hey, we, we want to get best-of-suite tools, you know, for security, especially for our customers. I think that's novel and, you know, noteworthy as far as the approach. But I also think you can over-index there where, um, you know, I see people not, not leveraging some of the Microsoft services. And not to say that, you know, Microsoft's a great, you know, tool for all those types of things, but it's already included and you have a lot of efficiencies by having it naturally there. So I think I think there's some, some decisions you have to make that kind of lead into more than just the cost factor or more than just the best-in-breed factor, um, that go into those decisions.

Yep. And, and I think, um, some of this we're natively good at, but I think there's a lot more that we can hone, right? Like, for example, um, two, two tools I use on the reg, uh, even though I can't stand both of them, is Microsoft Loop and Microsoft Teams. Why? Because they're sort of embedded into my pricing. Can I pick better tools for both of them? 100%, I can. A whole ones that I much prefer. But at the end of the day, you know, I owe it to my company to say I can use a tool that's not quite as good, not quite best of breed, not quite best in class, but my business demands it. And so I think that's one element. Again, going back to the margins and making sure they're protecting our MSP, that we're not spending foolishly on all these things that we don't need. And actually, you know, is worse, way worse at this than MSPs is we SaaS vendors. I know SaaS vendors that, like, I have a friend who was going through SOC 2 and he's like, dude, I was looking at this, we have 80 tools that we're using right now.

80.

He goes, it's not possible for us to get through our SOC 2 until we start trimming some of this out because of where our data lives and how we're using it. It's just ridiculous. But I do think MSPs should think about that very, very heavily. You should go look at what's in the COGS. You should go look at what's in, you know, all of your operational costs and what your tools, um, your tool cost is. But the other reason for it, you, you talked about this too, Nick, that I thought was is really important is also just making sure that we're effective with those tools. One of the, the easiest landmines to avoid for ourselves when it comes to, you know, just building out and being effective with our MSP is making sure that we are not doing something stupid and foolish where we have a good tool but no one knows how to use it correctly. Now we miss a ticket, now we don't handle something correctly, now we're not as efficient on it as we can. I'll give you one example. People have heard me use this over and over and over, but there's that— a good example of this. I won't say what, what vendor, but I was talking to an MSP friend— that is a SaaS monitoring tool. And the tool is supposed to see like outbound email inbox forwarding rules set up and, you know, potentially used for data leakage and email inbox compromise. And sure enough, the tool did what it said. It fired alert on it. A technician picked it up. They did— the technician didn't— was never trained on the tool. So they went and they went to look in the Microsoft tenant and said, yep, can confirm email successfully going out to this Russian guy.

We're good.

It's correctly doing it. And it's like, that wasn't the purpose of the alert. The purpose of the alert is to tell you you have an inbox compromise. Tech didn't know it. So now they ate huge crow with the client who is very angry at why they missed something. They didn't miss anything. So again, just going back to being like, are we effective with the tools that we have is a big, big deal.

Yeah, I think that, you know, Michael commented in the chat here. So did I don't know if I'm gaslighting, you know, or on Teams there, but, but, you know, I think there's the support burden, there's the maintenance burden, there's, there's also the security, you know, deficits too of like supply chain risk and, you know, access controls and data sprawl being in these other tools. But even just like, I think the more advanced you get too, like there's a lot of stitching that you have to do with these vendors as well too, to your reporting, to your PSA tools. To these other integrations they may have. And that's its own maintenance costs, right? Like collectively to be able to do all that so that you have proper reporting flowing in from all these tools. And the more that you stack on, the more that becomes, you know, a full-time job for somebody just to maintain integration, you know, as an example of it too. So I think there's a lot, you know, that you can go down in that set. But that's the only area where I, you know, I think it's easy to knock on Microsoft and, you know, some of these other tools, but it's also where you have a lot of efficiencies to be gained as part of that. But I think it's got to also go back to the forefront of what we've been talking about, which is, does that fit into your, you know, business outcomes you're trying to deliver to your client? Do they recognize value out of that? Do they— does it help you, you know, be more efficient in operating in that sense? And I think that's a much better pillar to lean on than it's just the best-in-breed security tool. Right, as an example of that.

Yeah, so as we get ready for tactic 5, maybe a takeaway for those that are listening. Many, many of you have heard us talk about the Cyber Defense Matrix and how valuable it is to start filling in the tools and processes that you have in place to kind of see what's in the stack, so to speak. If you've never done that exercise, I would encourage that because I think the first thing we need to do is have an inventory of, you know, what is in the tool stack, and not necessarily just what we pay for, but like what are all the things that we are able to bring to bear and that we're doing doing. And then the next thing that we should do is we should start mapping that. We should start mapping that to, you know, what clients have all of this and how much of it is actually rolled out and are we effectively using it. You might even ask some questions like, again, make a spreadsheet of your own. Like, are we fully trained on this? You know, what is the ticket load for these tools to Michael's point? And then the last thing I would do is I'd start to look and say, based on some of the data that we're seeing here, based on its usage, based on its cost to us, based on how noisy it is, that now you, you have some, some things you can start to estimate and say, what can we, what can we start to carve out? I think that, again, the business demands it. Good business hygiene demands some of that practice. Yeah, yeah.

I think, you know, part of that is just, you know, your own hygiene due diligence that makes you really efficient. And, you know, to the point was brought up earlier, you know, from Emily around you want to get to the state where if you, if you niche down and you don't have to do so much tenant switching all the time, but also have your house in order so that you're organized for the next thing that you bring on and it fits into your security motion and every check that you're doing is part of that, that makes you feel really good because then you could scale a team around that and really grow, you know, in the areas where it's, is important to invest as you keep going.

Yeah, yeah, I love that. So, so let's, for time's sake, we have 4 minutes, which again, I, I am shocked. I feel like we've been talking for just 15-20 minutes. Um, but let's walk into tactic number 5, that SOPs still matter but they're not the product, right? So, uh, walk us through what we got here, Nick.

Yeah, I mean, I think this is really like we talked on last week too, of we're not saying you can go abandon SOPs and these standard processes. Like, you still need to invest a lot of time in them, especially for a lot of the, you Backend efficiencies that you can gain through a very, very tight-knit help desk, right? Of time tracking, of project management work, whatever it might be. But it's all the things the client does not see necessarily. So it's thinking about that frontend and backend approach. And I think about it 'cause I like to go down the software development path, but it's like everything that we're doing on the backend is really hidden, you know, all the case to the user, but the front end actually informs the back end, right? That's how I've always thought about product is if you have this really good UI that a user can interact with, then that is going to inform how you architect, you know, the back end of your systems. And I think the same could be true here where you're saying, hey, if we're going to deliver this world-class business outcome, what has to be in place on the back end for us to fulfill that? And you know, you'll get into the parts of that that really correlate directly to that business outcome. Like, hey, we have to go fulfill it by doing X, Y, Z versus all the other, you know, secondary factors or tertiary factors that go into that of, well, if we don't put in this time, we won't be able to measure this and we won't be able to prove it as an example too. So it's largely just thinking about, you know, what, what SOPs do we have into place that are really selfish? And not to say that negatively, but it's more just like, this is for us, not necessarily for the client, that they don't, they don't see and they don't get value out of, versus the ones we could rewrite, you know, to create a better client experience. I think revisiting that on a periodic basis is also really healthy as part of what you do. And maybe that's, that's a conversation you have also in those QBRs with the client of How are we doing in this process? Like, what's the feedback of, you know, your users, your, the delivery motion, you know, of this service? Is it, you know, still providing a lot of value? How could it be better? So just kind of challenging that along that time too.

Man, that's, that's good stuff. And I'm going to peel out a little bit what Dean just said here as we kind of close out is that SOPs are a consistency control. And I think we, our clients demand that one of the good outcomes that we should be always delivering on no matter what size MSP you are, are, no matter what your capabilities are, no matter what niche, you know, areas you serve, um, is you, you owe to them consistency. You are going to get fired in a hot minute if they feel like, man, I, you know, I reach out one time and I get this, and I reach out the next time and I get that, you know, today it seems to be acting this way, next day it's that way. That lack of consistency will destroy your business. They expect consistency time and time again. And we see this over— like, it does, you know, one of the reasons my in-laws love chain restaurants is because of the consistency that comes with it. They know I'm gonna get this outcome every single time. For me, I'm a little bit more adventurous, and I go choose a hole-in-the-wall place knowing it could be a dud or it could be stellar. But, but what we're ultimately looking for is that consistent outcome when it comes to our business. If I'm a business owner and I'm paying you a lot of money per month, I expect consistency comes with it. So I love that he pointed that out, that really SOPs are one of the drivers for that, so that there's no room to say, "I didn't know. I wasn't aware. I didn't know how that worked." And so that now picks up into I think MSPs are great at writing SOPs. We have them everywhere. But like, have we really thought of it through that lens? And why do we have this SOP? And what has it been written for? And what task and purpose is it supposed to be accomplishing for the business? And what outcomes does it map to? We need to really think through those things so that we really have SOPs that are driving us in the right way and for the right rationale and for the right reason. So I'd love this. So those are the 5 tactics. Let me just kind of repeat them again and get these out again. So tactic 1 was just this idea of, you know, trimming things out, trimming the fat, and niching down into what we're doing. Tactic 2 was fewer clients and higher value and pushing towards all that. Tactic 3 was building a dream team of partners, uh, not, not clients, but actual partners that you work with. Tactic 4, reducing tool overhead. And then Tactic 5, SOPs that matter. So this has been a ton of fun. I'm going to put that QR code back up just so folks can see that. If you guys want the tool that we had talked about, out. It is right there, up there, so you'll be able to go and grab that, no problem. Nick, walk us through what we're going to be talking about next week on October— it looks like November 12th.

Yeah, so we're going to kind of double-click in on this whole ICP conversation. I think we got really good engagement on that this, this episode as well too. But thinking about, you know, what does it mean, you know, to really get into the weeds on defining that ICP what does it mean in practice, um, as far as like your discovery, how you're testing that out, and how you can actually, you know, continue to invest in that moving forward, uh, to start to build back, you know, your offers with that endgame in mind. Um, but really placating into, you know, some of the things that we've been discussing, but expanding and going a little bit more narrow on what that could look like for you too.

Love it, love it. Um, well, cool. So we hope to see y'all, um, on November 12th as we talk about that specifically. It's going to be good. One of the things that y'all can do to help us, scan that QR. That'll let you be registered for it so you won't forget. It'll be on your calendar. That's the first thing you can do to help us. The second thing that you can do to help us is just share the word. We're still— this episode 3, y'all, this is crazy. And I'm shocked that we had almost 1,000 views across all our platforms. That's unbelievable. But I want to see more, right? Not just for the, you know, for the street cred, but because we really want help, and we really want to be doing what we can to help your MSP continue to grow. So, uh, November 12th, um, it happens to be somebody's birthday on this, uh, among the two hosts. I won't say who, Nick, um, but, uh, that's going to be— it'll be fun for, uh, for that reason. And, um, uh, looking forward to it. So, uh, anything else as we close out? Um, by the way, yeah, don't forget the snapshot, um, uh, worksheet like we had talked about. Um, you'll get a link to that from the QR code. Uh, anything else, Nick, that you want to make sure that we cover?

No, I think this is great. Um, I know we're running a little bit past time here, but I appreciate everybody joining, and, uh, we're looking forward to the next one. So thank you guys, love it, appreciate it.

All right, thanks everyone, y'all take care, and thanks so much for joining, and we will be in touch with y'all soon.

Thanks.