MSP Business
Be the Owner - Not the Lead Tech
24 April, 2014
I love working with managed service providers who have "seen the light" and are ready to take their business to the next level. Somewhere along the line they've managed to start a business, sell their services, make money, and survive a few tough years. Now they're ready to reap the rewards.
More often than not, these folks started out without a clue of how larger consulting companies do business. As a result, they made up their own rules as they went along. They sold what clients asked for. They took as clients whoever offered them money. They got a little advice here and there.
And they built a business focused on one person: The Owner.
I've seen more than one consulting company with 50+ employees that is still completely dependent on the owner being in the office every day, making every important decision, and working his tail off. It's sad to say, but this poor owner can't take a day off, rarely managed to go on vacation, and doesn't realize he owns a job, not a business.
Quick quiz: How long would your business last if you disappeared tomorrow? Really think about that. For most small businesses, the answer is somewhere between one day and one month. I promise you this is true. If you have 30-50 people, you probably have managers and people between you and your teams (tech support team, sales team, front office, etc.). But have you really turned over enough of the company to just walk away?
So many people buy into a simple two-part myth that their business has value. First they are told that being a "company" rather than a sole proprietor means that the legal entity can live after you're gone. Second, they're told that signing long-term contracts brings value to the business. Each of these has a grain of truth, but neither is true enough to guarantee that your business will last one day longer than you do.
I always advocate that you operate as an entity such as a corporation or limited liability company. There are tax and financial advantages to this. There are also legal advantages if you are diligent to maintain the "corporate veil" between your personal and business lives. But just be aware that a legal entity with no income and no employees only exists on paper. Your business can still dissolve in a second.
As for contracts, many people have learned the hard lesson that you can't force people to do business with you. And one of the easiest ways to break a contract is to refuse to do business with a person or entity who acquired a contract as the result of a catastrophic change. If clients don't want to do business with whatever's left after you're gone, they simply won't. Your company might win legal battles, but it will be an unprofitable mess, and probably not the legacy you have in mind.
Run With the End Game In Mind
What are your potential exit strategies? In other words, how might you get out of this business? One might be to sell the business. One might be to create a partnership and gradually hand it off. One might be to simply leave it to your heirs.
Perhaps the best way to run your business is with the exit strategy in mind. That means maximizing the sale value of the business. And that, in turn, means that the business can’t be completely reliant on one person – not even the owner.
I sold my managed service business a few years ago. I sold it to my service manager, so the sale part was very straight forward. But this year he sold that same business to a stranger – for a profit. Both sales and the smooth transitions that followed were possible for a very simple reason: The owner could disappear for weeks at a time and everything just kept working.
I had put in a management structure several years ago and hired a president to run my company. I did sales, marketing, and project management for the large and interesting projects. I was there, but I wasn’t required in order for the business to continue running successfully. When Mike bought that business, he could step right in because the clients didn’t expect me to answer the phone, design their backup, or produce a quote.
Small businesses like to do business with other small businesses. That’s because they can reach the owner. They can hold that owner responsible. But that absolutely does not mean that they expect the owner to perform all the work. Think about the other small businesses you work with. You want to have a relationship with the owner of the print shop, the janitorial service, and the cabling company. But you probably don’t care whether someone else runs the printing press, vacuums the floor, or pulls CAT6 through the walls.
Owners Avoid Burnout
Here’s an added bonus to moving up from “lead tech” to owner: It’s more fun to step out of the tech role and into sales, marketing, and managing the company. Many business owners burn out because they keep getting pulled into every messy project. Plus, to be very honest, you can only crawl under desks for so many years before you decide that there’s more to life.
It’s one thing to say that your business cannot survive without you. Another way to look at that same situation is that you can’t have a life separate from your business. It limits your vacation time, your hobbies, and your family life.
Let me be clear: I highly recommend that you play an important role in your company. In fact, I think the best role for you to play is head of sales and marketing. Be the relationship person. But get yourself out of the service delivery department.
If you step back and look at what your company sells, it’s service. Yes, you sell some hardware and some software, but you are primarily a service company. That means that service delivery is the most important thing that should operate flawlessly without you.
You probably got into this because you love technology. And you probably still love technology. So create the “new” ideal role for yourself: Create a role that allows you to be involved in the really interesting projects and avoid all the mundane daily tasks. You’ll love your job a lot longer – and make it more valuable at the same time!
As always if you have any thoughts to share, feel free to leave a comment below!
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