MSP CEOs: Hyper Business Growth vs. Personal Happiness
A growing number of MSPs seem to be reaching the following conclusion: Maybe running a successful lifestyle business isn’t so bad after all. Indeed, earlier this decade thousands of VARs jumped into the managed services market with a common goal: Automate operations, drive recurring revenues, and vastly increase the value of their businesses. In some cases the goals are now changing. Some MSPs are deciding it’s time to focus on highly profitable lifestyle businesses rather than hyper-growth, high-valuation dreams. Here’s why.
This blog entry is based on four separate conversations that occurred over the past 18 months or so…
1. March 2011: During a phone call, the CEO of a $1.5 million MSP told me he was stressing out. Internal revenue goals for the year were about $2.35 million, nominal for many MSPs but a big jump for this particular company. The goals are part of a bigger long-term exit strategy for the company, which could be in jeopardy if the goals aren’t met. But here’s the twist: The company has nearly zero debt, zero outside investors, and the “high stress” goals are self-imposed. The CEO is just about ready to adjust the goals slightly downward, I suspect, so that he can spend more time with his wife and two kids.
2. October 2010: At N-able Partner Summit, I caught up with masterIT CEO J. Michael Drake and ETG CEO Mike Jones. Drake mentioned that he agreed with one of my recent articles about Five Year Entrepreneurial Fatigue. While masterIT and ETG continued to hum along, Drake said some of his MSP peers were struggling to generate growth and some were beginning to suffer from fatigue.
The conversation was also deeply personal for me. I arrived at N-able Partner Summit a few days after my brother-in-law died from cancer. I basically broke down during my conversation with Drake and Jones, and they managed to lift my spirits with some key reminders about what’s important in life. Ever since those dark days in October, I’ve reconsidered quite a few things about life, business and the pursuit of happiness. I also started listening more closely to MSPs who opened up a bit about their own family stories — rather than always asking about M&A multiples (which don’t seem to be rising, by the way).
3. September 2010: At Tigerpaw Partner Summit, President James Foxall told me he had some clear goals for the Tigerpaw customer base, which includes MSPs, VARs and telecom resellers. Sure, Foxall wants his customers to be incredibly profitable. But he tossed in this interesting twist: Many Tigerpaw customers are happy running lifestyle businesses, and if Tigerpaw can help that lifestyle business perform better, that’s just fine.
4. November 2009: At an HTG Peer Group meeting, there was heavy discussion about life-work balance. The peer group members — MSPs and VARs — have their spouses fill out a quick survey. On a scale of 1 to 10, spouses describe whether the peer group member is available for family activities, able to unplug from work, etc. Yes, many of the HTG Peer Group members are pursuing hyper business growth. But I suspect some members reconsidered their priorities after reading survey feedback from their own spouses.
Chasing Evolving Dreams
Don’t get me wrong: The managed services dream remains alive and well. MSPs can automate to ensure predictable recurring revenues that let dollars flow to the bottom line. In business there’s an old saying: “If you’re not growing, you’re dying.” But for a growing number of MSPs I hear from, expansion now means low double-digit — or even single-digit — revenue growth.
No doubt, some people certainly find happiness while generating hyper growth. I think the best hyper-growth people are constantly seeking out new challenges on multiple fronts. A prime example: ConnectWise CEO Arnie Bellini. During a January 2011 side conversation, Bellini asked me how I was holding up following my brother-in-law’s death. I appreciated his concern and I gave an honest reply… conceding that I sometimes cope by burying myself in work.
Bellini politely suggested that I find a secondary outlet. He noted that he’s always working on two massive challenges in life — one that’s business related, and one that’s personal in nature. Many MSPs have seen the business side of Bellini. But on the personal side, he competes in Iron Man competitions. And next up, he plans to swim the English Channel.
If Bellini can run a fast-growing software company AND train to swim the English Channel, I guess I can find time to figure out what to do outside of work. And I guess a bunch of MSPs can figure out how to grow fast (or reasonably fast) without burning out.
Lesson’s Learned
Still, the entrepreneurial dream means different things to different people. Chase the business dream at your own pace. And make sure you inject plenty of personal happiness along the way.
P.S. — As for me, I’m still working to find that outside hobby… though the overall pursuit of happiness has been going well.
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Work Hard, Play Hard…and yes…even Party Hard! Skiing tonight at Alpental my seasons pass revealed that I have been skiing 41-times this year…and there are atleast four more weeks of skiing. My goal is 50+
🙂
harrybbbb
Thanks for sharing Joe. I think there is an unnecessary stigma put on lifestyle businesses. And outside of growth those businesses have the same burdens any business has, so its about BUILDING balance not just FINDING balance, because for many people who have been work-o-holics, they have never had balance, so they won’t be able to find it. They’ll have to create balance. That being said, Joe, if you take up something like crocheting we’re going to make fun of you. 🙂
-brendan
HarryB: Ski the K-12, just once for me.
Brendan: I guess social media doesn’t count as a hobby for us… Not yet at least.
Best
-jp
First Joe, thanks for how transparent you have been with your personal struggles. We can all relate. Now, how do you define HYPER business growth? Is there some metric of MRR that you attach to this?
Joe, good job! Nice read!
Dave@4: Hyper business growth depends on business size — and the eye of the beholder. What’s better, a $1 million MSP that delivers 50 percent growth ($500K gain) or a $10 million MSP that delivers 5 percent growth (same $500K gain). To each his own. Generally speaking, I hear MSPs that push beyond $5M recurring revenues (annual) and 20 percent annual growth fit the hyper growth model and fetch the highest valuations. But I’m certainly painting with broad strokes here.
Todd@5: Thanks for always reading. And responding.
-jp
JP, thanks for a wonderful article. I know Ulistic is about building a lifestyle for my wife and I going into the “post kids” part of our life. Just enough business to sustain a great lifestyle.
Stuart Crawford
Managed Services Marketing
Stuart: Pleased to say readers essentially wrote the article, through verbal conversations with me. There are some great, caring personalities in this industry. I just repeated what they told me…
-jp
Great article. Balance has been a personal struggle for me (coming from a workaholic family). Currently making the switch to MSP, and only after reading this, realised I once lost balance to work. I have to agree a bit with Brendan, as I always had to create balance.
Thanks for sharing
Joe
Great article. I spend lots of time peeling back the covers on businesses through HTG and in depth when we deliver our SWOT visits. This is a significant problem for the channel – not just for MSP’s – but for everyone in IT including our vendor and disty partners (and even the folks who cover this crazy industry) 🙂
The more I work with folks on this – the more I am moving away from the term balance – I’m not sure that really can exist – and I am calling it life/work choice or control. It all boils down to one thing. We have to choose how we use our 168 God given hours each week. Every person can make choices to put priorities in order. Anything less is an excuse. But the world and our industry pushes us to go faster, work harder and spend time first on work. That is the wrong choice. We have to control what we do with our time.
I messed this up for many years – but the awakening of a quad bypass has made me realize if I don’t smell the roses today – there may not be a tomorrow. None of us have that guarantee. Time to take the bull by the horns and put first things first. No one I have ever spoken with has wished at retirement or on their death bed that they had spent more hours working. But I have dozens of examples of grown men crying because they missed their kids growing up, lost their marriage, failed to spend time with their parents and siblings or a multitude of other important things we all talk about as being most important. Time to make life match up with talk. It is about choice. We can control work if we choose to. If we don’t, it will win.
Nathaniel@9: Best of luck with your business transformation, and balance. Check in with me and MSPmentor down the road to let readers know how business is progressing.
Arlin@10: I’m not a member, but the HTG Community has taught me plenty about business and life since we launched Nine Lives Media Inc. in 2008. I look forward to learning more in Dallas this May.
-jp
Hey Joe….when was the last time we had this many comments about a subject? Just goes to show this is at the heart of what is on most people’s minds. It took me a long time to get better at life as well as work, but it is worth it. Keep up the good work and best wishes to your family.
Joe, timely post and great feedback. I remember well our conversation in Scottsdale. I’m a big believer in the law of attraction, and there are fantastic people in this industry. One of my heroes and mentors, Gary Pica, has been talking a lot about success amp; happiness recently. Your example of Arnie Bellini is spot on. The passion he brings to his business is a function of the passion he has for life.
Gary and Arnie are examples of people who achieve fantastic growth plus success amp; happiness. They are not mutually exclusive. I’m really beginning to learn that. Yesterday my 9 year-old daughter shadowed me at work all day, and during a lunch with our whole team (watching the NCAA tournament) she asked me, “Daddy, do you do this every Friday?” My reply was, “No, we do it every other Friday!” We are learning fun is a big component of success. Happily, our top line is 65% greater in Q1 2011 than Q1 2010, and our true profit is up 165%.
Arlin Sorenson’s depiction of life/work choice for me is better than balance. The more I learn, the more I realize I don’t know, but one thing hit me recently – Oliver Stone penned a great line, “Life comes down to a few moments, this is one of them.” I am sure the readers, like me, have pumped themselves up with this many times before going in to close that big deal. I don’t agree with it anymore because life comes down to every moment. We have no guarantee of the next one. Plus, we have no idea who is watching – family, prospect, team member. Whether managing an MSP or being a family member, we are all leading in some way. Max De Pree said it best, “The first priority of a leader is to define reality. The last is to say thank you. In between, the leader is a servant.” Simply said, but harder to live. It’s really all about reciprocation.
Joe,
Thank you for being real and transparent! I too remember our touching conversations in October at the SMB Nation event regarding the realities of life. I was impressed by how honest you were regarding your feelings and personal pains about the passing of your brother-in-law and how open you were regarding “What’s this all about and for?”. It helped me to reflect and appreciate the hard decision to open a new chapter [ http://www.clearcenter.com ] in my life after starting and growing DirectPointe for ten years [ http://www.mspmentor.net/top-100-msps/mspmentor-100-overall-rankings/ ].
Making the choice to open a new chapter was one of the hardest decisions and tasks I have faced in my life, however two years later I can honestly say it has helped me to find balance and personal happiness; because I am provided a greater opportunity to serve others yet leverage the lessons learned regarding the investments of professional time and magnifying the need to be more disciplined and balanced by spend and more time with my family… which is more important then anything else in my life [ http://blog.properfamily.com ].
From my perspective, growing is not only found in top-line revenue numbers and EBITDA measurements. It can be found in the fulfillment of serving others and being their during the simple yet cherishable growing moments with our spouse, children and loved ones.
We are not getting any younger, my simple advice would be to do something you can be passionate about and that can help bring you personal happiness. If you are not personally happy it is much harder to serve others… if you are going to call your self a “Service Provider” wouldn’t you agree you need to be happy doing it?
The tides of change are among us. The shift in society is here and the observation of the public financial markets which drive the liquidity markets, which drive the venture based markets provide indicators and evidence that the importance of running a scalable yet profitable Service Provider are more important then ever and that by doing so and finding personal discipline to be balanced will help to drive the “personal happiness” which is a necessity to remove the self-imposed perspective of being “burned-out”.
Here’s to a bright future as we choose our paths! Remember… the race is long and in the end its with ourselves. 🙂
It has been an honor to contribute to such a meaningful and real topic. Thank you again for being real and transparent Joe!
Much love!
Michael Proper
Mike@12, Michael@13, Michael@14: Thanks for the comments above. But most of all, thanks for the conversations we’ve shared.
-jp
Thanks for the post Joe. I appreciate your ability to be candid about your personal journey. Your post reminded me of a quote from our partner Ryon Ellis at briteCITY:
“The traditional support model in the IT services space is selling time for dollars. Spending the years that we did at our prior firm, we saw the lifestyle inhibitions and the profitability inhibitions that that model inherently brings to the table. We were convinced that we could be more profitable, spend more time with our families and less time working if we went with a strict complete managed services model. We don’t sell time; we sell solutions.”