“ transferable at any time ,” because while you may plan to run your business for 40 years , life sometimes forces your hand . Pointing to EPI data , he notes , “ 50 % of the exits in our country today are involuntary due to these destroyers of business — a death , a divorce , a disability , a partner disagreement , a pandemic .”
That ’ s why it ’ s important to know your “ number ”— the amount of money you ’ re going to need to walk away , says Rayanne Buchianico , owner of ABC Solutions , which provides accounting , business , and tax consulting services to IT solution providers . And that number will change as you grow , so “ make sure that you can measure your profits at every step of the way ,” counsels Buchianico . “ Just because you only have five clients , that doesn ’ t mean that you shouldn ’ t separate out your profit , your revenue streams , and manage the margins at each one of those revenue streams . . . . Make sure that you ’ re hitting the ones that you need in order to be successful .”
Build A “ Fit ” Foundation
Snider says four Cs will determine about 80 % of your ultimate business value : human capital , customer capital , structural capital ( your systems , processes , and financial structure ), and social capital ( your company culture ).
He says structural capital is “ the most robust ” of these factors . This includes developing playbooks , standard operating procedures , and good financial documentation . Says Snider , “ Those are the types of things that in those early years allow us to begin to set that foundation and begin to scale up so that the business owner . . . who ’ s likely the relationship builder and their sole salesperson , can go out and develop that customer capital and drive great relationships into the business for profitable revenue .”
Even for solo operators , Snider says , “ it provides a level of discipline that allows you to scale . It ’ s kind of like working out every day . If you want to live a healthier lifestyle , it ’ s about eating right and training . Same thing in your business .”
While you ’ re developing your customer capital , be disciplined about establishing a target customer profile that allows you to achieve your value creation strategy , adds Cissel . Your customer profile guides the technology stack you support ; narrowing your stack to fit your customers enables better efficiency in service delivery , he says .
With your stack in place , focus on “ the economics of margin ” to get your pricing right , Cissel says . Don ’ t price based on the competition , but rather , “ What is the value that I ’ m providing to my customers ?”
Staying In Shape For The Lifetime Of Your Business
After you ’ ve established a healthy foundation , don ’ t slack on setting and reviewing annual goals , Buchianico says , adding that “ your business plan should be updated every five years at a minimum .”
This is also a period of reinvestment , decentralizing yourself and building and empowering a leadership team , Snider says .
Buchianico agrees . “ You ’ re the visionary . You don ’ t have to be the one plugging in the Ethernet cables anymore .” She advises training clients on how to open tickets and make requests early on . “ Get them used to working with the others ,” Buchianico encourages , “ even if it ’ s just you .”
Once you ’ ve made the transition from technician to business operator , “ understand that you need to make 20 % profit ,” says Cissel . “ You need gross margins that are greater than 42 %, you need service gross margins greater than 50 %.”
Don ’ t Neglect Your Personal Growth And Goals
MSP business owners at this stage of scaling are familiar with the phrase , “ Work on your business , not in it .” But what you don ’ t hear a lot as an entrepreneur , Snider says , is “ stop living in your life and work on your life . I think every Boomer will be 60 years old this year or older . . . . What you ’ re finding is that they ’ re still struggling a little bit with , ‘ Who am I outside of my company , and how do I start to spend some time there ?’”
If you ’ ve built a strong foundational business that can run independently from you , you can harness some of your personal goals and “ live a little bit more of a fulfilling and well-rounded , holistic lifestyle ,” Snider says .
Still , if you want your business in the best shape for an exit , “ there ’ s very few small to medium-sized MSPs where you can be an absentee owner ,” says Cissel . However , he adds , “ you can get to where this is a fun business to run , and you don ’ t have to work those [ long ] hours ” if you ’ ve put the right people , process [ es ], and tools in place . The goal is to understand your value creation strategy and grow the best company you can , which is a company that somebody else wants .”
And like a good fitness program , “ it ’ s never too late or too early to start planning ,” says Snider , “ whether you think you ’ re one year away from [ exiting ] or 40 years away .”
Colleen Frye is Executive Editor of MSP Success . A veteran of the B2B publishing industry , she has been covering the channel for the last 17 years , most recently as managing editor of ChannelPro . Her work has been published in a variety of media , including TechTarget sites , InfoSecurity Professional magazine , and Application Development Trends .
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