Episode 132: The Word is No

 

Transcript:

Rich: [00:00:00] This episode of MSP Chat is brought to you by MSP Mastered. If you like co-host Erick Simpson’s Tip of the Week, you’ll love the comprehensive growth advice Erick and his team provide at MSP Mastered, your go-to resource for overcoming business challenges, improving service efficiencies, selling more profitable MRR agreements, and increasing the value of your MSP business.

From sales and marketing, to service delivery, to hiring and retaining high performing talent, MSP Mastered offers access to over 90 online Mastered classes, 150 on-demand webinars, and 250 advanced MSP tools resources, along with regular group coaching sessions and unlimited strategic email support, all for one all-inclusive membership [00:01:00] fee.

Unlock your true MSP potential by joining MSP Mastered today. And three, two, one, blast off. Ladies and gentlemen, welcome to another episode of MSP Chat, your weekly visit with two talking heads talking with you about the services, strategies, and success tips you need to make it big in managed services.

My name is Rich Freeman. I’m one of your co-hosts. I’m also the chief analyst at Channel Mastered, the organization responsible for the show. I am joined digitally this week, side by side, by your other co-host, our CEO and chief strategist at Channel Mastered. His name is Erick Simpson. Erick, how you doing?

Erick: I’m doing well, Rich considering that, I’m nowhere near any kind of, Canadian fire after effects or anything like that. We’re just really hot in Southern California right now. That’s the one thing that’s keeping the the air conditioning running almost constantly here at our house.

How about you?

Rich: My my sob story is that [00:02:00] I’m in Seattle. It is hotter than you… Probably not as hot as it is where you are in Southern California right now, but we are expected to get up to 89 today here, which by Seattle standards is just, desert hot, and nobody has air conditioning, myself included right now.

And so the… i’m I got a fan going here in the office. It’s doing a very good job of of keeping me cool. But yeah similar. But you know what? You make a good point. We were both in, in Buffalo at the Ingram Micro event last week, where the, the wildfire smoke was very much an issue, and we need to be grateful for the small things, which is that at least our air is fresh.

Even if it’s hot, the air is fresh.

Erick: And just thinking about all the folks affected by those wildfires up in Canada, hoping everybody stays safe. I know California is usually the ones in the news for wildfires and, burning half the state down. But hope everybody’s okay in Canada

Rich: we are gonna dive into our story of the week now.

And folks, Erick and I loved the Pax8 Beyond conference [00:03:00] so much that about a month and a half after it concluded, we’re going to revisit that because we have an interview segment coming up for you in the middle of the show with Juan Fernandez that was actually recorded at Beyond.

We just haven’t had a chance to use it yet until now. And the origins of our story of the week actually go back to Pax8 Beyond as well. During that conference, I had a chance to sit down with Peter Kujawa of ConnectWise. He both runs the IT Nation organization over there and the Service Leadership Organization, which is one of the best known, most respected, foremost sources of good, solid, deep, objective data about the managed services market out there.

And so Peter and I sat down to talk a little bit about Service Leadership’s 2026 annual IT Solution Provider Industry Profitability Report. Over 300 pages of detailed chart and spreadsheet-laden goodness. It had not be- it was not public information as of Pax8 Beyond, so Peter and I [00:04:00] had a conversation about it.

I didn’t get a chance to write about it on Channelholic, my blog, which you will find at channelholic.news, until much more recently, and this is our first chance to talk a little bit about it now. And again, tons of data in there But there was one particular phenomenon that Peter called my attention to in the research that Service Leadership is doing right now that is a bit of a mystery for now.

They– I– the Service Leadership folks think they may have an answer to this, but here’s what they’re seeing that they can’t definitively explain right now. So Service Leadership, for a long time, has been tracking a metric that they call service multiple of wages, and it’s a ratio. It’s very easy to calculate.

You basically just take all of the service revenue that your company is pulling in, and you divide it by all of the service money that you are spending to deliver tho- those services, and you come up with a ratio. And for many years Service [00:05:00] Leadership has been telling people to target two point five x.

That’s a good number. Best in class MSPs, top quartile MSPs for a long time have been averaging more two point seven, a little bit above that target number. You look at the data over the course of the last three-ish quarters now, though, and that best in class service multiple of wages ratio has been creeping up from two point seven, which is where it’s sat for a long time, to two point eight, to two point nine.

In Q1 of this year, and this is actually unpublished data right now that I am authorized to talk about, the number in Q1 for best in class MSPs was three point oh one. And to put that in context, in the entire history of this Service Leadership data set, they have only seen a number above three once.

That was in back in the Great Recession, 2008, 2009, when wages tanked across the board, across the economy. Naturally, wages go [00:06:00] down, service multiple of wages is going to go up. That was a bit of a blip Now we’re looking at a 3.01 number for best in class MSPs and service multiple of wages. And what’s especially interesting and mysterious about this, Erick, is we are not seeing that kind of improvement among the other three quartiles.

The median two quartiles of MSPs, there has been some improvement over those three quarters, but not a lot. There’s been none for the bottom quartile MSPs. And so the mystery is, why are the best MSPs pulling away from the pack in terms of service profitability? And Peter’s theory, and it’s only a theory for now, is that you look at that timeframe, and this corresponds pretty nicely with the timeframe in which MSPs have begun deploying this service desk automation, AI automation functionality from companies like Pia and Thread and Mizo and, of course, [00:07:00] Connectwise itself.

Logically speaking, can’t prove it, but you might think best in class MSPs might be a little ahead of the curve in terms of deploying and making effective use of that software. And Peter thinks what is happening is you’re starting to see the effect of that software, that basically the companies that are using it are, as he put it, backfilling at a slower rate.

So they’re not necessarily letting anybody go but they’re getting more done with the techs they have on staff now. They are not adding heads at the rate they were before. And service revenue is growing at a faster clip than service costs, and you’re seeing that service multiple of wages go up.

And Peter’s theory basically, and again, just a theory, is that a year from now, that 3.01 number, which is a pretty impressive number, almost historically unprecedented, is gonna be at 3.25 to 3.4. Now I keep saying can’t prove it, don’t know for [00:08:00] sure. They are needless to say very curious whether or not there is a direct relationship between AI software for MSPs and service multiple of wages growth.

And so they, Service Leadership has created what they call the automation index, and it takes service multiple of wages and five other variables, and it combines them in some kind of formula, and it comes up with what I am told will be a much more objective measure of the impact that AI is having on a MSP business performance.

That da- the first look we will get at that data will be in the Q3 update that Service Leadership publishes. Figure six-ish months from now, at some point in Q4 when they’ve crunched all the Q3 numbers, we’ll get our first look at the automation index, and that will tell us or at least begin to tell us whether Peter’s hunch is about why we’re seeing that service multiple of wages growth in the best, So where that, that growth in service multiple wages for the best MSPs is coming from.

But for right [00:09:00] now, it’s a preliminary little hint, Erick, that this stuff that a lot of vendors are trying to sell you, if you’re an MSP right now, might actually really work.

Erick: Boy, I wish I was in that conversation with you and Peter so much because I’ve got some ideas, and of course, Peter’s got the data.

Peter has been doing this for many years. As and many of our listeners may not know we were part of the HTG1 peer group. We worked really closely with Paul Dippel as he was developing and improving the benchmark report. And so I’m very familiar with this two and a half times wage kind of formula.

And even when I coach partners today, Rich, and we’re looking at that multiple of wage. And that 2.5 has always been the base. I’m always trying to, push to try to figure out how do we get three times multiple. So I’m very familiar with this part of the conversation. And what I will say is I’m gonna– I don’t think it’s as simple [00:10:00] as that.

I’m gonna push back a little bit. I don’t think it’s as simple as, oh, AI just came along and did this stuff. If you t- if you think about how these quartiles are designed in the slick benchmarking system, you’ve got your top performers, you’ve got your median performers, and then you’ve got the, the lower tier of performers.

And the top performers have always, been… That’s why they’re in the top quartile. They’re the top performers, so that means they’re doing a lot of things right. And I would say that the more mature MSPs, I’m not saying no that AI doesn’t have an impact here. I think they were just ready for it to help that acceleration.

Because if you think about, m- the history of managed services, we know from other reporting that, depending upon, who- whose data you’re looking at, could be a quarter, could be a third of MSPs are flat or unprofitable, right? So those folks, they have some challenges.

But the, the folks that are really [00:11:00] growing, the way that I’ve been eyeballing the market we’ve seen target margins grow from, what everybody thought was maybe 35, 40%, 50%, 60%. I’m working with MSPs now, Rich, that are– We’re targeting 70% gross margin when we’re bundling and pricing services.

If we’re increasing those target margins by 10%, 5% to 10%, every year over the last three or four years, think about that. Wages certainly have increased, but the gap is getting wider. So I think it’s a combination of these more mature MSPs, way more mature than, I was when we started our MSP practice.

We had to build the tools to build the tools back then a thing. But now we’ve got much more favorable Relationships and partner models and pricing models from vendors they’re very competitive. More vendor competition means prices are drive lower. Mature MSPs really know how to weed their garden, as Carl Palahuk says [00:12:00] your A, B, and C customers.

C, D, and F start getting rid of those lower folks working with those more, profitable, strategic clients. So I think that the AI introduction is an additive to that because, wow, now I get much more efficiency out of my team and if we’re doing ticket triage and things like that. And also, it’s not simply because of the work, I think also the, the AI overlay is allowing us to look at patterns and trends and make better decisions as business owners.

So I will say there’s definitely an impact here, but I think that you have to be ready to adopt AI properly in order to deliver what we’re seeing now in this reporting. So I think there’s a lot of little factors that have led to this and I think you mentioned it, it’s not having that big of effect on kind of the median quartile or the lower quartile.

I think it’s these more mature MSPs that are way more mature than, anybody was five or 10 years ago, that are [00:13:00] now able, in a position to leverage that for that additional little bump or increase. We’re– I was always trying to push for three times multiple on salary, and 3.5 times if you’ve got some dragon slaying engineers and you’re booking them out at, boy, $250, $300 an hour.

And think about the other roles that, that we now have in MSP organizations, Rich. The VCIO, the VCTO, where that is a much more mature role, and we’re probably charging the max per hour rate for those types of engagements because they’re so strategic and so valuable to clients. And then the budding, emerging VCAIO or VCAIIO role that we’ve been talking about.

So I love your thoughts

Rich: So I I, and I like your, I, I think I like the, the general take that what’s really happening here is it’s not just AI, it’s related to maturity. So the, the most mature MSPs are in that quartile. The only [00:14:00] thing I will say is that I need a better explanation than the one you just offered for why those most mature MSPs have gotten that significantly more mature in the last three quarters.

It’s the abruptness of the change that makes you wonder what’s going on e- exactly. And so maybe it’s a combination of there being m- more mature MSPs and also more mature MSPs, if you get the distinction. That’s just true of this industry over time. When you were pioneering the model, there were, there was no such thing as a mature MSP.

Now, obviously, there are just a lot more mature MSPs out there, and that’s been a, a process across the last couple of decades. But what we’re seeing in the, the latest service leadership data is something that’s happening quarter over quarter, not like year over year. And so- Yeah … it feels like it needs a different explanation.

Erick: No, I appreciate and [00:15:00] respect the pushback, and I just think it’s a readiness com- there’s a readiness component that underlies there. Because think about what’s happened with AI in the last three quarters or so, right? It is just leapfrogging. And how many MSPs do we know or, what the market, represents that says, we’re still trying to figure this thing out, how to incorporate it.”

So the ability for… So I, I’m adjusting my perspective a little bit. But I think, you have to be ready for that in order to take full advantage of it and, I’m not gonna discount the value of AI. I do think it has a definite, impact on what we’re seeing.

And I guess maybe I’ll adjust my thesis to say the partners that were the most ready are the ones that have, that we’re seeing, grow this highest quartile.

Rich: Okay. Clearly service delivery has a cost. Let’s move on to your tip of the week, Erick, because it has to do with another cost which has to do with concerns.

Not something you do, but something you say.

Erick: [00:16:00] Yes. Yes, and I was on a, a webinar yesterday and this just came up, as I, in my meandering style of conversation I shared with the attendees, I said, when I was building my MSP practice I had someone tell me one time that as I’m growing my business there’s one word that is gonna change my future tra- trajectory.”

And I said, “Oh, really?” And they said, “Yes.” And then now I’ll give it away. It’s like, when you’re able to say this one word This is what catapults your future trajectory, and the word is no. The ability to say no to things that, in the past, I would’ve said, “Oh, yes.” As MSPs, we know, Rich, that MSPs have big hearts and, we’re part of this great community because we like to help each other, we like to help our clients, our, our vendors.

The ecosystem is very friendly in terms of collaboration, like nothing [00:17:00] else I’ve seen in my career. Before, technology a- as an MSP, and I’m an entrepreneur by heart, I’ve tried different things, but, I’ve never felt I’ve been part of a community that was so welcoming and trying to solve.

And, saying no to an opportunity or no to a client, that comes with a bit of, again, that maturity component, and then understanding where we, where we- our lane is, what we deliver to clients, how we deliver to clients, and maintaining that, that kind of rigid focus on, here’s what we do, and if something doesn’t fit, then we have to evaluate how we’re going to approach it.

And I gave an example during the webinar. I said we… One of our clients was the Los Angeles Police Revolver and Athletic Club. They’re an an, a… They’re connected to the LAPD, but what this organization does [00:18:00] is it manages all of the benefits for all of the law enforcement officers.

So the, the Los Angeles Police Revolver and Athletic Club, it’s located up above Dodger Stadium, up in the hills there. There’s they train the recruits there. There’s a shooting range. They have a ballroom. They have a bar, a restaurant. They have a uniform and gun shop. It is very… if you’re an LAPD officer and, you wanna have a wedding or an event there, you can have it there, shop for your gear there and then help, they help you with your benefits and things like that.

So they came to us and asked our sales leader at the time, they said, “Hey we need a liquor control system for our bar.” A liquor control system- And I’ll just leave it at that. So they said, “Do you guys do that kind of thing?” And of course, the sales professional said, “Yes, we do. Absolutely.” And came back and, and said, “Hey, we need to put a liquor control system in over at LAPRAC,” which was the acronym for the [00:19:00] institution.

And we said, “What the heck is a liquor control system?” Right? Saying yes to something we had no idea what it was. And really what they wanted to do was try to, combat shrinkage. The bartenders had friends, they’d pour them free drinks or they’d over pour, things like that. And so it’s the device that now measures every, ounce of liquor, right?

So luckily for us, we, we found a, a partner that did that kind of thing, and they helped us deliver it and deploy it. But, today’s tip of the week, Rich, is really about, Learning when to say no. So thinking about not just, clients that we know are probably not the right fit.

Another story I’ll share is, doing that whole ABC thinking where we say, we love our A clients, we’re gonna keep them. Our B clients, we’re gonna keep them because we’re gonna spend more time elevating them to A client status by spending more time with them, being more strategic with them.

These C and D and F customers are the ones that are [00:20:00] robbing us of the time that we should be spending with those B clients and our A clients. So there’s a lot more margin and revenue to be had for us if we just focus on that and, weed our garden once a year. But the other– But so the danger is that we say yes to a new client, a new prospect that doesn’t fit our ideal customer profile, because that evolves as we mature.

And when we went through this exercise, Rich, the first time, we decided that 20 of our C, D, and F customers were on the exit list, and we started methodically exiting them as we brought in more A and B clients. And the dramatic change in morale was the thing that, that I noticed the most. The team was so happy that we were now working with more strategic clients more clients that valued us, that paid us more money.

And along with, we were much more profitable because these were the clients that were always, [00:21:00] haggling us on our invoices and slow-paying us and things like that. So a lot of things happened. So what do we do today when we say identifying c-clients that just won’t fit? You’ve got to have a standard that says, “These are the clients that we serve.

This is what we do best, and this is what we charge.” And when we develop our pricing model, as Rich, I like the good, better, best kind of presentation because if a client cannot agree to sign up for our good bundle, which is our lowest bundle, which means it is the minimum Requirement that we ask clients to subscribe to in order to be our clients.

It’s got everything that we need in it for security and support. It’s got a good SLA. It’s priced at the bottom of the bundle. The better bundle has more qualitative value, a better SLA, not the s- not more licensing than the first bundle. It’s more qualitative va- you’re gonna get these additional features [00:22:00] and benefits that aren’t available in the good bundle.

And then the best bundle keeps that going, right? It’s the highest price. It’s got the most stuff because people sometimes just want the best. So when we’re engaging with new prospects, they have to at least be able to agree to and budget for our good bundle, or else they can’t be our client. In the past, Rich, we would try to, “Oh y- your budget isn’t high enough for that.

Let’s take these things out, right? And try to reduce your cost.” That creates havoc with our billing teams, with the s- the service department. The technicians don’t know, is this included? Is it not included? So there’s a thought that says standardizing, having these bundles, understanding who fits and who doesn’t.

And then once a client is a client, Rich, when they’re asking for things that are outside of our original agreement, we’ve gotta have a process to evaluate whether we should be doing those things or not as well. Now, it’s hard, Rich, when you have a client that’s been a great client, and they ask you to do something [00:23:00] a little bit outside of the norm.

So there’s ways that you can think about that. First, ask yourself several questions like, is this something that is a one-off, and we’re gonna have to learn and train up and be certified on this one thing? Or is it something that we can package and maybe include and deploy for other clients? Is it… If it’s good for one, is it good for many?

And other considerations like that. How much time is it gonna take? Sometimes we fudge and just say, “You know what? It’s a one-off for a client,” but two or three years later, that’s gonna come back and bite us. So we have to have some sort of an exception approval policy. So think about that when you say, “Hey, client wants something,” have a scorecard, right?

And build it out and just pros and cons. Should we move forward? Should we not move forward? And if we do Maybe can we get another strategic partner, maybe a vendor to come in, maybe a distributor has a professional services team that can actually do that thing a- so that we– it doesn’t, defocus us from what we’re currently doing, and can they help [00:24:00] manage it moving forward?

So if you do have an exception policy, you decide to make an exception, consider who else can deliver this for you so it doesn’t detract from your normal day-to-day and require m- a higher uplift of your team and things like that when they get a ticket. So those are just kind of the basics here. And then teach your team when something needs to be escalated to someone else to say no to.

So I don’t ever want my technicians or engineers to ever say no to a client. That is not a good approach because they’re the folks that are gonna be engaging with those clients more than anyone else after they become a client. So don’t put that onus and burden on your team and say, “If they say this, say no.”

You need to escalate that up beyond the service team to maybe a, a manager or a director or something that can have that conversation with a client in the appropriate way so that we keep our [00:25:00] service team in the highest level of appreciation and support for our clients

Rich: Yeah, and it’s not just the the technicians.

To bring it all the way around to the story you started with, it’s very much the salespeople too, who need to be taught when to escalate as opposed to just saying, “You bet, we’re in. We- yes.” The only thing I will add to that, Erick unless you disagree basically, is you were setting it up as it is a nice moment in the evolution of your business when you can start to say no.

And all I would say is the vast majority of MSPs in our audience right now are there now, regardless of where they are in that journey. Meaning, as you saw and learned yourself, if you want to be a successful high growth MSP, y- you’re gonna stay focused on the A and B clients. You’re gonna know who your ideal customer profile is, and you’re gonna weed out the people.

All, all the things that you were just talking about that. And a piece of what you’re talking about obviously is just [00:26:00] knowing when to say no. So it’s never too early to actually start doing that. It is not, as you said, easy at all. But the sooner you actually start saying no, even if it feels like I’m not there yet probably the better.

Erick: And you know what? In that spirit of us, l- lifting all ships as MSPs, other MSPs that you can probably refer these clients to, and we started doing that, Rich. And the benefit to us we didn’t expect anything in return, but then we started getting referrals from smaller MSPs that couldn’t handle these larger clients, or they weren’t mature enough to handle that.

So you’re building this network of trust and referral without, just by the goodwill of you, participating in it or maybe even starting

Rich: it. Okay. Folks Erick and I are going to take a quick break here. When we come back on the other side, Erick will be joined by Juan Fernandez.

Juan Juan is many things. He is a former MSP, a very successful one. He is an [00:27:00] investor in the managed services world. Most recently, he is founder of MSP as a Service. He will tell you himself what that is. It’s actually a very interesting business based on his experience with his observations of where there is some demand for MSP services and tools.

He’ll tell you all about that. This is an interview that Erick recorded with Juan at Pax8 Beyond, and it is coming your way right after this break.

Erick: Welcome back to MSP Chat. I am pleased to be joined today at Pax8 Beyond with Juan Fernandez, a great friend of mine. He’s currently the chief encouragement officer of Summit Holdings, which is the parent company of Knockd, empowering MSP as a service. That’s right. That is a mouthful, Juan. Welcome back to the [00:28:00] show.

Juan: You’re just in person. It’s a pleasure to be here, brother. It’s so good to be back and-

Erick: Oh, my goodness. Now, you have been creating a lot of noise-

Juan: Yeah …

Erick: in a good way in the channel. Yeah. You and I have had some very deliberate conversations- Absolutely … the last few months about what you’re building and this journey.

For folks that for some reason have never heard of you-

Juan: Yeah …

Erick: don’t know l- about you, tell ’em a little about yourself, kinda your journey- Yeah … through the channel, and what you’re up to now, and what led you to create this very unique perspective and offering for MSP partners and vendors.

Juan: I appreciate that.

For those that don’t know me, I am Juan Fernandez. I’ve been in the IT industry for, God, north of 30-plus years, and, always being the youngest exec at the business table was always a pride of mine, and now I feel like I’m the old guy at the table- … which is often-

Erick: You and

Juan: me both, brother.

a hard part for me to swallow, but I’ve been here for a long time. A lot of my career, I was, building enterprises, and, one of the things most folks know me of- for in the channel was [00:29:00] building an MSP, which I took zero to 20 million in about six years, and then popped out of that and wrote a book called The MSP Owner’s Handbook, and then invested in some SAS companies, brought some SAS companies to market.

And, I’ve just been a big advocate of community and sharing, and taking a lot of those lessons and the failures and sharing with the community, and looking at the model and reapplying it to see if it’s still applicable, and helping MSPs like, hey, here’s some quarters. Let’s drop ’em in, see the dollar come out.”

And I’ve just really focused on that, and being here considering myself as a resident MSP, I really started to see the way people were interacting. Even after I wrote The MSP Owner’s Handbook, it has a shelf life, right? The relevance in what the content that you put out is only good for a period of time.

And so if you don’t keep iterating on that, you have to keep doing it. And one of the things as I was a young entrepreneur- I tied this back to the thing called death behind the desk, where I saw a lot of people sit and get comfortable and not stay relevant to the time. So I’ve [00:30:00] continuously forced myself to either stay technically relevant, business relevant, and just relative in the space by listening and taking in all the nuances and trying to help others figure out how to tweak and turn and find success in business and tech.

And so with that, after bringing out the last SaaS company, one of the things I noticed, and I started talking about this MSP 5.0 and this, this future of managed calls, being change agents for the next generation of managed services. And I saw a huge gap between the future and where we stood, and I was like, “Shit, they’re not gonna make it.”

And it scared the hell out of me because I was like, they c- they can’t get operationally sound fast enough to get to the other side of the bridge. They’re gonna miss this moment, and they’re gonna hit the edge, and it’s gonna be bad.

Erick: You’re talking about MSPs-

Juan: MSPs as a whole …

Erick: in general.

Juan: Because we’re running toward AI, but we still can’t get out of our business. We’ve been trying to get out for a long [00:31:00] time and focus on the things, and it’s just, it’s deafening the sound that keeps bringing us back in. And so as I… I said, “I gotta figure this out.” So I went out and I bought some MSPs, and I stripped them down and I started to rebuild it again and was like, “Okay, where is this gonna…

Like, how do I get this to go there?”

Erick: Let me pause right there. So you bought some MSPs. I did. So you said you stripped them down.

Juan: All the way down.

Erick: Tell us what stuff you stripped and why. What were you looking for, and what were you trying to reach?

Juan: Yeah. The primary objective was to try to figure out… And again, we created a company called the MSP Owners Group, right?

And we acquired some MSPs, and created a whole new model of acquisition to do a different things, which I wanted the MSPs in that group to see what we call success. A healthy exit, and feel good about how you go out there and empower your employees [00:32:00] and create a legacy behind you, instead of taking money and exiting and not feeling good about it.

So what we- It was when you speak about stripping down, you’re like, “Let’s get rid of all the stuff that isn’t working- It’s- … and start from s- step one, and move forward.” What were the things that you started with first? Yeah.

To be honest, we tore everything to the studs. There’s sticks left there, and you can talk with some of the CEOs.

We tore ’em all the way down. The entire platform, their entire RMM, their PSA, the entire f- Just died … every single thing is dismantled.

Erick: Processes.

Juan: Whole thing.

Erick: KPIs.

Juan: All gone.

Erick: What about culture?

Juan: The culture was the thing that I felt was the strongest within the organization. So the

Erick: coolest part- That’s what normally stays in- Oh,

Juan: man,

Erick: you know-

defines an MSP, right?

Juan: I think all of us want to see the people in our buil- organizations be successful, but there’s not strategy around employee success because we have to just operate a machine. That’s not how they get there, right? Just because you know how to turn the next wrench doesn’t mean you are successful, right?

When you [00:33:00] own the machine, and you can deploy the machine, you’re successful, right? So we’re trying to push ’em up into a new realm, and as we removed the noise, we did all the tool sets. We started to create this new model, and that’s where MSP as a Service started to emerge, was we knew what we could do at scale, and we knew how quickly we can move from one platform to another and adapt and touch and feel and connect to different infrastructure and customers And it changed everything.

And you watched the employees, they automatically started going to get certified, and then they started doing webinars, and marketing started to emerge, and sales started happening, and happiness started to take place. And they were like, you could see the reverberance of what was taking place in the organization.

So the culture started to flourish, to the point that some of them were like, “I have a much bigger path in life” that they wanted to go do other things, which I thought was beautiful. And, but their internal staff is still there except from one or two that wanted to go build something on their own, [00:34:00] which when they get to that level of comfort, like they found self-worth, and that’s really what the most beautiful thing is.

And so I say this all the time, like there’s two paths to take. I think everyone is running toward AI right now, but what I’m saying is don’t automate your way away from your customer. Be careful of that. Like that’s a byproduct you don’t see coming, and that was one of the things that we said, “Hey, let’s bet on the people and grow that as a culture and build a company that’s legacy based, and automate the noise to help our partners be successful with MSP as a service and meet them where they’re at, do all the things they need us to do.”

And we’re using that, for instance. So our experience factories is what we call them now. You can come and see it, and it’s just it’s different and it’s so hard to imagine. And even they say, “I would have never done this on my own. There’s no way I would have done this.” But now they’re there and they’re like, “I would’ve never thought I could do this before.”

And that’s really what we’re trying to help partners do, is find that I can moment and help them move. And all of us know we got to go. [00:35:00] It’s either AI or die, right? And so it’s like that’s the way we hear. And it’s actually, we’re going the opposite way. Like you can still get a… Like focus on the c- customer interaction.

Get deeper with your customer. Start talking to them more. That’s where we’re pushing people, and so we’re super pumped to be able to do that.

Erick: Oh, I was able to get inspired, I see. You’re embodying kind of what the community and the channel is all about, right? Yeah. It’s all about coming together, identifying things to help others grow.

Yeah. The rising tide lifts all boats. Really appreciate, how you think about these things because I think about them the same way. I think that’s why we get along so well together.

Juan: Have

Erick: for a long time now. Yeah. So you started off thinking about, this new model, and then you started thinking about growing it at scale.

Juan: Yeah.

Erick: And T- take us through the next part of that journey, because now we’re at the point where you said, “Okay, [00:36:00] we can build this.”

Juan: Yeah. “

Erick: We can help MSPs close that gap.”

Juan: Yep.

Erick: Right? Be relevant. Don’t miss out on the opportunity.

Juan: Sure.

Erick: What was the next thing that you tackled?

Juan: I think the biggest thing was to find a good operational back end.

When I built my MSP, everyone asked how did I scale that fast. That’s not normal, right? You can’t go 0 to 20 in 6. That’s really hard, and everyone was like, “He must have done something or he’s not telling the true story” and I’m like, “I hear you” But what they were saying to me, which I truly love, was, “It was good then, Juan, but that may not work today.”

Yeah. And so I was like- That won’t

Erick: play out. That won’t

Juan: play out … okay. I’ll take that challenge” because that’s what I’ve done my whole life. Is say let’s go do it again, then.” And I always say to my team, “I won’t ask you to do anything that I wouldn’t do,” so how can I do that to the rest of the world?

I wanna go do it again, and then I’m gonna show everybody exactly what it could look like and how success could look if you’re profit first, culture first, and community, and allowing your customers to be successful. So we aimed at [00:37:00] those areas. And so when I went out and looked for products and services that I wanted to bring in, I knew there was a couple good service desk companies out there that I wanted to work with.

So when I am engaged with Knockdot, I was like, “Hey, I wanna bolt you into what we’re doing” because they had ITO framework. It was all CIS aligned. And we bolted ’em in and it’s, it was great. It was a great experience. And so we added a little bit and we got really close, and we started working well together.

And I said, “Hey, you should let me buy your company. We could really do big things.” And they were like, “No, we don’t wanna do that.” But as we got a little closer, they were like, “Man, we really like working with you. This seems to work really well. You’re v- where you’re going and where we’re going, really similar paths.”

And so then we became really fast friends, and next thing we were sharing a Thanksgiving dinner together. And here we are creating MSP as a service.

Erick: Wow. You know how rare that is, right? To find alignment with s- some- a new [00:38:00] relationship in this, very challenging-

Juan: Yeah …

Erick: business environment that we’re in.

To align that quickly and agree to, to partner together to build something bigger than the sum of the parts.

Juan: 100%. And let me tell you, I think that it’s re-stimulated… And I our primary objective is to re-stimulate the entrepreneurial ecosystem, right? I feel like there’s a lot of voices that have gone away because of maybe things that have happened and they’re not that proud of, so they just go into the ether.

And I’m like, “If you want more community, you have to be honest about what’s happening,” and we gotta go through the journey and be honest with each other. We gotta talk about the hard things we’re challenging and all the conflict that we’re going through in our business so that we can grow fast. We don’t have time to play.

So I tell them that. “Hey, be open and honest about what’s going on. Nothing’s perfect. And as we’re going through this, the success,” and I said this early on to my team, “we will move with the speed of quality. We will not detract from that. Because when we remove [00:39:00] quality from the equation, we’ll end up being a commodity, and I’m not willing to negotiate that at all.

So let’s keep down this path.” And so we’re very adamant about how many customers we could take on and the MSPs we could support, but it’s fun, man. We’re having a great time.

Erick: So we’ve walked through maybe three or four chapters so far of the journey, and this has happened really quickly.

Juan: One year

Erick: Lots of recent announcements now.

We are. We are at Pax8 Beyond.

Juan: We are at Pax8 Beyond.

Erick: 2026 strong now. And fans in the audience, that was the CEO of Pax8.

Juan: That was the CEO, Nick,

Erick: Yeah …

Juan: yelling Beyond. He’s-

Erick: Giving us a shout-out.

Juan: What’s up?

Erick: Tell us about the announcement that we heard- Yeah … today during the opening session, and what that means to you, to your vision, and to the folks that you’re working with.

Juan: I’m really extremely proud. And I say this often, it’s [00:40:00] amazing what can happen when the cultures align and the teams align. And one of the things as we started to work with Pax8, we talked about what we were doing, and they really liked what we were doing and they, they came in and did the same thing.

“Hey, is this real?” Or, “What is this, Juan?” And so again, back to being fast friends again, it was just wonderful to watch how we just really clicked and we were gonna meet the partner where they needed to be. There was solutions to the problems that we keep hearing in the channel, and it just, it really worked out.

So we’re super pumped to be able to announce that we’re in the Pax8 Marketplace as a NOC-SOC service desk offering and a strategic partnership with Pax8, and be able to offer this up to all the MSPs that are here. And we’ve already had a lot of resounding success from the booth time, and we’ve had tons of MSPs just like, “We need this now.”

And it… I’m so [00:41:00] happy ’cause when we created this, I said, “We’re gonna create a bridge across to the future.” And as I started doing that, working with all these strategic partnerships like the announcement we made with Kaseya, impossible things have happened because we’re all aware of the changing tide, and we’re all focusing on trying to get our partners to this next era.

It’s so difficult, and we all know that it’s gonna be a challenge, but- I think that’s why we’re all willing to sit down in a room and say, “All right, how are we gonna do this together?” We gotta help our partners. And so I saw it, and I just am happy to be a catalyst of change for that, and it just makes me smile to know.

And to be able to truly do it is the biggest thing. So now, as we’ve talked, is I say this all the time, what do you do when what you do isn’t what you do anymore? Yeah. Because if you’re not operating noise, we’re now in the Maslow’s hierarchy, food, air, and water, now up to the next level where you can go and focus on, the next thing of growth.

And again, the education for your team and your staff to move into the [00:42:00] next era like you guys provide. And then, AI consulting and all these other things. It’s all these things melding together is… I don’t know, man. I’m just… I say excited, but I feel like it’s time for this to happen, and I…

we don’t have any more time to waste. And so-

Erick: Yeah …

Juan: I’m happy to be a part of it.

Erick: You know what strikes me, Juan, is you’ve been able to bring together, I would say- Groups and folks that I would not have thought would- … would say, “Oh yeah, we know who you’re working with, and we want to work together with you as well.”

Oh, dude. Tell us a little bit about that and just ‘Cause you and I have talked about this. Yeah. It’s… and you’re very clear about, look, we, just like I always say we’re like Switzerland.

Juan: Yeah. We

Erick: wanna work with everybody.

Juan: Sure.

Erick: Ski our slopes, drink our beer. Let’s- Yeah

Let’s go, right? Tell us about some of that thought process and how [00:43:00] you were able to kinda bring the clans together, if you will.

Juan: Spending so much time in, in a lot of different ecosystems and being in the channel for as long as we have, there are things that make things work, and I think that we’re all truly interested in our partner success.

So when we just hold onto that thread, and just that one thing, if we just hold onto that one thing, it’s so easy to focus everybody’s attention on something. Where I think there’s a lot of distraction trying to meet all these different things, but when I have conversations, and I’ll give you a for instance, with vendors, I’m like, “Look, you’re using language from the past.

Did you hear we’re building the future? We can’t speak that language anymore. That doesn’t exist in the future, so let’s start talking the new language of partnership and not the old language of friction. Let’s just park that bus outside. We’re no longer on it. We either [00:44:00] get together or we don’t get to go to the new place.”

We have to band together right now. And I think that has a lot to do with it, just from a, like just core perspective, like as a community as an industry. These are moments right now that I feel like we… This is not the right time for people to start staking their flag on, self.

Erick: Yeah.

Juan: We need to start thinking about being selfless and the preservation of our entire community, and that’s where I feel like if I keep everyone’s attention there, things happen.

Erick: Yeah, it s- it feels to me like you’re building a movement, and that’s creating momentum.

Juan: Yeah. And I… But it… I’m like, “Hey, look, let’s just open our minds to anything,” right? Let’s think about this differently right now. And I said this years ago, right? 2024, I started talking about the future and being…

The future of manage is change, right? We’re gonna be managing change. That’s it. And in order for us to get to this change [00:45:00] management era and be agents of change, we have… Everything has to change. So- partnerships like you mentioned that we just announced are not possible by doing the old thing.

They’re not possible by standing on our laurels. They’re not possible by having this standard approach to things. So that being said, it’s like, okay, let’s just park everything and let’s just point at this, this moment right here. Let’s all see how do we actually get there and new things emerge, and that’s really where I’m happy about ’cause-

Erick: And I think it’s a testament to the vendors and distributors and marketplaces that you’re working with- Sure

for them to see that because I don’t know if this would’ve been possible five years ago- No … the way that things were back then, right?

Juan: No. I don’t believe so either. I’ve been around long enough and I understand. I can-

Erick: There’s a different sensibility-

Juan: There’s a very d- …

Erick: leadership and different vision now

Juan: We all know that there is a disruptive technology coming to disrupt everything we do, and [00:46:00] so if we can’t figure out how we all come to the point in the future where…

none of us have got it figured out. All of us are trying to figure it out. It’ll change in 18 months anyway, so It’s gonna change, so you see every vendor… I think today I saw five different announcements already so far- Yeah … of companies that have now added, agents and agentic frameworks and other things to their stack, and how good are those without all the data?

So unless we come together to harness these moments as a force- And you’re just gonna be a point in time

Erick: It takes a channel

Juan: Yeah. It takes all of us.

Erick: Yeah.

Juan: This is the one time we’ve been able to band together for the greater good and actually make it work. And I- we’re standing at a very interesting inflection point, and I’m just so happy to be able to break down some of these old walls and be able to continuously just push them down.

To your point, they’ve had foundations for [00:47:00] ages. We’ve been fighting this battle for a long time. And-

Erick: you’re reminding me of those good old days.

Juan: Dude, when we were at MSP, it was like you had to like… Shit, if you could’ve even got a vendor to do business with you back in the day, and now it’s like-

Erick: Yeah

Juan: It’s- And I’d have to buy 1,000 licenses or something, right? Remember those days? There’s so many different places now, and now it’s just changing,

Erick: we talked about the journey up to today. Yeah.

Juan: Yep.

Erick: Now, what do the next 12 months look like for what you’re building?

Juan: It’s not gonna stop, right?

We have probably a, a fairly interesting announcement almost every month for the foreseeable future.

Erick: Keeping me on my toes.

Juan: I’m not… And people are probably gonna get tired of it, but I think the thing is that I need to show everyone what’s possible in terms of what can be changed when you’re focused on something more than just yourself.

And for me, I’m not focused on anything for me. I’m focused on everyone else’s [00:48:00] success. I know that I- we can deliver that, and as a community, we can come together and get that. I think if we just think differently- I’m just trying to help. Again, back to the, if I won’t ask you to do something that I wouldn’t do, I’m just trying to set the example of what’s possible when we just get all in and just really try to be a change agent.

And that’s, I think, for the next… We got a number of wonderful things to announce in the future, and so many great collaborations with things you’ve never, ever thought were possible. To your point this is just the beginning, and our partners are… we call ourselves the world’s first elastic service provider because we can deliver things and services and products in the ways that they were so tied down before.

And now, to just walk in and just be like, “I can have anything in this store,” and not have to pull out my wallet and walk out, which is already, is, pretty cool in itself [00:49:00] when you go to the airport, right? But now you can do that in managed services. It’s just it’s unnerving and it’s actually weird.

At first you’re like, “Am I stealing this? Are they really gonna… is that really gonna work?” Like, how does this work? But that’s where we’re at, is we’re trying to remove the friction from the service delivery and partner success, and just be moving forward. So when we announce we’re a profit first company we compress time to revenue to time to profitability down to day one, where you can have a whole stack, no contracts, no nothing, and go and land a deal with a customer.

We onboard them, you bill a customer, and then you pay. That’s profit first. Everything’s in. And that’s not been normal. We’ve always been paying first, profit last. And so by just switching that has been a huge shift, and that’s where we’re seeing a lot of partnerships emerge ’cause they’re like, “Oh, we see what you did there.”

And it’s gotta change the vernacular. We gotta [00:50:00] change the language if we’re moving in the f- in the future. You can’t… Your product, it either delivers success or it doesn’t. Not to say that everyone isn’t gonna continue down their path, ’cause change is complex, but we just try to make it easy.

Erick: I appreciate what you’re doing for the channel- Thank you … and for the partners, Juan. For folks that wanna get a hold of you, want to learn more, how can they reach out to you, learn more about MSP as a service- Sure … and all that?

Juan: Yeah. Come and visit the website. Lots of updates are on there all the time, msp-aas.com.

Or ping me on LinkedIn LinkedIn Juan Fernandez, and you can… There’s a booking link there. There’s also, on the w- on the website you can book some time. And we’d love to sit down with you and just have a chat. We’re not selling anything, we’re just trying to help people.

Erick: I’m looking forward to see what comes next, Juan.

Juan: Thanks for all you do, brother. Keep going. Appreciate you, brother. Thank you.[00:51:00]

Rich: And welcome back to part three of this episode of the MSP Chat Podcast. Interesting conversation with Juan Erick. Interesting business that he has launched. The momentum that he’s experienced has been something to watch. It sends us s- interesting set of signals. But what did you come away from that conversation most struck by?

Erick: The first thing that I’ll say is, Juan y- more than anyone that I know in the industry embodies that, that spirit of the go-giver, right? That he is here to help, he is here to… he is very selfless. I’ve known Juan for decades as you have, Rich. And, there’s one thing that really impresses me about Juan, is how much of a leader and community builder he is.

And it’s no surprise at his success if you know him that way because, he always puts himself in ce- scenarios where he is very valuable, even if it’s just for a little bit of [00:52:00] mentorship, bouncing ideas off of, or, helping not only MSPs grow their businesses, but also helping vendors really understand MSPs and the ecosystem and really just a facilitator of really great relationships and conversation building.

And so that’s where I’ll start. And, n- I don’t think anybody but Juan could pull off what he is pulling off now. It is a very unique and aggressive, and I would say disruptive approach to shaking things up in the MSP industry. He feels like there, there needs to be change and MSPs need something different and unique, and they’re asking for something different and unique.

And so that’s what’s led him to create MSP as a service. And, in a nutshell he’s basically creating an opportunity for MSPs to subscribe to MSP as a service and select [00:53:00] and build their solution stack through relationships that he’s built with all kinds of vendors and distributors that make it easy for MSPs to bundle price and just sell services.

And then with the with the acquisition of is it the, the service desk component, they’re delivering the service desk for MSPs. So it’s taking things in a very unique and different way. We’ve seen some components of this in the past, but nothing put together like this. And it feels every week or two we’re hearing, we’re seeing another press release come out with a new relationship that Juan is building, which is surprising the, the, the relationships that he is able to pull together because of who he is.

And that’s why I say I don’t think that anyone else in the channel, Would be able to execute on the strategy that Juan is executing, just because of the relationships that he’s built and how he [00:54:00] approaches partnering.

Rich: Yeah, and so first of all, I echo everything you said about Juan and how genuinely from the bottom of his heart he is committed to helping everyone in this community get better and do better, and it’s…

That is the most consistent theme in my relationship with Juan for as long as I’ve known him. I would go b- it, the relationships he has are very important, but I also think the the momentum he’s experienced, the alliances he’s forming with the vendors, I think a lot of that is coming from people recognizing that Juan has built something that meets a very important need.

I, I do these interviews with vendors and distributors all the time. Y- you and I have been immersed in managed services for decades at this, this point, and it’s easy for us to forget how many VARs there are out there who have not start– You know, th- just haven’t added a managed services component to their business.

It comes up a lot in interviews. And so Juan has created this sort of [00:55:00] managed service practice in a box, complete with a service desk that it click, build the tool stack plug into the service desk and go. And so there is this, this s- need, this compelling need in the industry by people who haven’t gotten into managed services, but wanna do it and don’t know how, for what Juan has built, and I think that’s responsible for a lot of the the momentum that we’re seeing.

Erick: Yeah. No doubt. No doubt. And it is definitely growing by leaps and bounds. So obviously, he’s filling a need that many of us didn’t even know existed. Yeah. We’re excited for Juan, and look forward to keeping up with his growth and success.

Rich: All right. That leaves us with time for just one last thing, folks.

And look we’ve all experienced billing glitches before, there’s nothing new about that. And we’ve experienced it from vendors who we do business with in the IT [00:56:00] industry. Nothing new about that either. The scale of the billing glitches that came out of Amazon Web Services recently, though, that I would call a little bit new.

A whole bunch of AWS customers, the, the, let’s call them more casual customers had a common experience recently. I’ll give you one particular example. A gentleman in in the UK who is used to paying about a pound or two a month to AWS got his latest bill and saw that the total he owed them was $7.8 billion Erick, for that month.

And by the way, he got off easy. There are apparently AWS customers out there who got hit by bills as big as $1.5 trillion. Now, you get a $1.5 trillion bill in, in email or on paper, and you pretty much know something went wrong. I’m not [00:57:00] actually gonna be on the hook for paying this. But man alive, that’s got to to put a crimp in your day basically.

AWS said, “Hey, sorry. Our bad. Glitch in the software. We fixed it. Nobody owes us $1.5 trillion.” But I, I don’t know what AWS could possibly do to help people recover the the stress and the angst that they went through when they briefly saw these sums that they supposedly owed.

Erick: Yeah, that’s an amazing story, Rich. And I’m sure listeners on our program that are subscribers to A- AWS are now gonna be compelled to review their last invoice and just see if there’s anything weird going on there. Not that it’s trillions, but hey, any kind of a decimal move, in the wrong direction is a concern

Rich: good tip.

Good final tip there. And folks, that is all the time we’ve got for you on this week’s episode of the show. We’re gonna be back in a week’s time with another episode for you. Till then, I’ll simply remind you this is both a video and an audio [00:58:00] podcast, which means that if you are listening to us right now, but you’d like to check us out on video, go to YouTube, look up MSP Chat.

If you are watching us on YouTube, but you’re into audio podcasts, go to Google, Apple, Spotify, wherever you get your audio podcasts, you’re gonna find MSP Chat there, too. And wherever you find us, please subscribe, rate, review. It’s going to help other people find and enjoy the show just like you do. This show is produced by the great Riley Simpson, part of the team with us here at Channel Mastered, where we help vendors build, grow, and optimize thriving MSP channels.

You can learn about the many ways we do that at our website, which is located at www.channelmastered.com. Channel Mastered has a sister organization called MSP Mastered. That’s Erick and his team working one-on-one with MSPs to help them grow and optimize their business. You can learn more about that at www.mspmastered.com.

Once again, we thank you for joining us. We’ll see you in a week. Until then, folks, please remember, as we always ask you to, you [00:59:00] can’t spell channel without MSP.