Episode 83: Private Equity Without Private Equity

Erick and Rich discuss the pros and cons for MSPs of placing bets on today’s emerging crop of startup AI automation vendors and the best practice roadmap for helping clients make AI-driven business model shifts. Then they’re joined by Juan Fernandez, founder of MSP Owners Group, to discuss that recently launched company’s unique, private equity-free approach to building a PE-style MSP platform. And finally, one last thing: the seething mass of giant, hairy spiders that customs inspectors in Germany recently found in a container supposedly full of chocolate cake.

Discussed in this episode:

AI-Native Approaches to AI-Era Managed Services

InfiltrateIQ’s AI to Z Approach to Pen Testing

There are Riches in Niches in AI for MSPs

MSP Owners Group

Roughly 1,500 tarantulas found stuffed in boxes meant for chocolate cake

 

Transcript:

Rich: [00:00:00] And 3, 2, 1 Blast off. Ladies and gentlemen, welcome to another episode of the MSP Chat podcast. Your week we visit with two talking heads, talking with you about the services, strategies, and success tips you need to make it big in manage services. My name is Rich Freeman. I’m chief analyst at Channel Mastered, the organization responsible for this show.

I’m joined this week as I am every week by your other co-host, our chief strategist at Channel mastered Erick Simpson. Erick, how you doing?

Erick: Doing well, rich. Just trying to, dot all the i’s, cross all the t’s before you and I begin our next phase of event attendance and travel. Yes. How about you?

Rich: Yeah yeah. I’m right there with you. I’ve got two weeks on the road starting on Monday. We will [00:01:00] both be at GTIA channel con next week. And in fact, the ne next episode of the show will be recorded at that conference. So we’ll be coming to you live on videotape, as they say from Channel Con.

And then I’ve got a build it live after that and a few vacation days and another conference company. Yeah, that, that travel season slowed down recently, but it’s about to to heat up again.

Erick: Yep. We’ve we’re, we’ve got into a little bit of a valley and now we’re heading back up to the peak of more travel, more events, and I’m looking

Rich: forward to it.

Yeah, me too. I I always. I’m ready for a break when I get one, but I’m also ready to get back out there when when the time comes. And that time is next week. But for now, let’s dive into our story of the week. And Erick, this is actually a familiar story to longtime listeners of this podcast and earlier podcast that we’ve done together before this one.

You’ll remember that once upon a time there was a point where the cloud [00:02:00] management, cloud security products were all coming from startups, newcomers to the MSP world, the big platform companies that Kase Connect, Wises enables. They weren’t providing that functionality yet. And as an MSP, you had to decide, am I going to invest in these new newcomers or am I gonna place my bets?

Basically, with these platform companies that they’ll be playing catch up, but they’re gonna be doing the same stuff and it’s all gonna be on one bill and they’re gonna be advantages and efficiencies basically. In, in getting those products from companies I already do business with, we are entering that phase again.

I think Erick with ai right now, and I based this on some reporting and writing I’ve been doing recently for my blog channel Hawk. I’ve been writing about some AI startups that are very MSP focused. So I’ll just quickly cycle few through a few of the companies that I’ve been writing about.

So there’s one called Sift CYFT for those who are interested. They’re actually not in market with a product right now that [00:03:00] is scheduled to change in October, but their first product will basically listen in on interactions between technicians and end users collect information in detail, use it to produce documentation automatically.

You’ll then be able to use AI to query that documentation and get quick, concise, efficient answers to incidents that took place in the past. But that is only a step on, on the road to larger things they wanna do where. They’re gonna use all that data they’re collecting to look for cross sell opportunities, look for customer satisfaction issues that might be coming.

Look for billing issues that you might need to deal with reduced churn, increase revenue and then they will be their, the longer term roadmap is to get a agentic with that, where they’re not only providing that intelligence based on the data that they’re collecting, but they’re actually acting on it on your behalf.

Thread is a company that may be familiar. Some folks in our audience, they won the ConnectWise Pitch It competition a couple years [00:04:00] ago. They are familiar to folks like ourselves who are on the conference circuit for their the pirate gear that they wear in their booth.

Their original vision basically was to take the pain out of ticketing both for the end user and the technician, but they are now on a path to use AI to create what they call the AI service desk. So they’re already able using AI to triage tickets and in about 10% of cases actually just close the ticket end to end for simple things like password resets and and so on.

But they are on a path basically to automate the work that a dispatcher does to basically use AI to run the service desk for you. And to end. Another company that I first encountered on the show floor at the Kase Connect Conference a couple of months ago, they’re called Infiltrate iq.

They’re using AI to. Perform pen tests on a 100% automated basis. And so pen tests traditionally they’ve required [00:05:00] a lot of human labor and expertise. They cost 20, 30, $40,000 using ai Infiltrate. IQ says they can deliver a very effective pen test for essentially a few hundred dollars. And you can charge, as an MSP two, $3,000 for that.

You’re coming in at a price point, tens of thousands of dollars below what most other companies are charging, and you’re still making massive margin. Just three examples of many companies out there right now that are building specialized AI-based solutions, specifically for MSPs, and they’re doing things that, again, the big platform providers aren’t doing right now.

And so the question is going to become, should MSPs do MSPs? Place bets, do they invest in these newcomers out there right now? Build those products and solutions into their operational processes into their stack because of the capabilities these companies can provide, or do they [00:06:00] believe that in time and we’re already seeing giant investments in ai at Kaseya and ConnectWise and and some of these other companies out there are they more attracted to the efficiency efficiencies that come from getting everything from one company?

The price point of the Kaseya 365 offering of the new ConnectWise Pro pricing plan, which isn’t quite in market yet, but is supposedly coming very soon, hard to resist, but you’re maybe sacrificing some functionality and agility. So it’s another kind of decision for MSPs to think through.

And I’m curious what your advice is on this, Erick.

Erick: Yes, it’s it, and it’s a very interesting time that we are in right now with, AI and agentic ai and this idea that, the more that we consume ai into our MSP practices, the more efficient we can be. Rich, we’ve seen surveys and reports that, profess [00:07:00] that, AI will be able to solve, 80 plus percent of level one triage tickets and things like that.

So there’s a lot of, there’s a lot of marketing spin that’s going on. There’s a lot of, hope attached to some of these things. It’s tough for MSPs, I think, today to evaluate AI from several different perspectives. Number one. How much of it do they want to incorporate into their practice on their own?

How much time do they have to evaluate these tools? How much more does that add to their tool sprawl, let’s say? And how much do they trust these larger organizations who they’re relying on for their RMM tools, their PSA solutions to provide them a solution that fits their business model?

So it’s one of those conversations, I think, rich, that I think [00:08:00] about from a, from a, just getting started, MSP, we’ve had this conversation on the show before. Okay. It’s easy for me to subscribe to a very feature rich platform that includes ai, that kind of has a lot of things that.

I could utilize now at this stage in my growth to make me more efficient and profitable. Then you mature as a solution provider and you start thinking about serving, the needs of maybe other niche clients or industries or verticals, or you want a kind of a curated what you feel is a best of breed portfolio of services that go maybe beyond what is built into a platform offering like we were talking about.

And now you’re creating these bespoke services solution because you want the best and you wanna serve a very specific client. So we get back into that same challenge that we’ve had. Even back [00:09:00] when I was in MSP back in the day where. I’ve got a bundle of services that I can sell to a lot of clients very quickly and onboard them.

But then I’ve got these other solutions that are very specific for a bunch of clients, and how do I integrate those together? How do I make sure that I’m tracking usage and billing, and how am I ensuring that I’m avoiding potential tool sprawl and, costs overruns and things like that.

Because I’m so busy trying to deliver the best services through the best solution packages to my clients that I’m not doing a great job of truing everybody up along the way. So I guess my perspective is long way to say, just be very judicious and careful about how you’re evaluating these tools and every tool that you do bring on.

Make sure that it’s going, you have a client to integrate it, you have a plan to deploy it so it just doesn’t sit on the shelf and you’ve got [00:10:00] 10% of your clients on it, 90% that aren’t, and have a plan to increase your billing or these tools and some MSPs rates think, oh my tools are my cost of doing business.

No. Everything that you do is a cost of doing business, and you should be recouping the cost of that and adding a little bit of margin on it because you have to manage it, you have to update it, and you have to manage those products and solutions just like you’re managing your client’s solutions that, that you’re delivering to them.

So just a couple of things to think about. As we enter into this, deeper into this, AI future that, looks like it’s gonna be the, the groundswell of opportunity for MSPs and business owners, here in the next few years.

Rich: And I’ll just add in one more thing to, to keep in mind.

I think the issues you highlighted there are the most important ones. But I know you had a conversation recently with someone, I won’t name that person. I won’t say who that person is, but he is, probably known to a lot of folks in our audience. He’s actually [00:11:00] appeared on the show once upon a time and he was talking with you about his belief that there is an AI bubble out there right now, which is a whole other topic.

We won’t get into that at all now, but I do think there is some truth to the thought. That a lot there, there are gonna be a lot of these AI startups for MSPs, and they will not all make it. This is true of the AI economy in general. Venture capital companies are pouring massive amounts of money into AI businesses right now.

Most of those businesses will not be successes. And so I would just say if you are going to, increase your tool sprawl and maybe your overhead, so just do a little due diligence about the financing, how how much trust should you have in the durability of a business that you are investing in operational.

Just get some sort of comfort level that this new vendor you’re adding to the picture is still gonna be around in two years. That’s a great thought,

Erick: rich. Yeah. Agreed. Again you’re [00:12:00] basing the future growth of your organization. And the ability for you to meet and exceed your client’s needs and expectations in terms of delivering that service.

Like they say when you’re getting ready for taxiing on on an airplane, put your mask on first when something happens before helping others. So make sure that your organization is in a good position to bring on a new solution. Like I said, plan for it, integrate it quickly and evaluate it from a, a longevity perspective.

Great point. Rich. Do I feel like, these folks are well funded. They have a good roadmap, a good strategy, a good team and are they, listening to me, the MSP, their client and allowing me to, ask about roadmap and feature. Requests and things like that to make sure that they are growing and aren’t gonna struggle with some of the [00:13:00] basic things that are table stakes for MSPs.

It’s gotta, it’s gotta integrate with your platforms. It’s gotta be priced right so that you can, integrate it and make money doing it. And it’s gotta be easy for your technicians to utilize, manage, report on and helps drive profit to your bottom line.

Rich: Some of these companies are gonna be a huge success.

Some of them aren’t. And so that’s just a piece of the story they’re doing. The, doing the evaluation and thinking back through, in addition to the even more important issues you’re talking about. Now we’re talking here about. Business model transformation or change for MSPs. But obviously MSPs are not the only companies by far that are going to be making business model significant business model changes using ai.

And that’s a huge opportunity for the folks in our audience. And it’s also, I believe, the subject of your tip of the week. Erick?

Erick: Yes. Rich. I think one way to look at [00:14:00] I this episode might be AI all the time. ’cause not only are MSPs looking to leverage the value and benefits of ai, MB business owners are doing the same thing.

I saw a statistic recently that, that indicated that 87% of small and medium business owners surveyed, said they want to adopt AI into their businesses as well. So there could be some pressure rich on MSPs. To introduce AI solutions to their clients when they themselves are still evaluating how to integrate that and the value of it into their own organizations.

But let’s just say that MSPs have a good handle on how they’re utilizing ai, whether it’s just, adopting and getting the benefit of the AI that’s already built in to some of their platforms and solutions that are getting from their upstream vendors or whether they [00:15:00] are, doing a little bit of what we were just talking about, creating a very bespoke custom AI with different solutions and integrating that the same opportunity that is available to them to sell all of their other services to their existing clients.

Appears to be available with AI as well. So just a couple of caveats before I get into this topic, rich, because Yes, MSPs, I was one of them that was always looking for the next greatest thing, right? The sizzle that we can bring to our clients and then we would evaluate the solution and we would deliver it.

And that’s great for technology solutions. It’s there’s a greater weight and onus and risk when we’re talking about cybersecurity solutions. And I would say with AI it’s potentially even more of a risk because if we introduce some AI solutions into a [00:16:00] client’s business, and not to say that they’re not doing it by themselves, right?

So there’s also that risk that MSPs, aren’t getting ahead of it fast enough to provide some governance and some. Risk mitigation for clients that are just signing up for these chat bots and things like that, and potentially inadvertently exposing their company data to who knows where in some data like Data Lake somewhere that other folks can query against, right?

So we’ve gotta think about how we’re going to utilize AI and create some governance around how we’re gonna help our clients and have these conversations with them to inform them of not only the opportunity that it could deliver to them, but also the risk of doing it wrong. And that means that we have to have a solution for that.

So thinking ahead to MSPs that are ready to maybe start introducing a very [00:17:00] highly valuable business outcome oriented service or consulting. Service or an AI management as a service, a deliverable to clients. Let’s think about how to educate these clients first. So the first tip that I’ve got when you’re thinking about creating an offering for clients that, that concerns AI is to educate them first.

So how do we do that? We do that with business breakfast, lunch and learns, maybe some webinars and things like that start introducing the concept of ai. The platforms that are already available that don’t cost I’m not gonna say they don’t cost anything extra, but there are platforms already available and maybe licensing that can be upgraded through, let’s say, the Microsoft suite of services.

Copilot is an easy, low hanging fruit opportunity to begin. Introducing an AI solution into a business [00:18:00] organization that can help them with day-to-day activities. So now, the knowledge workers and the information workers and the support staff and the sales teams. There are ways to introduce co-pilot into their day-to-day activities to help them get more out of that out of their role.

Rich? So starting off easy, maybe offering some workshops. I know that Microsoft is offering workshops where partners can invite their customers to. So Microsoft kind leads the conversation and then the the MSP then can pick that up and then introduce a solution to a project, maybe to get co-pilot rolled out to everybody, and then teaching them how to manage it and then AI as a service.

From there, supporting some pilot projects is an easy way. To get clients to say yes, where, when they’re not really sure whether they wanna roll it out to 20, 30, 50, a hundred users. Finding a [00:19:00] small group, maybe a business unit, maybe a couple of key individuals in the organization where you roll it out first and then get their feedback tweak in tune, and then perfect the delivery of, or the integration and the rollout for the rest of the team.

The client pays for that pilot, of course, and then when we’re satisfied that we’ve got a solution and we’ve got good results, then they pay for the larger rollout. And then adding some sort of AI planning into your quarterly business reviews or your strategic business technology meetings with your clients or VCIO conversations we’re managing.

Assets we’re managing lifecycle of, hardware and platforms and applications. Rich. We should also think about managing kind of the AI roadmap as more and more AI solutions become more mature. We [00:20:00] can start seeing the MSPs now having the ability to create or introduce agents into the organization going beyond chatbots.

Now, agents that actually can take action on their own based upon parameters that we create, workflows that are triggered, agents can actually decide what to do next. This is why there’s such a big opportunity, rich for MSPs in their level one service desk. In the next, I would say 12 months or less, we’re going to start seeing very immature agents from some of the vendors you’ve talked about and others that we’ve talked about on the show.

Being able not only to manage the dispatch function, but actually triage and close tickets because they’re able to do things based upon parameters that we set. Again, that governance component comes in. So having the ability to do the same thing for clients, building agents to help them do specific [00:21:00] tasks.

And we’ve had examples on the show, rich, where we’ve talked about responding to RFPs and things like that, right? Where we know some folks that have perfected that offering and are delivering it to clients that are nonprofits that are looking for grant requests. They’re using AI agents to complete some of these grant requests and RFPs for business with, state and local government and things like that.

So once we start delivering these agents, now we get to orchestrate teams of agents. So you can see how this growth potential for. Can be very attractive to MSPs when they think about, okay, I’m gonna utilize it in my organization. I’m gonna do these things myself. Of course, I’m orchestrating my own agents for sales and marketing and service delivery and project management.

I can do the same thing with my clients, but it’s a one step at a time approach. Rich. It’s a piloting with a trusted client or two with a business unit or so, as we begin to develop these solutions. So there’s plenty of [00:22:00] opportunity. The more strategic opportunity, I think, lies with the MSPs that really realize that creating these agents and orchestrating and managing these agents, and then creating a recurring revenue stream that has one time revenue for delivering and creating and and then a recurring revenue stream for managing over time.

I think it’s very attractive to MSPs, but like I said, one step at a time.

Rich: Yeah. And I think you’ve you’ve introduced or described a an excellent roadmap for an MSP to build an AI business on a client by client basis. And it’s not a theoretical roadmap. Erick I moderated a a panel about success in AI for MSPs at the Kaseya Connect event.

And and I’ve done interviews with executives at other companies. There are the companies that are having success in AI already are using that very roadmap, beginning with, as you said, that the absolute beginning is risk [00:23:00] assessment security assessment, governance. So you’ve gotta lay that foundation in.

But then you do a workshop. You look for a business process that can be optimized. You start with one. And so that, that would be the one little nuance I might, you were talking about maybe a few pilots. I’m gonna say one because what a lot of the MSPs I’ve spoken with who have had some success in AI say is what you find this one process and you mentioned the RFPs, right?

You use AI to automate the creation of RFPs, and the sales folks absolutely love this solution. They get way more productive. And then what happens is other people in the business see the success of that AI pilot. And it’s not even just a question of you opening up. Opportunities, things to sell.

They come clamoring for the ai. Right now it’s like the HR people what can you do with this AI stuff to accelerate the hiring process, and help me get through all these resumes more quickly. And then they have success and the billing people one in and so on. [00:24:00] And so you start with that workshop, you start with the security.

You go to the workshop you have a successful pilot, and then you build a roadmap for going department by department function, by function to help this business utilize AI effectively. And like I said, this is not theory, this is fact. For real world MSPs out there right now, they are making good money and building giant businesses using that methodology.

You’re right on point, rich, and

Erick: thanks for clarifying the approach here because yes, that’s exactly what you’ll do and you’ll end up with a process for each business unit in the organization and custom agents for each business in the organization. Now you can go to your next client and deploy in the same manner and the next client and deploy in the same manner.

And I, I’m gonna predict Rich, that we will have business units within MSPs that are just focused on that, on AI and delivering AI for just like we see [00:25:00] SOX or cybersecurity and not knock for, infrastructure that’s a unit. And we have our security team, we have our help desk, we have our project team.

I think we’ll have, and maybe in, in other organizations we’ve seen this too, rich is we’re selling so much VoIP. We have a VoIP team so when tickets come in, they’re the ones that are handling that. I see the same thing for ai. It’s an onboarding team, an assessment team, a deployment team, and then any tickets that occur for the AI solutions that are being deliver.

They’re not going to, the level one help desk for everything else. They’re going to that team. I’m predicting that’s gonna happen.

Rich: Alright, folks, we’re gonna take a quick break here. When we come back on the other side, we’re gonna change the topic a little bit. We’re gonna be joined by Juan Fernandez who many of you may know from former positions he has held these days.

He is the founder and chief Encouragement Officer at MSP Owners Group. I’m not gonna call that a rollup, [00:26:00] but it has some similarities to what in the m and a world for MSPs would be called a rollup. It’s a platform of MSPs, but with a different model. And unlike Rollups, which are funded by private equity, there’s no private equity involved in this particular model.

Interesting topic. We’re gonna get into it with Juan. When Erick and I return right after this break.

And welcome back to part two of this episode of the MSP Chat podcast, our Spotlight Interviews segment. It’s gonna be no news to any of the MSPs in our audience that there are a lot of investment dollars, creating a lot of MSP platforms offering MSPs a lot of exit options that even just a few years ago weren’t necessarily there.

There is a new model, a new option or alternative for MSPs thinking about scaling up The business we’re exiting to consider is called the Ms. P Owners group, [00:27:00] and we are pla pleased to be joined by the founder of that organization. He’s also, as you can see if you’re watching us on video, the Chief encouragement officer at MSP Owners Group.

He is Juan Fernandez. Juan, welcome to the show. It’s good to see you guys and honored to be here. One Erick and I have both known you for a long time and through various roles in the past. Before we get into MSP owners group, for folks in the audience here who have not met you before, just tell them a little bit about who you are and your background.

So maybe they understand a little bit about the experience that you’re bringing to MSP owners group.

Juan: Yeah, a hundred percent. And I’ve been in the industry for a long time, right? I think for some in certain people would say maybe too long, but I I’ve been here for a long time.

I’ve care a lot about the IT industry. I’ve was, I’ve been in the, in IT industry now 28 years, if you can believe. That seems so long ago. But, I’ve built a lot of enterprises over my career. I’ve done a lot of different things building a number of different types of companies and [00:28:00] organizations and enterprises, but I.

My passion was, really building out an IT services organization. I’ve now had a couple IT services companies, one of them, which was, less than illustrious, right? I think we all have our first journey into entrepreneurism, as either a success or failure. My initial one was a, not necessarily a, it was a big success, but also ended in failure.

And the second one, which is the MSP, which most people know me for, was where I went and zero to 20 million in about six years and grew across 16 locations. But. Proud author of the MSP Owners Handbook we’re, talking about helping MSPs grow and scale their businesses. And I’ve founded a number of different companies that are all focused on education and helping MSPs and entrepreneurs figure out how to do the things that they want to achieve in their lives.

And have invested in a number of SaaS companies and have taken SaaS companies to market. So I’ve been all over the channel. I’ve done a lot of things and it’s just really an honor to take that and culminate all that into [00:29:00] the things that we saw as challenges in the ecosystem to try to develop and derive something new.

And that’s where the birth of the MSP owners group came and we’re really excited to bring it to light. ’cause I feel like it’s something that has been asked for a long time and we were just able to put it together and to make it a reality.

Rich: Yeah. So let’s get into that.

Talk a little bit about the landscape for MSPs out there and m and a, what it was that was missing, what it was MSPs wanted or needed that you identified, and then how Ms. P Owners group is designed to, to fill that gap.

Juan: There’s some initial components that I felt that, we looked at, I, ever since I exited my MSP and I looked at investing in a number of things, one of the things that I saw as others, m and a became really hot during the time that I was exiting.

And, I had an opportunity to look at, working alongside private equity and advising and doing other [00:30:00] things. And, a lot of ’em wanted us to come in and help ’em build a platform. And I really started doing the math behind why we would do something along those lines. And, ’cause I built ours organically and both my companies, so I was like, okay, why would I take money to do this? And what is it in it for me? And I talked to a number of folks and as I watched acquisition after acquisition take place, one of the things that I noticed was that there was a pattern, right? And the pattern was, is that as people were, facing this opportunity for an exit, they also were looking at, it disappeared.

It just would go away and they would just not show back up. And I was like, what is this? Why is this reality? What happens? What is the situation? So really started focusing on how does m and A really affect. People and why are they leaving? And it’s not necessarily because they were getting the deal that they wanted to share.

About, and, a lot of stories like, my employees were upset [00:31:00] with me. I heard one just recently where they, clearly said the ownership said you we’re not gonna sell. And the next thing you know, seven days later, they were on the auction block, all the employees were told that they just got sold.

And that they had new owners. And now the owner of the company had took off and they were like really upset with that owner and were like, Hey, you just said you weren’t gonna sell your company, and yet here we are, like you just blindsided us. And so I feel like there’s a number of nuances that we were looking at, like, how do we fix this problem?

There’s so much great knowledge in this space. I had the beauty of exiting graciously and being able to watch my company be able to grow and flourish and the folks that are still there running it. And I have a lot of pride in it, in what we built. I wanted to share that, and I was able to stick around and I enjoyed being able to share my knowledge.

And so one of the things I wanted to do was, as we built out the MSP owners group was like, Hey you can sell your company. [00:32:00] That’s just one piece of the puzzle. What if you stuck around and helped others grow and allowed, your knowledge to permeate and your culture to stay solidified and build something bigger and better together?

What would that look like? And a lot of challenge with that is, is that, when you take money investment money, it needs to deliver on a certain period of time. And culture’s not always the thing that. That money wants, usually it wants profits. And that usually comes at the cost of culture. I need transactional leadership at this point.

I don’t need the Kumbaya, I don’t need the pizza parties, I don’t need the team building. I don’t need any of that. What I need is return on investment. And we really looked at it from a different perspective and said, what if we didn’t need that? What if we did the thing that we think this community really needs is more culture and more community and more education and more give back?

What would that look like? [00:33:00] And that’s where the decisions to, privately fund and self fund. These, this opportunity with the MSP owners group came about. ’cause there’s a lot of challenge that’s coming and it’s gonna take some really great people that care about this place that I call home to be able to preserve it in the way that I think that we should.

So that’s why we did what we did and why we’re doing what we’re doing. And, we’re all about transparent leadership and showing that, a culture led company that cares about the people and are stitched with the technology can, hopefully grow and thrive and in this new ecosystem technology.

So that’s what we’re doing and really proud to be bringing it to life.

Erick: Juan, when you and your partners are talking about the MSP owners group, we hear you using words like collective movement and community, a lot. You mentioned community like three or four times just [00:34:00] now. So is this kind of your popular resistance movement against like private equity share some of.

Juan: I don’t know. Everybody private equity’s all, I’ve talked to ’em, I, trust me, they’ve been in my desk a million times now. We’ve already even been offered to be bought. And it’s not even like the ink’s barely drying on some of the acquisitions we’ve just done. And I’m like, no, we’re not for sale. And no, we’re not interested in exit.

Like we’re creating opportunities for people to exit within the organization and they don’t have to go external. Like we don’t need to take money from the outside. I’m not saying that we won’t do something in the future that might re, open itself up for investors. But right now, it’s not a pushback against the status quo.

It’s just I’m trying to demonstrate that there’s a way of doing things that doesn’t have to be just like everything else, right? Like it doesn’t have to all equal. That’s the thing about it, right? Like I noticed that everybody, like if you’re thinking about exiting your [00:35:00] company, there’s only a couple routes to go and none of them looked like they felt really good and.

I’ll be honest, after listening and talking to a number of folks, I’m like, how do you feel about this? And they’re like, ah, if I had to do it over again, I might not have done it. And I’m like, why? And the interesting answers are on the back end. It’s just, I wanted to stick around. Maybe I didn’t want to go, maybe I wanted to be with my team.

Maybe I wanted to retire there. That wasn’t an option. I just took what I got. And I’m not trying to push back against anybody. I’m just trying to create what everybody was asking for. And a lot of it is listening. And a lot of it was, and I just, I say all the time, if you wanna make a difference, sometimes you gotta be the change.

And to be honest with you, I asked private equity as they came around my desk saying, why did you do this? I said let me ask you a question. Could you do this? And they said No, because that’s not what we do. And I said, my point. So [00:36:00] it’s, what do we do? And I made a comment in one of the interviews I did early on and it resonated with me on our mission.

And it said, we don’t buy success. We build success. And again, to your point about community, yeah, we want to create and curate the community. We want to allow everyone to feel like this is a place that they can come and find success and be a part of something that’s way bigger than they could have ever been.

And share along that journey all the way up. So that’s why we’re not acquiring the entire asset. We’re actually acquiring a majority of it, but we’re leaving them with a significant amount of ownership so that they can experience this compounding effect of financial success and freedom. And then also allow their teams to retain within our organization and find new homes as well and be part of something bigger.

I’m not trying to push back. I’m just trying to create a new path, and that’s where I, hey, they’re gonna continue to do it. Private equity’s got a lot of money. They can do whatever they want. I don’t have any [00:37:00] issue with that. I just feel like I have to do my part in preserving this place that I call home.

So that’s keeping good people around and trying to pave an example of what’s possible.

Rich: Let’s get into the details a little bit. Because as I said before, there are a lot of different sort of options and models out there. There are platforms in which the the acquired MSPs get to keep their brand and control their culture.

There are a lot of options. The, I would say the majority of the PE backed platforms out there don’t allow any of that. You already mentioned something interesting about the equity deal that you have with acquired MSP. So talk a little bit about how it is what it is an MSP is giving and getting basically with MSP owners group versus what they might be offered elsewhere.

Juan: Yeah. And I would say, to be honest with you. There’s a lot of what we’re doing that’s very different than what everyone else is [00:38:00] doing. I don’t know that there’s even a couple pages of in here that smells even relatively similar, other than just some of the basic math equations that might look similar.

But, for all intents purposes, we’re buying a majority of the company and allowing them to retain a certain amount of that. So as the company, grows and basically we’re helping grow that organization through our operational framework internally and our operations and sales teams and marketing and all the things that we’re doing internally that they get to see that exit over and over again.

And their employees, 100% not going anywhere. We are actually we have a definition of success etched in the helm of our ship. And it’s that it says basically that when a leader empowers another leader. We start to see what we call success. But only then can we recognize true success until that leader also grows and empowers another leader.

And really what we’re looking at doing here is, and I said this to the [00:39:00] staff, one of the beauties of you being here, and I know many of you may not believe that you know you would ever do anything amazing, but our definition of success is that one day you’ll run the company. Because our entire program is around building internal leadership from the moment that you enter into the MSP owners group.

So every employee that’s here immediately starts learning how to lead and become a leader in their own right. And then ultimately, we’re gonna train these folks to ultimately one day run a company. So you’ll see us do something very different than everyone else, which is grow exponentially because of the way that we’re actually building and supporting employees now and into the future.

MSPs can come in, they can sell a majority of their company to us. We’ll take over help manage, grow, and empower, and then take and help their employees ultimately take and run these companies so that we can continue to just lead and create new leaders, and then they can create new leaders and just keep moving forward.

So [00:40:00] there’s a lot of that. So we are creating a whole new ecosystem of programs and the way we do things and education. Again, we have a lot of smart people that are coming together. So we just harness that brain trust to help these leaders. And I say, you’ll love this, that their disadvantage is their advantage because what they don’t know is what, I don’t have to untrain them, right?

Like the beauty is I can train you on best practices, I can train you on the right ways to do things. I can easily get you up to speed on the things that you need to do in a way to operate a business in a finite mannerism. We’re creating a whole ecosystem of opportunity here for owners to feel success, not only in their own personal pockets, in their personal lives, but in their culture, in their teams, and in their people and everywhere around them.

And so that’s different, I’d say, ’cause I don’t think anyone else really cares. We do,

Erick: Juan, you and I, we’ve talked [00:41:00] about leadership for many years. That is something that you know we each aspire to becoming better leaders. And what you’re talking about in this philosophy, I’ve, picked this up out of one of John Maxwell’s books.

The five levels of leadership where you get to a certain point of leadership and now you’re creating these other leaders that is very unique and distinct. And it resonates a lot with me. As I try to, go down my path of becoming a better leader and growing other leaders around me.

So that is very unique and different. And is that one of the distinctions that MSPs are attracted to when they’re talking to you versus a new charter or am Plex? Can you talk about, some of those other things that, that really draw these MSPs to, to you?

Juan: I would say this, there’s a lot of reasons why somebody would make, would look for an exit, and I range ’em in a number of variables, right?

In terms of where you’re at in your life, right? You’re [00:42:00] ready to exit, you’ve had enough, you’re thinking about what’s next. You’re at a point where your company is, not growing and you’re just like, okay, I think I’ve had enough here. Or I got to a size that I knew what I needed to get to the multiple that I was looking for.

There’s a number of reasons, but there are a lot of people out there that haven’t sold, and the reason why they haven’t sold is because they’re afraid of what’s gonna happen to their company and to the people that they’ve spent years with. These are families that are together, that have been together for, 10 to 12 to 15 to 20 years that would love to try to figure out how to get to the next level and how to innovate past their current capabilities.

And those are the types of companies that are coming to us because they’re interested in preserving their legacy, right? They want to stick around, they wanna be a part of something, and they wanna see their company grow. They wanna see their people lead. And a lot of folks, to be honest with you. That have come to us, [00:43:00] already had plans for them to transition their company into their employees or into their family or whatever it may be.

And they don’t know how to do that. And they’re like, I don’t know how to actually mechanically deliver on that promise. And so we’re getting a lot of those folks and, if there’s people that are looking for exits, we’re not for everybody. And I’d be honest with, we’ve had hundreds of MSPs that are interested and I am honest with them.

Look, if you’re interested in a check, if you’re looking at being an add-on, that’s not what we’re doing. If you want to just get money and you want to leave, that’s not us. If you wanna stick around here and make a difference in this place we call home and this community that has helped countless numbers of folks over the years give back, that’s where we are.

That’s what we’re doing. If it’s just money you’re after, then I can help you and make introductions to a number of folks. That would be great. But that’s not what we’re doing here. We’re here about trying to make a difference and solidify [00:44:00] this place and really build, cultures and teams and legacies of a very impactful brand, I feel like will become just demonstrate the possibility of being different.

And that’s what we’re looking for. We’re looking for culture led companies that want to join, us and be part of something different, and ultimately, at the end of the day, to make a difference, right? We have a number of initiatives that are gonna be very different and what we’re doing that I think will be impactful.

So the first piece of what we’re showing right now is the the acquisition and through the MSB owners group, but we’re doing a lot more than just that. So for right now that’s what we’re exposing. But. I’m happy to talk with anybody that’s interested, just to give more details.

’cause most of the folks that come to us are, we’re pretty diligent about who’s part of this and why. So it’s a very different model. It’s not for everybody. We’re not looking to try to grow to be, buy a hundred MSPs over the next 12 months. I could care [00:45:00] less about that.

I’m a, we’re gonna partner and work with, 20 great companies and just, become, one of those, for instance, companies that just did things differently.

Rich: This is an area I wanted to get into with you a little bit because you were talking before about building success in instead of buying success and Yeah.

That it’s fair to say the typical PE backed SP platform that they’re looking for successful MSPs that they think they can take to another level with their money and expertise and Sure. And so on. You guys, it sounds like, have a different definition in terms of the kind of company that you want to acquire and will acquire.

How do you define that target? How do you evaluate whether or not a given MSP is a fit for MSP owners group?

Juan: And I’ll say this, and a lot of people look at some of the stuff that we’re doing and they’re like, yeah, I wouldn’t have bought that company. And it’s yeah, because you’re buying it for a different reason.

I’m buying it. [00:46:00] For an opportunity to demonstrate what’s possible when you have a wonderful team of folks that are focused on each other’s success, our customer success, and growing great brands like, and that’s where I say we don’t buy success. We built success because that’s what we’re predicated upon.

We’re all banding together to make sure that all of us are successful. And not just us, but our employees and our customers, right? And it’s a very different nuance, right? I’m not looking at it as a, you need to be at this multiple, or you need to be at this level of ebitda, or you need to be at this level of revenue, or you need to be X profitable.

To be honest with you, I don’t care. And it doesn’t even matter to me about where you’re at. What matters is what you want to do after this. Do you want to stick around and help the community? Do you want to help things move forward? If that’s the case, then hey, by all means, let’s have a conversation and let’s talk with our team and see, does this really match up culturally?

That’s all that’s important, right? It’s, it doesn’t, there’s not a money component that [00:47:00] should stop the decision making capability. And again, this is why I’m doing what I’m doing, because we’re gonna demonstrate what’s possible when you don’t focus on trying to be like everybody else, when you’re trying to focus on making a difference, just a little bit different than everyone else.

So there’s not a lot of caveats in terms of what we look at or how we look. There are MSPs that are fairly successful that are wanting to be part of this. There’s MSPs that in certain eyes wouldn’t seem successful, but they’re primary focused on, community and trying to give back.

There’s a number of different folks that are in line to be a part of this that, none of ’em were looked at the same, by the same lens. All we care about is what do you want to do? To make a difference and does that line up with what we’re trying to do? Like how are we seeing each other there?

Everything else we can figure out. But our primary objective is to try to grow them, grow their brand, grow their people, and grow great companies. [00:48:00] And so far it’s working out great in a very short period of time. It’s actually probably one of the best companies I think I’ve compiled. And I can tell you just based on the smiles and the excitement and the employees it’s just, we’re gonna see if it’s gonna work, which I’m pretty sure it will, but it feels pretty good.

Erick: So Juan Private Equity has access to, lots of investment capital and you guys are self-funded. Yep. How does that limit. What you’re able to do or what you wanna do because you’re self-funded. In any respect,

Juan: I would say that, private equity and venture capital, when you look at the two things they’ve done a couple of things.

They go out and they raise some funds, they predicated on in a multiple, and they pre cate on a timeline in terms of when [00:49:00] they this multiple or this exit might happen. That’s not, there’s, it’s not a question of whether or not somebody has the ability to do something on their own. It’s just that we’ve only seen one way of doing it because it’s an easy way of doing it and it presents itself to us.

There are a number of ways to do the things that private equity does without private equity. And that being said, we’re just. Not necessarily shunning the opportunity, but we’re just looking at it, okay, how do we create internal value? And to be honest with you, does it limit us? And in terms of what we can do, not really, to be honest with you.

If you look at the way to finance opportunities and the way that you actually put deals together and the ways that you combine companies, having smart financial people, having smart legal teams, having smart, backend operations like you, there’s, it’s amazing how much you can actually figure out.

And to be honest with you, it hasn’t limited us yet. We do [00:50:00] recognize that, if we’re gonna try to buy a hundred million dollar MSP for whatever reason that would happen that might be a concern, right? Because that would be a point where does this, and again, culturally, would we do that?

Probably not. We most likely would become one before we and build one versus buy one. From right now what we’re looking I in currently in what we have and the folks that are interested in being part of this, there’s not a real limitation for us right now in terms of that. So I don’t feel like, and again, sales solves a lot of problems and growth solves a lot of problems.

So when you have revenue coming in and it’s amazing what you can get done when you have, capital coming in. And of course the companies are growing at XY percentages. There’s not a limit to the types of financing that you can get your hands on in terms of, staying internal to the organization.

So we haven’t seen that limit yet. I don’t even recognize that it probably would be a big concern for us. Internally, we have enough folks here and enough power [00:51:00] so far that we could fund ourselves for a long time. And so I don’t see it as being a big challenge.

Rich: So stepping back a little bit, Juan I would be remiss if I didn’t take advantage of access to somebody who is thinking about m and a in the managed services world all day, every day.

To talk a little bit about the m and a landscape out there. Right now we’re midway ish through 2025. There’s still economic uncertainty out there. Interest rates haven’t really come down a ton. What does the m and a landscape look like for MSPs out there right now?

Juan: And again, I think that right now it’s still a, if I’m looking at private equity, I still think it’s a buyer’s market, right?

We haven’t seen, to your point, the interest rates go down in terms of how things are funded, but. I will say that the multiples for MSPs is still really low, and I think that’s why you’re not seeing as many acquisitions take place in the upper echelon. [00:52:00] But you are looking at a number of private equity platforms, if you will, that are coming up on renewal or exit.

So you’re gonna see some pretty interesting moves over the next, six to 12 months. And I think it’s gonna be eyeopening to watch, right? Because I think that as things get to a certain size they become an immovable, right? They have, they have a path that they’re set on and they really have to keep going down that similar path.

And that’s what we’re trying to stay small, flexible, and nimble. When you think about, I would say in the next couple years you’re probably gonna see the re insurgence of this, acquisition train fire back up. Because you’re also looking at people that are looking to exit. I’ve had a lot of conversations with a lot of folks, and you can see, you look, there’s other folks out there that are doing some pretty interesting acquisitions and trying to make their mark on trying to create a platform and do the things that are, they feel that they wanna see in a business.

And they’re doing [00:53:00] great. I, there’s hundreds of MSPs that are looking to do something different, and sometimes you get to a point where it’s time to go, so it’s just depending at how you want to go. And then there wasn’t a very many options previously to do this type of thing. And so we’ve just decreased the barrier to entry and changed the trajectory.

But I think that you’re gonna start to see folks that are just looking for quick exits. They’re probably done, I hear a lot of MSPs are like, one, I’m done. I don’t even care anymore. I’m just ready to sell. So you’re gonna start pricing between now and I’d say this time next year, another. Another surge of acquisitions for sure.

Definitely some change of the guards, and you’re gonna see some platforms change private equity companies for sure.

Erick: Juan, you’re speaking to a lot of MSPs. I’m speaking to a lot of MSPs. We know that, the m and [00:54:00] a activity based on, recent reporting and analysis has come out, has shown that it’s dipping a little bit here.

What are you hearing about the current economic uncertainty that we’re all going through right now, having an impact on m and a as well as on just MSPs out there, just trying to make a butt, trying to run their businesses. What do you, what can you share?

Juan: I call this last year, like stunned in place, right?

I think that everybody’s reevaluating their organ, their business as a whole. If they hadn’t sold already at this point, they’re probably like, okay, we’re gonna make a push. We’re gonna try to get to X. We maybe have a new reason why, or we’re gonna start trying to, acquire on our own or try to figure it out.

But there’s this the thing that’s I think stopped them in their tracks was AI and the growth of it. And that’s where they’re like, oh, I may need to read, completely retool my stack. And I think that’s [00:55:00] where, there’s a lot going on right now that is, is causing this slowdown.

And I think for the most of it is you’re gonna see a couple, they’re gonna try their hand at, can I redevelop myself in a different way to. Maybe deliver and try to create a new value equation and try to get a higher multiple if there are looking at exit or they’re gonna redevelop themselves completely and try to see if they can become the platform.

So I, I don’t know, to be honest with you I’ve heard a number of different approaches and I talked to ’em MSPs constantly about why they’d be doing something and it’s just very interesting to watch. But I would say that it’s more than just the economic uncertainty, it’s the technology uncertainty.

What are we gonna be doing? And I talk about this when I started talking about MSP 5.0, five years from now, what you do today, you will not do anymore. So that’s gonna put pressure on everybody to figure something out. Now I know there’s a lot of people that say hey, hold on one dude, don’t say that.

And [00:56:00] I’m like, okay bro, there’s still newspapers, people still read newspapers, that’s fine. But there is gonna be a majority of the things that we do today that you will not do five years from now. What does it look like? We’re gonna this is probably one of the most interesting times for us in a long time.

Like this is almost like five x what cloud was. And when we finally got our hands on the m which was the management of these problems, right? I don’t know, it’s gonna be interesting to watch, but I’m gonna be here so I, I can’t wait to ride this out to see. And again, we’re doing a lot of things to prepare for that future too.

So that’s one of the other advantages is that we’re not just collecting wood to build a house, we’re building a bridge for the future. So it’s a, it’s an exciting time, guys.

Rich: It’s a very interesting new venture that you’ve just gotten off the ground recently. Juan we thank you for joining us on the show to talk about it a little bit.

For folks in the audience who wanna learn more [00:57:00] about MSP owners group, wanna get in touch with you, where should they go?

Juan: Yeah, a couple different places. If you want to add over to the website, you can kinda learn a little bit about it, find out about some of the companies that have joined us, msp og.com.

You can also, if you’re interested, fill out the form and shoot it in. And if you wanna have a conversation about what it could look like, and again, at depth, what could this look like for me? Love to chat. We’re all about having conversations and finding out if we’re a cultural fit and seeing if there’s a way we can be successful together on the other end.

By all means, could always call me (505) 270-6558, shoot me a text. My line’s always open and available. If you guys all know you can call me anytime. So happy to help any way I can. If you’ve got questions or I’ve also even had people call me and ask, Hey man, I’m going through m and a. Is this a good deal?

And I’m like, depends on what you wanna do after you do this. So I’m happy to chat about anything anyway. And, no pressure. And it’s just, it’s an honor to be a part of this community. And I wanna say thanks to you guys for contributing [00:58:00] and constantly giving back, featuring stories that are just a little bit different like ours.

Thanks you guys.

Rich: Thank you very much. Juan Fernandez, founder and chief encouragement officer of MSP Owners Group. We thank you for joining us here on the show. Folks, Erick and I are gonna take a quick break here. When we come back on the other side, we’re gonna share some final thoughts about MSP Owners group in this conversation with Juan Fernandez.

Have a little fun wrap up the show. Stick around. We’ll get right back. Next one. Yeah.

All right. And welcome to part three of this episode of the MSP Chat podcast. Very interesting conversation about a new and different exit or investment opportunity option for MSPs out there. Erick, it talking with Juan, it reminded me a little bit of something I heard an executive from Synex in, in pre-merger days back when, back before TD Synex.

I remember the north AmErickan CFO [00:59:00] of that company talking about how there’s a playbook that the private equity companies use after they make an acquisition to grow an MSP or other IT solution provider. And once you understand what’s in the playbook, you can run those plays. You’re you don’t have to sell to private equity.

Necessarily to generate the kind of growth that private equity wants to produce. And MSP owners group from a certain perspective it is trying to do exactly that. There’s no private equity involved in what they’re doing, but they’re running a lot of the same plays, plus some new ones that are entirely their own invention.

And looking to grow a business, help MSPs grow their business using some of those same techniques without. Some of the drawbacks the trade-offs that MSPs who sell to PE backed roll-ups have had to deal with in the past. So that’s really interesting. The other thing I’ll say Erick, and this is gonna be like dropping tantalizing a little hints to people so maybe it’s unfair, but off the air, talking to Juan A.

Little [01:00:00] bit it became clear to us that there’s much more to the picture at MSP owners group than we got into during this conversation because they’re keeping the really good and interesting stuff under wraps for right now to give themselves first mover advantage later. I think there will be more to say about this company later down the road and the model it’s pursuing.

But for right now, just right now it’s already an interesting story and a different option for MSPs to investigate. Yeah, you’re right. So I think it’s

Erick: Tip of the iceberg of what what. What they’re releasing and what they’re sharing right now. And looking forward to, learning more about the Mastered strategy here.

I think what’s very attractive to potential MSPs is it’s because it’s not a PE backed rollup. It’s not one of these giant organizations that are just doing six, eight transactions every quarter or more often. We’re seeing that happen now [01:01:00] and what, and it’s, and led by successful team of MSP owners.

So that is very encouraging to say, oh I am now gonna be part of something where I’m going to be more successful just by being a part of it from learning and integrating and talking with other owners. In that have done this before and know what success looks like, rather than just being another, EBITDA producing component of a large organization that is being measured by what the spreadsheet says what the financials say.

So it is very interesting and yes Juan definitely said, Hey, I’m looking at other factors, besides, financial performance or ebitda. And he even made it sound like that is probably not in the top two or three things we look at. We’re looking at culture, we’re looking at leadership.

We’re looking [01:02:00] at the ability to grow in a way that feels mu much more like an organic collaboration of folks with shared interests and ideals. Which is very unique and interesting, and we haven’t seen anything like that before. Yeah. Looking forward to keeping an eye on what the team at MSP Owners Group has next.

Rich: And we will be keeping an eye on that, and I’m sure it’s a topic we will revisit on the show for this week. That leaves us with time for just one last thing though. And Erick, I don’t know if this story is gonna affect people in our audience the same way it did. Me, I have, I hang up, let’s say, maybe not a phobia, but a hangup about tarantula is.

Big hairy spiders. They just creep me out. I You live in Southern California. I grew up partially in Southern California. We had tarantulas in the yard, in the driveway all the time. And I I just freaked every time I saw one. So you [01:03:00] can imagine how I was impacted when I read a story recently in the Washington Post about how customs officials in Germany were inspecting a shipment that came in from Vietnam.

Officially what was supposed to be in these plastic containers was chocolate cake mix. They opened up the containers though, just to take a look and were immediately struck by a very strong, unusual smell. Upon investigation, what they discovered was that there wasn’t so much chocolate cake mix in these packages.

It was mostly tarantulas, 1500 tarantulas, a seizing mass of giant hairy spiders. Erick which apparently smelled something terrible. And 1500 tarantulas, 15 pounds of chocolate flavored cake. That interesting scheme. I assume the the chocolate was camouflage for the smell of the tarantulas, but it did not work apparently.

All I can say is if I was a customs official [01:04:00] in Cologne, Germany, that would’ve been a really bad workday for me if I discovered 1500 tarantulas in a box.

Erick: Yeah. We need the tarantula sniffing dogs now. And what is that? Some kind of weird, like exotic. Exotic creature business happening here is there’s some, like these tranches are worth so much that I’m gonna risk and shipping them, and risk getting caught.

Interesting. I’m sure that that at when they appear at court, it’ll be probably one of the most unique court whatever trials folks have wi the jury has ever seen.

Rich: And some of the scariest evidence that anyone in that jury has ever seen. It won’t be one of those jury scenes where they’re passing the evidence up.

The no thanks. You can keep Yeah. The

Erick: way Yeah. I’m sure that you know that the the jury pool will be affected just like you were at seeing, these very crazy Tyra. So how do you remain objective? But, I digress.

Rich: And folks, [01:05:00] that is all the time we have for you this week on the MSP Chat podcast.

We’re gonna be back in a week with another episode. Like I said before, this will be coming to you from the GTIA Channel Con conference where Erick will be speaking by the way. So if you’re gonna be there watch out for Erick’s session. I’m very much looking forward to that. In the meantime, allow me to remind you that this is both a video and an audio podcast, which means that if you’re watching us on YouTube, but you’re into audio podcasts, go to Spotify, apple, Google, wherever it is that you get your audio podcast.

Look us up there. If you’re listening to us, but you’d like to check us out on video, go to YouTube, book up MSP chat. Wherever it is you find us. Please subscribe, rate review. It helps other people discover and enjoy the show just like you do. This show is produced by the great Ru Johns. It is edited by the also great Riley Simpson.

They’re part of the team with us here at Channel Mastered. They can produce a podcast for you on podcast. Needless to say are the tiniest little bit of what we do for our clients at Channel Mastered. If you really wanna understand the big [01:06:00] picture, please visit www.channel Mastered.com channel. Mastered has a sister organization called MSP Mastered, that is Erick working one-to-one with MSPs to grow and optimize their business. You can learn more about that at www.mspMastered.com. So once again, folks, we thank you for joining us. We’ll see you in a week. Until then, please remember, as always, you can’t spell channel. Without [01:07:00] MSP.