In this episode, the hosts welcome Shawn, a seasoned MSP expert, to discuss the concept of ‘co-opetition,’ a blend of cooperation and competition among Managed Service Providers (MSPs). Shawn shares insights from his 25-year journey in the MSP industry, his experience with peer groups, and his current role in running events and providing coaching through Encore Strategic. He emphasises the importance of community and peer groups in overcoming industry challenges and improving business practices. The discussion also touches on the need for MSPs to properly value their services and adjust their pricing models. Shawn also highlights the benefits of forming strategic partnerships and peer group collaborations to enhance service delivery and business growth.
00:00 Welcome and Introductions
00:24 Life Between New Hampshire and Aruba
01:36 Diving into Co-opetition
02:04 The Value of Peer Groups
04:44 Overcoming Competition Fears
09:04 Pricing Strategies for MSPs
18:46 Client Relationships and Growth
22:27 Global Collaboration and Community
27:55 Upcoming Events and Conclusion
Listen on Spotify or Apple Podcasts
Connect with Shawn Walsh on LinkedIn by clicking here – https://www.linkedin.com/in/encorestrategic/
Connect with Daniel Welling on LinkedIn by clicking here – https://www.linkedin.com/in/daniel-welling-54659715/
Connect with Adam Morris on LinkedIn by clicking here – linkedin.com/in/adamcmorris
Visit The MSP Finance Team website, simply click here – https://www.mspfinanceteam.com/
We look forward to catching up with you on the next one. Stay tuned!
Transcript:
Daniel: [00:00:00] Sean, welcome to the podcast.
Shawn: Thank you. Thank you. Pleasure to be here.
Daniel: And,our audience will prob probably guess by, by the accent that you are,not,not from the uk. and, we,we actually met you last year at a Comptia event, I think in London.
Shawn: Yes.
Daniel: so, you are based in, you’re based in the states, but also there’s a holiday, island as well, isn’t there?
Tell us a little bit about that.
Shawn: us a little bit about Yes, I am lucky enough to spend, half my time in New Hampshire on Lake Winnipesaukee. we are about two hours north of Boston where we’re headquartered, and then I get to spend half the year in Aruba. Not far from the beach and we run events down there for MSPs and we have an outdoor classroom that we built on the property.
And that’s, it’s not a bad setup.
And, and of course,Adam and I are looking forward to, at some point coming over and. I think you mentioned about giving a scuba dive and lessons and, Yes. Yes. so my other claim to fame is my side hustle that I work as [00:01:00] a, a dive instructor when I’m in the islands. I’ve actually been a professional diver in one way or another for, since 1986. And, when I started living in the islands part-time, the guy at the dive shop saw me and said, Hey, you actually know what you’re doing.
I’m like, yeah, not my first rodeo. So. They asked me to come on as an instructor and so when they need a extra set of hands, they call me up and I go out and I teach some scuba lessons and it allows me to take people out and, introduce them to the hobby.
Daniel: Brilliant. Well, we’re, we looking forward to it and, packing our snorkel, in anticipation.
Shawn: Absolutely.
Daniel: So, yeah, we’ve got an interesting topic for today. as we often do, we, we channel at events and then, and then follow in and then ahead of today’s, today’s podcast. And, we really wanted to get into the topic of co-opetition and,we,yeah, I guess, you’ve got, you’ve a background of, being involved in peer groups for some time, I believe with ConnectWise, so.
Talk to us a little bit about [00:02:00] how you’ve, how you found that, that topic, over, over time.
Shawn: Yeah, so, I had an MSP for almost 25 years. We grew it from the basement of my house with me and my wife to locations in four states across the us and, we sold it at the end of 2017 to private equity, and I wasn’t ready to be done yet. And in addition to my MSP background, I’ve had a teaching background, so I’ve taught college and high school, and while I built my MSPI was a member of peer groups.
I had received coaching. but the peer groups were incredibly valuable and having a community of other business owners and MSPs to work with. So during that time, I was not only the member of peer groups, but I helped ConnectWise start their regional peer groups. So myself, MJ Shore, who’s,the who’s head of channel for, GTIA, formerly CompTIA. myself, him and a few others, started up the first [00:03:00] ConnectWise Regional peer group. So we were kind of the beta testers and we were the facilitators for many years of that Northeast group, as well as being in our regular paid group. So when I sold my company, I knew I wanted to stay in the channel, but I wanted to do something in the teaching vein. while I ran my business, I managed to get my MBA along the way so. I felt like I had some, knowledge beyond just the fact that I’ve been here and done it. So we started up Encore Strategic, and our main things that we do for MSPs is we provide direct coaching, but we run peer groups and that is our, probably our largest offering. And we bring people in, and the idea is to put together a group of MSPs that act as a board of advisors for one another. And there are people who are there that when you have a problem at your company, you can throw it out to the group and say, Hey everybody, this is really kicking my butt this week. What can, what have you run into this before, how can you help? And [00:04:00] you’d be amazed at the responses that people get. And I often say that when I was a member of a peer group, my peer group, helped me up off the floor when I was getting my tail kicked, and they knocked me down a few pegs when my ego would get too big, they kept me in check. and that’s what a board of advisors should do. But I’ve done it through the. The volunteer side, I’ve done it through the paid side, but no matter how you engage, this business is amazing for the community that it has. And I’ve worked in other industries and there is no other industry I’ve seen that has the level of community that the MSP community has and people need to be taking advantage of that.
Daniel: And the,the first barrier to. I guess engaging in, in that is the fear of engaging with your competition. and,what, how did that man manifest itself in the early days? Obviously we’ve got lots of points of reference now, thanks to peer groups,having been around for some time.
But, how did you get over that in the [00:05:00] beginning?
Shawn: that in the beginning? Yeah. Sometimes people were very standoffish and said, Hey, these people are my competitors that are in the room. I don’t wanna share my best practices. I don’t want share my secrets. And the reality is what we realized was that these people aren’t my competitors. And these people are people who understand my industry. They might have some additional expertise that I don’t have and we can support each other and. you know, we call it coopetition. So, so the idea is technically, yeah, on paper we’re competitors, but the reality is that the market is more than big enough for all of us. There is, years ago I was at a conference and somebody was complaining that the company who’s was holding the conference was allowing too many people to sell their software in a certain area. And one consultant who I’m still friends with to this day. She stood up and she said, you know what? I don’t care how many consultants you put in my area, [00:06:00] as long as they’re good because good consultants are good for all of us, and bad consultants are bad for all of us, and that, that really stuck in my head and it’s never left. And so when I look around the room and I see people doing what I’m doing, my first response is. How can we support each other to help each other to grow, as opposed to, oh my gosh, that’s my competitor. I don’t wanna, you know, I don’t want to tell them anything. you know, somebody who was technically my competitor helped me through my very first network install, and it never would’ve been successful without it. what MSPs need to realize is that. We’re not usually each other’s competitors. The competitors that we need to worry about are the companies like Microsoft and Dell, and the people who wanna eliminate that last mile that we represent from the product to the client. Dell has been, you know, Dell has built to go direct.
They have fought MSPs for years and they’ve [00:07:00] killed MSP programs. They’ve reinstated them. They’ve gone back and forth. They’ve never been able to close that gap, and that’s what we need to worry about. I. Interestingly enough where my first office was, when you pulled into the parking lot, first door on the right was an MSP, and then I was around, was two doors around the corner, an MSP.
He was parrot computers. I was paradigm computers and we always got each other’s deliveries and he and I. Wound up owning our units and we both wound up on the board of directors for the condo complex where our office was. And we often joked with people ’cause they’d say, oh my God, you guys are right next to each other.
You’re competitors and you’re so friendly with one another. And we’d just laugh and we’d say, we’ve known each other for over 10 years. And in that time he’s taken one of my clients, I’ve taken one of his, and we both tried to give them back.
Adam: yeah,
Shawn: true story.
Adam: just a couple of thoughts. My end on this, because I was, you know, one of those typical [00:08:00] owners, insular, fearful. Worried about competitors in my town stealing all those beautiful clients, you know, from me or taking them, you know, so that I couldn’t get them, hiring, you know, hiring people that I wanted to hire, all that kind of fear mentality.
and I think it’s not particularly helpful as we’ve just talked about, and one. There In any one town there’s about 50 MSPs, right? Vary varying size. obviously it depends on the size of the town, but there’s gonna be a minimum 10, probably 50, right? so any individual MSP that you build a relationship with isn’t your competitor, it’s just one in 50.
so, you know, go out there, build some strong relationships with,
Shawn: relationships.
Adam: some. You’re not gonna be mates with them, all right? just have some relationships and you know what? When you need a bit of help from them or vice versa, you know there’s some support for you [00:09:00] there. and that can come really in handy.
the second point I was just gonna make was around. This, there seems to be an overall, I’m not sure if it’s the same in the US but certainly in the uk there seems to be an overall sentiment of devaluing what MSPs do or this theory of, you know, no one will ever pay, you know, a hundred pounds an hour or whatever it is.
that’s why I’m selling my services at 40 an hour. 40 pounds an hour. Yes. But my competitor down the road sells it for 38, so I can’t, you know, or whatever the face seat price is or whatever, it’s, so you end up with this kind of bottom to the race, to the bottom kind of mentality where pricing seems to be based on what the guy around the corner’s doing and the guy around the corner’s basing his price on someone else down the street and it’s just artificial and it’s artificially low in my view or in our view.
And I.
Shawn: in our view, and I think all do with,
Adam: and just generally, understanding the, truly understanding the value of what we do overall. solicitors, architects, [00:10:00] doctors, other accountants, other professionals don’t do this. It seems to be a
Shawn: Yeah,
Adam: in the SP world, so in the uk.
Shawn: absolutely. I see it. Every time we take on a new consulting client, one of the first things we do is a financial analysis. We look at their books, we look at their profitability. One of the key things. For an MSP is gross profitability After your tools that you deploy to a client for your stack and your labour costs, your engineers, if you deduct those costs, what’s the gross profit of your agreements and agreement?
Gross profitability is a key measure and we often see that companies come to us because their gross profitability is too low for them to be profitable and they are the biggest. Hurdle to get past. ’cause it’s the mindset of I can’t charge more. And your prices should never be based on what you think you’re gonna get from because of what the person around the corner is charging. Right. [00:11:00] your pricing should always be based on your cost. There’s a financial model that we use with MSPs and. The perfect financial model is that here’s what your gross profit is, here’s what your administrative expenses are, and in the end we model it so that you come up with 20% or better. NOI net operating income bo net profit quality, but a. And usually not a big difference between those two numbers for an MSP. but there are so many places that are operating at less than 20%, which is completely doable. and the owners are typically the biggest impediment. And there’s an old saying in the US from Henry Ford, you know, whether you think you can or you think
you can’t, you’re right.
And it, it’s the mindset of I can’t raise my rates. and years ago I remember sitting in a peer group with my. Facilitator and he was telling me, you have to raise your rates. And I’m sitting there and again telling him in front of the group, I can’t raise my rates. [00:12:00] My clients will never pay that. And finally, he put his fist down on the table and he said, stop imparting your cheapness on your clients. You’re the cheapest person. I know your clients aren’t. Go home and raise your rates
Adam: Yeah. Yeah.
Shawn: And I did. And guess what happened?
Adam: well, your profit went up. probably 40%.
Shawn: But from a, from the client standpoint,
nothing happened. Nobody
even noticed. Nobody even questioned it. I was like, oh my God. All this time I’ve been here undervaluing. And then a year later we raised the price again and again. Nobody noticed. I have worked with two companies recently where the first thing we did, we came in, we analysed the profitability, and one was an MSP and we found 10 clients. That their profitability was negative, so they were actually paying the client to do the work for them in the end. And we went through the list and there were two [00:13:00] companies that were just bad clients. They did not align with the MSP’s core values. They were constantly, you know, asking for discounts.
They were paying late. They were just a C list customer. And we said, you know what? Fire these two. The other eight. Do you like working with them? Yep. Good. Here’s what they need to pay for the services that you’re doing so that this is a profitable agreement. And for a couple of the clients, we had to quadruple the monthly spend. I don’t think there was anybody that was less than double. And it went up from there and he went around to those clients. Now, against my advice, he went to the two that I told him to fire. And in the end, the eight good clients all said yes. The most common response was, we were wondering how long it was gonna take you to raise your prices. And the two that I told him to fire threw a fit and he wound up firing them [00:14:00] on the spot because he got so mad at their response, blaming him for issues. So in the end, he added about $10,000 a month to his MRR, just because he went
out and asked. That’s all it took. The other client, she, after we analysed her client base, half her clients were unprofitable.
When we looked at them on a case by a client, by client basis, I told her, I said, you could fire half your clients, have half the work, half the headaches, and make more money. And it was eye-opening. And again, she went around to all the clients and once again, the common response was, you know what took you so long?
- So, people need to know that there’s value in what they’re doing. and quite honestly, if somebody’s paying, if somebody’s charging $40 a seat or 40 pounds per seat, there’s no way they’re doing this
Adam: They’re doing, and they’re charging an awful lot less than that as well, which is, and they’re charging an awful lot less than that as well, which is really worrying. and then they’re wondering why that they can’t [00:15:00] actually build their business and why, you know?
And their clients are wondering why they’re still having
And they’re just attracting the wrong clients. That’s the thing. They hold onto the wrong clients, you know, and they can’t truly invest properly to build those, you know, top tier services to look after the good clients. And so eventually they’ll lose them as well if they’re not careful because they’re not charging enough.
Shawn: not charging enough.
Exactly. I work with a lot of Canadian clients and at one point I had a group that I was doing peer groups for up in Canada, an a Canadian franchise. And I often heard from them, we can’t charge. What you charge in the us we can’t charge that. and there was the per seat price that I kept getting pushback on.
And then I got a young guy who started an MSP. Way up in Northern Canada in the boonies. Well, he didn’t have competitors to tell him he couldn’t charge it, and he started charging 200 Canadian per seat, which is double, more than double what the
others were charging. And I said, well, how’d you set your price?
He goes, well, I [00:16:00] looked at my cost. I figured this was what it should be. I said, well, everybody in Canada tells me you can’t. You can’t charge that proceed. He goes, well, nobody told me that. And he went, he just went
out and sold it ’cause he didn’t know any
better. And you know what? and he was doing great.
So it really is about mindset and it’s also how you sell it. There’s so many MSPs and this is a really unfortunate problem, but there’s a lot of ’em who really think that they’re, what they’re doing is only worth at that price. And the reality is, if you’re doing it, I mean, there’s a lot, you’re not just fixing computers.
you’re keeping data secure. You’re keeping a business running. You know, I told one MSP, you have to set a minimum threshold, 1500 US a month or you don’t take them on. And he said, well, I have a meeting with a small law firm and they only have three seats. And at, even if I charge 200 a seat, that’s only $600. I said, well, I said, you explain to them if they would like your services, [00:17:00] this is the minimum. But if they add up to 10 people up to, so that you know, it’s an average of 150 a seat, that they won’t have a price increase. And he went into the attorney and he laid that out in front of the attorney, and the attorney thinks for a second, he goes, yeah, that’s three billable hours a month.
That’s fine. Do it. and because. The attorney was paying
Adam: Exactly,and it’s the perception, you know, everyone has a perception, which is their reality. So that if that attorney’s perception is it’s three, three hours of my billable time or one of my employee’s time, do you know what, for complete data security, maybe I’ve got 24 7 support in that.
proactive this, proactive that, whatever it might be. Yeah. I’ll have that you.
Shawn: E. E Exactly. I mean, so to him the value was, I don’t, I mean for 1500 a month, for three
hours of my time a month, I don’t have to worry about this. And I know everything’s secure and I can sleep at night. So that’s the [00:18:00] problem is we’re selling like engineers. We’re not putting ourselves in the seat of the person in front of us.
And I often say to MSPs, you need to stop having server room conversations and start having boardroom
conversations. You have to understand their business model, not you have to understand yours, but when you’re selling, you need to understand theirs and how they’re perceiving your value. And that’s something that is not
done enough.
Daniel: great example there of,also, being deliberate about who you’re gonna do business with. you know, can they afford and would they value what you do? a ano another professional service provider that charges a hundred dollars,an hour, would, you know, their throwaway price would be $300, you know, rather than 1500.
Shawn: So, You know, and the other part of that is. If you’re an MSP and you’re growing your company, you have to understand that some of the clients who got you started are not going to continue with you on the journey. And I remember when I lost one of my very first [00:19:00] clients and I was heartbroken.
I’m like, but this person could not embrace the idea of managed services and the value. And my wife looked at me, she goes, why are you so upset? I’m like. Lee was my first, one of my first clients. She goes, yes, and we’ve outgrown them and they, we’ve grown and they haven’t, they’re gonna do better with the new person who’s starting up a solo practice like you did, and we need to move on to other clients and. You know, my, my wife was a good business partner and often the voice of reason when I was getting fixated on something and, you know, she had that big picture view. but that’s the reality. And so many MSPs have such a hard time with that and continue to keep unprofitable clients because they’re just emotionally
Adam: Agree. Agreed. And actually, another way of sort of twisting this around then is when a client says, you know what? I’m not sure if we’re a fit anymore. You know, I don’t get the same, I don’t get Joe on the help desk anymore or, you know, [00:20:00] I, you know, there’s some kind of workflow that you’ve implemented where it is a bit less personal.
I feel like you, you know, maybe you’ve outgrown us or some, something about you that doesn’t fit with us anymore. Do you know what? Yeah, you’re right. and actually, and that’s a good thing. So, you know, you wanna take that away. It’s a good thing you’ve succeeded in growing. You’ve exceeded in scaling a business, maturing your processes, and not become.
All things to all people, you know, right down to a tiny client that you, you started working with. So there’s that relationship piece, which often, hurts a little bit, right? Because, you know, these guys helped you get started and, you know, went out for dinner with them and whatever it may be.
But, at some point, yeah, you know what? you’ll outgrow them. And that’s a good thing to have.
Shawn: yeah. And a lot of people have a hard time saying no. So one of the things, one of the strategies that we recommend is if you’re growing as an MSP, find that one person shop. I had a company that was started by one of my [00:21:00] college students when I was teaching it, and he wanted to focus on people with less than five computers and home users. And he built an amazing business. It’s been, he’s been in business now 15 years. I. Plus,and running a very profitable company. But when we call, when we had somebody call us that didn’t fit that minimum and they just really were too small, we didn’t have to say no. What we did was, I often tell people, use yes and to trick from improv comedy, you never say no.
You say yes, and we say yes. We’d love to make sure that you have great IT services and we have a partner company. We’re going to, we’re gonna, I’m gonna make an introduction to, and they specialize in dealing with people your size and we’re gonna make sure you’re well taken care of. So now they don’t have a negative opinion of us.
’cause we told them, no, you’re too small. You know, we said yes and we have this great partner who’s the perfect fit for you. And that helped us. to, we felt that we didn’t have [00:22:00] to say no to them, so we felt good, and if it was a referral from somebody, we don’t wanna shut down that referral feed. So we made sure the person was taken care of and at the same time we’re helping this small person who, again, they back us up with taking care of these little guys.
So we’re not getting bogged down with home users and things like that, but we don’t become the company that says no to people.
Daniel: And inadvertently there, you’ve,you’ve taken us towards. one of the other key outcomes I see from the co-opetition, community, element of finding a way of, expanding your delivery capability. you know, we, you described there in terms of a particular type of client, but maybe there’s a geographic, delivery, element maybe it’s a particular service capability that the department might have that you may not.
And of course, by getting into. embracing the community, talking to your competitors. You discover where their strengths and your weaknesses are, and where you can come together to,to deliver a more [00:23:00] complete solution to a wider audience.
Shawn: Absolutely. Absolutely. And MJ from GTIA, him and I bordered each other. And there were oftentimes when,we might have a client that was closer down his way. in particular, I remember MJ used to have a law firm client, and we happen to really know legal software really well. Most of our.
Clients were attorneys, but we also did the software implementations for them. and MJ could call us up and say, Hey, they’re using that software that you guys support, can you come down and help them? Absolutely. And we make him look good. And we get a little, you know, we get a, an eng engage, a small engagement out of it. But again, it’s, that’s supporting one another. It wasn’t competition. You know, we’ve been promoting our peer groups in the UK now, and we’ve gotten a lot of people that we’ve talked to that are very interested in joining a peer group. And, but the fear is, well, this person might, are you gonna be taking [00:24:00] anybody from this area?
And people are to, were pointing out towns that we’re a good distance away. And I’m trying to explain to them that you’re worrying about the wrong thing. Don’t let that prevent you from coming in the group because. The relationship that you build between those other people that are in adjacent communities is gonna strengthen your business, not weaken it. and you know, MJ and I, that was a great example of that. And, I. And I feel like we still have some work to do in the UK getting people to buy into the coopetition. But when I was running the peer groups, the regional peer group for ConnectWise in the Northeast, people would come up to me and say, oh my God, you just spent two days standing on stage sharing your best practices and the things that you do to make your company run well, aren’t your competitors in the audience? And I said, well, technically yes. But then I explained the whole idea of coopetition, and I can tell you in over 10 years of running that group and sharing [00:25:00] with people who, some of them, my direct competitors, right in the, from the same town I. It never, ever created anything bad, nothing bad ever came from doing that, but I will tell you, I got three acquisitions out of that, out of sharing in that peer group, and it helped me build my company. So it was everything that came from that sharing was positive. And that’s really the mindset that you need to be going into these type of
Adam: and Dan, maybe. You should mention, brief briefly, the initiative that you’ve come up with.
Daniel: Yeah. So we obviously being part of the MSP community,ha, has inspired, has inspired. Way we work with, with our competitors,both in the accounting and the,and the wider sort of supporting MSP, industry. So, so we’ve had a couple of initiatives.
a few years ago we started a group called the, ITBetweeners, which,brought, brought a number of us,solopreneurs, together. and that’s,that’s been, a great catalyst for forming relationships. And in [00:26:00] some cases, we’ve managed to,collaborate on,on projects.
For example,a subset of us are putting on some events this year, that the UK Stadium tour. so, so, and that’s something that we couldn’t have done it on our own,put concept together and executed it. And, and then with, with Ms. P Finance team. We,we’ve effectively created a, we haven’t actually got a name for it yet.
We call it, the Global Alliance. Although,we’re not entirely sure whether that sounds a bit Star Wars,two or two Star War should say. and,and this is where we are working with, effectively MSP Finance team esque businesses, in di different parts of the world, the US and Australia as,we, we see.
we see the globalization of the MSP,industry, re really starting to accelerate as
Shawn: Absolutely.
Daniel: businesses. The MSP supports are in, you know, in. Improving in their globalization as well. And so, so yeah, we see the MSPs becoming [00:27:00] more, more global, and therefore the support services MSPs have as well.
But yeah, we,we compare notes, we, we review geographical differences. and, and in doing so, yeah, it, it makes us all stronger and, and better equipped to, to support our customers.
Shawn: Customers. Yeah. And spe speaking of com community, you guys referred me over to, tech Tribe. and I gotta tell you that is a fantastic community. I have been thoroughly enjoying that since I signed up and, having great conversations with people. So, thank you for that.
Daniel: Yep. you’re very welcome. And, yeah, tech Tribe is one of, one of the, well, I’d say Tech Tribe,co CompTIA, GTIA as it is today. yeah. But both of those groups have been, have been re really, in instrumental in keeping Adam and I in, in, involved in the MSP, industry, beyond, beyond our exit.
So, so yeah. I guess we started this conversation around co petition. And, effectively we’ve talked more about community and peer group, but, but I think it’s a, been a [00:28:00] great catalyst to explore some of the benefits and,PR perhaps, perhaps we’ll have to welcome you back the next time you are in the UK for a follow up episode.
Shawn: I look forward to it. I’ll be back there for the GTIA, GTIA conference, this fall. And, we are actually talking about maybe doing some workshops, over there for the UK audience while we’re in town. So, so keep your eyes out for that. we’ll be putting events up on, our website on core strategic.io as, as those events come around.
Daniel: Brilliant. Well, look forward to that and to, to seeing you in the,the autumn as we say. and,and maybe, yeah, maybe spring in Aruba. is that what Adam and I should be aiming for with our snorkel?
Shawn: I think so. I think so. Yeah. Springtime, you know, when it’s,I was saying I’m back in New Hampshire now and Winter decided to wait around for me, so that’s usually what I’m trying to skip. But you know, when it’s, cold and wet and rainy where you are, then that’s a great time to be in Aruba.
Daniel: Brilliant. There we are. Good stuff. [00:29:00] Well, we look forward to seeing you,somewhere warm somewhere very soon. And, and thanks ever so much for joining us.
Shawn: Joining, joining. Thanks so much for having me. I greatly appreciate it.