RICK JORDAN MADE IT to $100,000 a year in revenue relatively fast—and then stayed there for what felt like forever.
Now CEO of Chicago-based MSP ReachOut Technology, Jordan was a solo operator back then. What finally got him past that first plateau to $300,000 a year, seemingly overnight, was hiring someone to take some of the technical load off his back so he could spend more time on sales. Later, handing sales over to full-time professionals and devoting more time to strategic leadership got him from $1 million, where he’d been stuck for two years, to $3 million in months.
Lesson learned? The secrets to growing your business change over time. “”What got you here is not what’s going to get you to the next phase,”” Jordan observes.
Indeed, veterans of the process say that getting to $1 million, then to $3 million, and from there to $10 million and beyond, involves overcoming an evolving set of very different obstacles.
“”People are generally aware that there will be challenges,”” says Peter Melby, CEO of Greystone Technology, a multimillion-dollar MSP in Denver. “”There’s not a very clear awareness of exactly what those challenges will be to the point that they know how to start preparing for them.””
Melby, Jordan, and experienced channel pros like them do know what to expect, however, and have plenty of advice to share.
Getting to $1 Million: Investing in Success
Most channel pros begin their entrepreneurial journey with little to draw on but technical skills. Getting to that first big landmark—$1 million a year in revenue—is mostly about laying in a more complete foundation for growth.
If you offer managed services, that process begins with implementing a PSA solution, an RMM system, and other critical tools. Inexpensive options are available for newcomers with little initial revenue, but Jordan cautions against using them. “”I don’t believe in cheap or free, because cheap or free is not scalable,”” he says. “”You have to invest in the right tools in order to grow, and the right tools cost money.””
To get peak return on that investment, though, you must also take full advantage of the software’s capabilities. In the case of RMM platforms in particular, that entails scripting as many management tasks as possible. “”Almost everything is automated in our RMM,”” says Jordan, who does a service ticket review with his team monthly to spot further opportunities for eliminating manual effort.
Tools and automation will only get you so far, however. You’ll need a team around you to reach the million-dollar mark, which means mastering the fine art of hiring skilled, reliable employees. Like many channel pros, Jordan’s first hires were mostly technicians who freed him up to sell, but if you won’t be finding prospects and driving deals personally, he counsels, hiring someone to do it for you should be an early priority.
“”You have to put a focus on sales and stop thinking about the tech, whether you’re selling yourself or whether you have somebody else sell for you,”” Jordan says.
Karl Bickmore, by contrast, spent less time on salespeople in the early going at his business and more on sales process. “”You’ll probably be just fine on lead flow through asking for referrals from friends and family and from existing customers,”” says Bickmore, CEO of Snap Tech IT, an MSP and solution provider with offices in Atlanta, Phoenix, and San Francisco. Devising effective, repeatable techniques for tasks like running a first meeting, performing assessments, generating proposals, and quoting solutions is more important, he believes.
In fact, finding the one best way to do everything, including technical procedures, is a widely acknowledged key to reaching $1 million a year. “”The first thing you have to figure out is how to standardize your offering and how to make it more process-driven so that you can have other employees delivering the same level of service,”” Bickmore says.
The same logic applies to the hardware you sell, according to Jordan, who’s been limiting customers to a short list of desktops and laptops for years. “”You don’t want to sell a thousand computers. You just want to sell four,”” he says, noting that a narrower range of devices to support reduces training requirements and simplifies administration.
Performing regular refresh cycles with customers confers similar benefits, Jordan continues. Yes, some of his clients complain about replacing devices that are only a few years old, but the payoff is more than worth the hassle. “”Embracing the newest technology for our clients did two things,”” he recalls. “”One, it made them happier because nothing ran slow. Two, it made us more efficient because nothing ran slow for our clients, meaning we didn’t have as many tickets coming in.””
Getting to $3 Million: Embracing Discipline
Channel pros can make it to $1 million by the seat of their pants eventually but are unlikely to get much further, according to Arlin Sorensen, vice president of brand and ecosystem evangelism at ConnectWise and the one-time head of a big-time managed services practice. “”You really either have to create a business or you’re just going to get stuck, and a lot of people get stuck,”” he says.
Getting unstuck, and reaching $3 million a year, is largely a matter of adopting rigorous policies and procedures in areas like collecting accurate and complete employee time sheets, even on “”all-you-can-eat”” managed services contracts. “”I hear a lot of people in those early startup years say, ‘We don’t have time to keep track of our time,'”” Sorensen notes. “”If you don’t know what it costs you to deliver the all-you-can-eat contract, how do you possibly know if you’re making any money or not, and if you don’t make any money, you’re not going to grow.””
In fact, metrics of all kinds become critical on the road to $3 million. “”That was the stage we went from making money by accident or losing money by accident to kind of really knowing what’s going on,”” Bickmore says.
Pay particular attention to how much money comes in each month and how much goes out, Jordan stresses. “”It’s really not cash is king. It’s cash flow is king,”” he says. “”The more dollars you have flowing through your organization, the more options you have. You can bring on more people. You can invest in newer technologies. You can bring on consultants to help you.””
The key to cash flow, Jordan adds, is recurring revenue. “”If you’re still doing break-fix, get off that now.””
Getting targeted about who you serve is helpful as well, Bickmore suggests. “”When you’re in that early stage and growing, you’re kind of willing to figure out a deal with anybody you talk to who’s willing to give you money,”” he says. Established firms, in contrast, only accept clients within a specific size range and with relatively similar technology requirements. “”The more your customers have similar needs, the easier it is for your people to do a good job of servicing one from the other,”” Bickmore notes.
Vertical industry specialization is useful once you’re past $1 million too. “”It makes the sales process a lot easier, because when you’re selling you have to be able to create trust,”” Bickmore observes. Demonstrating familiarity with a prospect’s jargon and business pains is a shortcut to earning that trust.
Fast-growth firms, which Sorensen calls “”empire builders,”” understand the importance of firing bad clients as well as adding new ones. “”I’ve had empire builders tell me, ‘If we’re not getting rid of the bottom 10% of our customer base from a profitability perspective, we’re not really doing what we need to do to grow effectively,'”” he says.
A million dollars is roughly where formulating policies like that on your own becomes impossible, Sorensen continues. “”You need to round out your team so that you’re covering all the key bases of what it takes to really run a business,”” he says.
Melby agrees. “”You can’t get to $3 million without having a management layer,”” he says. Delegating real responsibility to those managers is equally critical. “”You have to make the shift from being able to make every decision and control every interaction to needing to trust your team to act on behalf of you and on behalf of the company,”” Melby notes.
Clarifying roles and responsibilities below the management layer is another key to scaling the business, Jordan and others advise. Calling everyone who supports customers a technician is fine when your organization is young, but divvying people up into narrower categories like help desk administrator, senior engineer, and project manager as you grow will make your people more effective.
“”They only focus on things that they’re really, really good at instead of what they’re really good at and four other things that they’re just sort of OK at,”” he says.
Getting to $10 Million: Embracing Vision and Scale
You’ll need to focus on the right things yourself when you break past $3 million. Plan in particular to spend less time as an individual contributor and more time defining the organization’s vision and culture, says Melby, who like Jordan relies mostly on full-time salespeople to generate revenue these days. “”It’s beyond $5 million that I’ve seen it really has to become programmatic and systematic,”” he says. “”Owner-led sales doesn’t do the trick.””
Leaning on sales alone to reach $10 million, however, will be time consuming, which is why mergers and acquisitions often enter the picture north of $3 million. Jordon, for example, is accelerating growth by purchasing other, smaller MSPs. “”It’s the fastest way to get to that point,”” he says. It’s also given him whole new markets to conquer by expanding his geographic reach beyond his base in Chicago to the Southeast and West Coast.
Melby, for his part, chose a different though increasingly common option for reaching the next level. Late in 2020, he and Greystone co-founder Jesse Armstrong accepted an acquisition offer from New Charter Technologies, an MSP portfolio owned by private equity firm Oval Partners.
“”We see this as an opportunity to do something bigger,”” says Melby, who freely concedes that he’s long been turned off by the tendency of private equity buyers to enforce conformity with cookie-cutter business models. New Charter, by contrast, gives the companies it purchases autonomy to continue operating much like before, only with more resources to draw on and less financial risk.
“”It’s made us better leaders,”” says Melby of the transaction. “”I’m not constantly worrying about the doomsday fallout of any little decision I make.””
Not that he won’t continue to face hurdles as steep as the ones he cleared before, of course. It’s just that after many years of climbing into multimillion-dollar revenue territory, those hurdles look a lot less intimidating.
“”I don’t think the problems get any easier,”” Melby says. “”I think we get more capable.””
Image: iStock
