Archive for the 'IT Business' Category
My head is spinning from all the amazing conversations I’ve had this week and I wanted to offer a bit of an explanation regarding my animosity towards VC involvement in the SMB space. As I hinted previously I am working on building another business and have had the “pleasure” of spending some time with the attorneys and consultants that specialize in the financial world. On one hand I’m incredibly thankful these folks exist, on the other hand it makes me long for the good ol’ days of $500/hour IT and corporate law attorneys charge. Yes, my butt hurts.
And on the subject of anal rape, why the hate towards the VCs? First of all, I don’t have a problem towards the model itself – venture has a place in the world helping larger companies get even larger, helping fund projects banks would otherwise refuse to undertake, helping finance complex deals and provide the means for all sorts of debt reduction, leveraged buyouts, etc.
Which in short is the exact same reason no small business (let’s say under $100m) should ever deal with one. But don’t take my word for it: Go talk to someone that has taken funding without a clear exit strategy that involved the IPO. What they will inevitably tell you is that even though the VC typically steers away from day to day, they shackle the kind of big picture and strategic moves that help small companies make it big.
But how could this be? Isn’t it common knowledge that VC is the very fuel that helps companies grow in the first place? Yes. Big companies. That you can count on your hands – the rest of them are in essence private money that is putting the money on either red or green and only hoping for the ball not to land on black. They’ll take losses and they’ll take big wins but nothing in between works. You can’t just build a highly profitable business with a long term strategy: You have to blow it out of the park so they can either win big or cut their losses.
Now that you know..
What is the lifecycle of a funded company that doesn’t go public?
Well, they’ll let it ride forcing big moves and expenses. While the illusion of grandeur (most of the time a delusion) makes things look amazing the course is to make even bigger and bolder bets.
But once things slow down a little, things get ugly. The employees that are working below their market worth get antsy because they want to be bought out. Things are always on track, everyone is winning (except the employees) and you’re just one step short of retiring to your own private island. But then your boss starts getting really interested in your expense report. And your hours. And your conversations. And increasingly trivial big projects while the costs are cut left and right. How can a company be blowing up big time and at the same time selling it’s Aeron’s on Craigslist? Because it’s being gutted, books cooked and working towards being served to a scrap buyer that might make more with it than the sum of it’s parts.
While this may sound ugly and heartless, this is the norm and this is the process. These folks aren’t evil, they are after returns. I ain’t mad at them.
But the part I don’t like is when a small company, who let’s face it lives or dies on the passion of it’s founders, is shackled and distracted towards someone else’s agenda. This is not VC’s fault: they aren’t funding you to believe in the magic of your dreams. It’s more of a steroid shot.
Borrow money from the bank: It’s your name, your credit, your decisions, your call all the way. But get taken over by the VC and well, for the convenience of not having absolutely assessed risk you are trading away your ability to control your own destiny. Yes, even if you own 49% you’re still a minority and now you work for whoever owns you.
That is my beef with the VC world: People do business with people. And when that trust is broken and it’s a matter of customer vs. logo and everything else be damned, the small business and innovation loses it’s spirit and it’s potential. I have seen so many friends and so many great business and ideas get ruined in this process.
And it’s that process of killing a successful long term business that I mind the most: When people take a shortcut that both mathematically and business-wise leads to a fundamental change in the values. Because people aren’t throwing money at you to keep on doing what you’re already doing well, they are doing it to maximize the leverage and get their returns to grow faster than they would than if they gave you a loan.
Money is simple that way: It just wants to make more money.
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Thanks for your concern, I appreciate it.
Pretty misplaced though. Things have been going so well that it’s hard to believe and I’m one of those folks that doesn’t really get much easy in business: so when everything is going well I try to figure out the ways it could all go to shit in a heartbeat and stay ahead of it.
The migrations business we introduced in October has been insane. We will be launching a hiring spree in January that will likely double us in 2014. Shockey Monkey and our mobile solutions have been maturing and due for a huge release shortly. Ditto for the Unicorn remote support and monitoring tool.
That said, the move from a pure software to a service business has not been easy. Far from it, unfortunately. Even though it’s been a grueling, grunting, bruising exercise it’s what gives me faith that we will more than double and become an irreplaceable component of our partners strategy in 2014 and beyond. Here is why:
Every time we get burned on some service aspect I hear the following: “We need to better define what we will not do and not touch so we don’t have to do this again.”
My response is always the same: No. It just means we need to ask more questions and define a better process for it the next time.
If you can sufficiently define the scope of what you’re willing to do and not there is no limit to the amount of business you can lose. And in real life people don’t grade on the curve or love you for what you do for them – they judge you by how often you’ve failed them and how many mistakes you’ve made. Trust me, I’ve got refund checks to prove it.
So how do we move this forward? Well, as I discussed in this weeks webinar it’s all about surrounding our partners with the end-to-end solution: marketing that makes sense, process and support that extend it beyond just tech work, mobile strategy, support strategy and coming soon – a training strategy.
The strategy of the service business is simple – do whatever it takes to get the user to the cloud, once there make sure they leverage the power of the cloud. This has been a bit of a tough bargain between me and some partners that want their clients to be limited and kept in the dark on many of the features but what’s the sense of going to the cloud if you’re going to keep the same crappy process that’s gotten the on-premise solution to choke in the first place? A lot more on this later.
Although I haven’t had the time to blog here as much as many of you would like, I did also hear and notice that the “channel” has been kind of quiet too. It’s a sign of maturity – by now all the hype has kind of died down and only a handful of vendors have proven themselves to be trustworthy and capable of innovating and moving their partners up.
The rest are being unwound, cost controlled and being financially book cooked for a sale (garage or rollup); it’s a natural progress of any business particularly the short sighted one.
As far as I can tell, IT in SMB is doing really well or it’s going out of business entirely. It’s somewhat polar: few really big winners and many losers. And when you’re doing really well but see the carnage of Marketing-In-A-Can and Indian-In-A-Box MSPs and VARs all around you then you probably thank your lucky stars and try not to brag too much about it.
I of course wouldn’t really know much about the humble part but I know this much: It’s one thing to be a perpetual hype machine and quite another to be a valuable revenue generator. Any jackass can throw a great show and be the next big thing, but after the champagne bubbles out and people go back to work and start solving true business challenges they are back to dealing with the real world problems and people problems. That’s where we’ve been for years and that is where we’re moving to become even more valuable in 2014: It’s just a whole lot more work. But given the choice of more work or unemployment is an easy one: None of you would make it working at a Verizon store.
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Before I share some seemingly pessimistic and insensitive commentary, that is written in a hope of helping motivate you, let me say that I understand and I relate:
I too am pissed off about not getting stuff I don’t deserve. I don’t like many aspects of what I have to do in order to obtain the kind of life I want for my family.
But I have no other options. I’m just not pretty enough for porn.
Now that we have the Vladville tone firmly established, let me share a post from Facebook that I thing highlights the challenge of compromise in corporate America – and how it transcends the plight of minimum wage and is even present in every day mental handicap of many people you may have working with you across all levels of income.
Mixed feelings on this one… Yes, it’s sad. Yes, that is what happens on minimum wage and it’s sad. But if that is not the incentive NOT to stay at the bottom and show 0 effort then I don’t know what is. No, not everyone can be a CEO and not everyone is going to get to waste 4 years in college, but “I do my job, give me more than you agreed to pay me for it” is not going to end well. That IMHO is the true “entitlement” in USA, expecting more for not doing more — not the food stamps that help people that get stuck in minimum wage temporarily.
Now every time you post something about doing the bare minimum the defense points from the more compassionate people are always the same: 1. Minimum wage is not livable wage 2. Many people cannot afford to move to a place where there is more demand and thus higher pay for unskilled labor 3. Employers should just pay people more. Fair points but unrealistic in the economy and legal system we have – income disparity is in place to reward people who can maximize profits. End of conversation, you can disagree with it and bitch and moan about it’s unfairness but it’s all about the highest score at the end of the game and nothing else matters.
Now, I shared the above in the typical Vlad compassionate way and was told the following:
“This store is 5 minutes from our house, and it says a lot more to me about opportunities here, than Walmart’s wage structure. We are a community engulfed in brain drain, it’s not that people don’t strive to provide for themselves, but far too many of them have to leave here to accomplish it. I’m sure you are not often accused of being an optimist Vlad, but incentive and hard work don’t seem to be worth as much here.”
The key word is “here”: If your work is not being rewarded then you need to get the fuck out of “here” and move elsewhere.
The Solution To Economic Class Warfare
Walmart is not an inherently evil corporation, it is an American corporation that behaves in the same soulless way that they all do: their job is to maximize corporate profits that are reinvested in further growth or dispersed as dividends to it’s shareholders who spend it, donate it, reinvest it or otherwise. In order for Walmart to continue to grow it needs more demand and more people.
Raising pay would be a suicidal move for Walmart because it would impact it’s margins or raise the cost of goods sold which would make it less competitive with Target/etc. So don’t hold your breath waiting for that to happen.
The only way Walmart, McDonalds and other minimum wage sweatshops will raise their wages is if there is less available labor that is willing to work for minimum wage. And how do people stop working for Walmart? Education, moving to an area with more opportunities, starting up a business, etc – it starts with people not willing to put up with shit deciding to make a change.
But most people don’t want to be inconvenienced: I like where I live. My family is nearby. I don’t have the time to get a degree or enroll in a vocational program. I don’t want to move. I don’t like those hours that pay more because I want to spend time with family. Insert $WHINING $BITCHING $MOANING, it’s someone else’s fault.
And you see, fellow Walmart Associate and everyone else unhappy with their pay, it is not someone else’s fault that you are making excuses instead of doing something. That is not injustice, that’s your inability to accept inconvenience and sacrifice. If you look around a little and see a whole bunch of people doing better than you.. unless you are surrounded by Kardashians, those people had to go through a lot to get where they are and they feel very little sympathy for you.
Wishing and hoping and praying may make you feel better but that temporary comfort will not change things or make them any better. As much as it may appear that some folks have it easy, barring something illegal, in this country we work for rewards. Yes, the more you work the more disproportionately you get compensated eventually compared to those who show no effort at all, but knowing that fact.. right now.. you have the opportunity to do absolutely nothing or do something.
An optimistic person would tell you the truth and implore you to work harder towards what you want. A pessimist would blame something instead of doing anything.
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Diet mountain dew and obsessive attention to detail can be a blessing and a wonderful combination. I recall chatting with someone a few years ago about plans and goals on MSN Messenger a few years ago and talking about how I wanted to get married and start a family and a whole bunch of other stuff. Some came true, some not so much, other stuff way above what I could have expected.
Which brings me to todays topic: You gotta have a plan.
Not too long ago this was one of the most hectic weeks in my life. I had to coordinate and micromanage every little minute of it and often ended up with 20+ hour days. No, I didn’t have to – someone else designed and produced the collateral, managed the schedule, lined things up – but I was involved in every little tiny detail of it all. Not because I didn’t trust my staff, but because I had a plan and I wanted to make sure we did exactly what I wanted to. I rewrote the marketing copy (a few times), I tried to track people down for meetings to get feedback on what we were doing, I for some dumb reason even worried about the booth..
In 2013, this week is just another week. I’ll be doing my actual job as a CEO with an hour or two of showing my face during the ConnectWise reception and the party on the last day. The rest of it will be handled by my team, much like it is done every other day of the year.
I’m not gloating here, nor will I be sitting on a beach sipping a mojito out of a watermellon, all I’m trying to say is that all this didn’t happen by accident. This was planned, took tons of excruciatingly long workdays and unwillingness to give up through a lot of failure. I didn’t find any magic products, I had no amazing epiphanies along the way, I didn’t invent anything. It was just hard work and not drifting too far away from the plan.
And I’ll highlight this because I think it’s important:
One of the most disappointing things about this industry is the lack of respect for hard work.
I love this industry. I think we’re among the smartest folks out there. My criticism towards it’s less than reputable (or outright criminal members) makes some people think I’m a dick – and fuck them, they are entitled to their opinion. But I have not and never will have any respect for people expecting a shortcut or a handout.
If you’re stupid enough to think peering up, copying bad ideas from people who are no longer in business, attending events that are only designed to sell you junk you don’t need, are always on the lookout for the next big thing while refusing to grind it out for the opportunity that is right in front of you… then you deserve nothing but to be robbed by the people telling you that you don’t need to work.
Everyone in the IT chain knows what needs to be done, they know what the clients ask for and are both smart and creative enough to make it happen. Few of them make millions of dollars while the remainder of the crowd makes millions of excuses for why certain things don’t fit their model, don’t have enough margins, don’t have enough time and make no sense. So they troll through life, barely making a single digit percent worth of success year over year, still “working on it” while fawning over the bullshit mill and the few successful people that say the same thing – it’s all about effort.
To those of you that are in Orlando this week – welcome. I hope I bump into you. Carpe Diem – you won’t find anything new today that will drastically change your fortunes, the good thing is you already have everything you need all you need to do is stick with the plan. Good things happen.
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One of the more annoying themes in IT is the lack of understanding that anything valuable and complex takes time. We recently launched a new service at work and I’ve spent the past month on the phone talking to people and discussing some common problems and issues we have with the business / people and the fallacy of impatience.
I need huge margins and immediate results. I understand, I need to lose 50lb in one day but the only way for that to happen is if I chainsaw myself in half. Nobody wants to clean that up – and I’m pretty sure it would be less of a legal challenge than if you took that chainsaw to your clients Exchange server. Yet many people want to do just that. Ain’t nobody got time moment.
Since this is likely to only be valuable to people that don’t have a long attention span I’ll make it quick: Nothing good happens fast. If you have no experience and you think you can fix a problem in a split second because everyone around you is an idiot, grab a buddy – use them as a human shield when you earn your “experience” and something blows up.
When it comes to complex issues, particularly the ones involving the cloud and infrastructure / process shift, it takes time. You won’t be a millionaire by the end of the week. Or month. Or a year. But that doesn’t mean you just turn your back to it and wait for it to errode you out of business – ask all the Geeksquad MSPs how well they are doing next time you visit them at Target, Car Max or another IT vendor job – ignorance is not a business model. It takes time to build, promote, sell, implement and sustain a new business line or a new product and if you’re just hoping to find that next “set it and forget it” piece of IT then it’s going to be a rough winter.
I have (a lot of) projects that fail. I don’t want to give you an impression that I have any magic solution to failing, just my process for handling failure.
1. It starts with planning. All new ideas come with plans, tracks, stages, estimates, priorities, outcomes, scenarios and so forth. Most crackheaded ideas don’t even see the light of day.
2. It’s sustained through monitoring. You have to stay on top of your plans and you have to keep on checking how things are going. Everyone at every level of management will tell you that their reports are task avoidance ninjas, trained in the art of avoiding any hard prolonged work. Quick bursts of output, no problem. Repetitive mindless droning, got it. Six week project with deliverables, unknowns, research, etc – it’s due in six weeks, right? We’ll worry about it in 5, I’m stalking something on eBay. If you aren’t paying attention to your business nobody else is.
3. It lives and dies through evaluation and persistence. How is the plan progressing? Has anything changed? Do we make changes or push forward?
Ineffective people fall on the opposite parts of the spectrum: They either get consumed in their projects and never get anything done and don’t know how to quit… or they quit at the first problem they encounter and don’t give their projects enough time to develop.
I want it all and I want it now. But I don’t want to take the time to get there and I don’t want it to require hard work. Who am I to say you can’t dream?
But waking up in the IT services landscape we have today paints a picture of ridiculously complex and overpriced infrastructure that never lived up to it’s billing, competing with a cloud infrastructure that is seemingly free and easy but it’s really neither. The challenge of bridging the two for a business is a difficult, painstaking and process oriented task that will be neither easy nor quick. And that’s your job. Embrace it, take it and build a business around it.
Or look at the alternative: It is quick and easy and nobody needs you. Your call.
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While we haven’t yet officially announced the biggest thing we have on deck this year (because we want to talk to our partners about it first and there are many of you and most of you don’t pick up the @#%@ phone) the details of things that are coming along with it are starting to pop up as is the usual partner chatter and the never-ending bitching from my competitors who just can’t get enough of my missteps to make it seem like “we’re not listening to our partners”.
But you know what.. record numbers came in again. Record month, record quarter, record year. And I didn’t have to suck Arnie’s dick for it.
So with all due respect, kiss my ass.
Now that we have the pleasantries out of the way..
Let’s discuss something that has been on my mind all year and that is the subject of vendor responsibility and the right fit for the MSP.
Which in itself is a mindfucking misnomer because the job-hopping channel chiefs seem to be in consensus that all MSPs are pretty much the same and (if you kind of squint on their PSA/RMM/BDR choices). And as 100% of my former employees who knew how to run my business better than I do while being completely incompetent at the task they were given, I am going to offer some fucktastic advice for you to ignore as you try to decode the fountain of channel chief bullshit being spewed at a smaller and less occupied side room
To a vendor, you the MSP are the channel. That faceless, mindless, numbfuck ninja that can get past the executive gatekeeper / IT guy in charge through your cunning use of body odor and Gilden cotton shirt with a BBQ stain on it.
As the channel chief looks down on you from their elevated stool the airport Hilton facilities guy stole from the bar, s/he
(let’s not be sexist here, tits are tits) thinks the following:
What the fuck have I done wrong in the life to be stuck here??? I guess this is better than being back at home with the wife that hates me or the office that I can’t stand but how much longer can I keep up this shit show of having these idiots fail at selling my shitty half baked solution till the last of these morons gets a real job? What the fuck do I tell them?
I am here to help you make more money.
Sell this shit right here, your clients can’t get enough of it, your business needs more revenues.
And friends, they aren’t that wrong: The typical MSP is just an animal that needs to be optimized for a maximum sell-through. The only problem is that the animal farm MSP they think they are talking through/about died last decade. You can’t get people to sell more shit because the end user got a lot smarter and more informed while the MSPs diversified far from their RMM-watching days.
The industry got better. To be more specific: The part of the old VAR/MSP industry that thrived looks nothing like that stereotypical case-study guy that’s at every IT roadshow talking to you.. because he wants a job!
MSP / VAR / ITSP Perspective
You’ve heard the same sales pitches about the same crap a million times before. The only thing that has changed is the logo.
The reality of the MSP marketplace is that it matured in a way that many didn’t want it to – instead of the “come to your friendly local MSP pawn shop, we’ll sell you yesterdays technology at last decades price” – the smart people ignored “Just do anything for money and sell all of our shit because we came up with this cool 3D poster” and instead specialized in different things. Some went into health care, some into legal, some into VoIP and communications, some into mobile, some into…
This is infuriating to a software/hardware/solutions business that no longer has your complete and undivided attention and a cookie cutter mass sellthrough solution is no longer appealing.
The coming age of conflict, as has come up in many of my conversations with service providers over the past few months, is in the realization by the vendors that they will have to do a lot more work to remain a relevant piece of the puzzle because you have diversified your business away from what was traditionally seen as IT.
The traditional IT got commoditized by the MSPs (remember how we pulled the plug on the in house IT employees last decade) and the workstations/servers are rapidly becoming commoditized by the cloud and mobile devices. With less gadgets to monitor and patch you have to move up the food chain.
This natural evolution of our business has a casualty: the incentive to do the hard, ugly, difficult and messy “must not impact business operations during business hours” job is now not the primary revenue driver for most small business IT providers.
Simply put: The vendor community has a much higher incentive to do the hard work than your typical service provider who frankly isn’t interested in making cents on the dollar and is chasing 3 digits rates per hour.
Not everyone has received this memo yet. Hence the bitterness and misplaced anger.
The future of MSPs, just to arrogantly pile you under the same convenient panel moniker, is in working with vendors who effectively supplement the business model to eliminate headaches or boost profit margins. With the traditional IT becoming a commodity, this business is no longer about maximizing revenues “to keep your lights on through the effective use of an RMM platform that” – it’s about finding people who will do as little or as much work as needed to get the solution implemented. Smart and profitable MSPs are diversifying away from being the provider of the commodity service and are positioning themselves as the expert part of the overall solution. You’re just no longer dumb enough to be the conduit for it all that assumes the most liability while getting the least margin in return.
The vendor community now has to bend itself to fit into the MSP / IT Solution Provider business model and do so in different ways (branded, white label, full service, licensing only, software with support contracts; because different MSPs will rely on the same vendor for the same product at a different level of involvement depending on the client, business maturity, other business projects and opportunities, hiring cycle, etc)
Good for you. The line between solution providers and vendors is blurring. Which yes, brings some competition & friction, but elevates service levels and brings the common interest closer to the top.
As for the swag dispenser road shows.. Well, I don’t want to say anything rude.
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A little bit on strategery here just so we’re smoking the same stuff..
Today we announced the Android native application for Shockey Monkey:
It’s joining native applications on iPhone and iPad – none of that webkit / slow junk anymore, we’re spending a lot of time expanding the mobile offering very quickly and I thought I’d offer you some perspective as to why in case you haven’t figured it out yet.
As you’ve seen by our ExchangeDefender business model, things are growing very rapidly and we are expanding our solution portfolio in a manner that we believe will allow our partners to grow exponentially.
The launch of branded support and branded migration services removes the “human” “tech” factor involved in service delivery, it basically allows the solution provider to not be a salesman and a plumber at the same time. Everyone wants the salesman salary, nobody wants the sanitary waste mess on their hands that comes from supporting someone elses product/service or the solution. At the same time, there are no shortcuts – someone still has to do the work, the tools are still necessary to fall back on if “best case scenario” doesn’t work out and… well, I wish I had more developers and I wish I could take on more business but we’re moving as fast as possible with the resources we’ve got and we’re trying to do it right instead of doing it quick.
So what you are seeing with the agenda of Shockey Monkey and ExchangeDefender – with the fascination with mobility and the fascination with the remote access/management with Unicorn 2 and focus on storage with LocalCloud – is a convergence of the stuff we know works and stuff our clients and partners are begging us for.
This tends to piss people off. I’m sorry. I’m really sorry. I know that you’d rather see us focus on the legacy stuff and you’d rather optimize the heck out of the old way of doing things… but my business model is very simple: I do what people are willing to pay for. And the cold hard ugly truth is that people are not willing to pay the top dollar for minor enhancements of stuff they already have that works for them.
They want a solution that dramatically improves their efficiency.
While a tweak or two to the desktop or web experience is always on a to-do list, I’m getting hounded day and night to support mobile devices because high profile (read: employees in organizations in charge of spending money) are not walking around with laptops.
While a solution to a gaping hole in the portfolio might make some of my partners more entrenched with a client… the ability to offer migrations, support, new solutions and not having to do any of the hard work to get it – will grow your business, not just make it stickier until the client pulls the plug.
I understand that there is a conflict. There is comfort in safety and lack of ground breaking changes minimizes the risk of having to do more work. I understand that.
The positive solution to this conflict is to be able to do more.
We are seeing the opportunity in converging the service (migrations, support, billing) with the products (ExchangeDefender, cloud, Exchange, Lync, storage, Compliance Encryption and Archiving) with the business process (Shockey Monkey) and deliver to small and medium business what enterprise has been able to enjoy for a decade. Like an IBM commercial, minus the 8 figure bill.
The good news is that if you really hate me and what we’re doing, you have other options. We’ve considered that. Other options are doing nothing (going to conferences trying to find more clients, trying to find more people to sell legacy stuff) or fortifying a legacy tool with stuff that would make your business look amazing for 2010.
We’re investing in our solution and in our partners to make you great for 2014 and beyond because we have full faith that we’re not going to be going out of business (or on the sales block) anytime soon. Perhaps that’s something you ought to ask yourself when it comes to the vendor choices you’re making – is the service changing with the market demands or are they just trying to monetize (ie, take more of your money sooner) me in the short term because they have no faith in me long term.
That answer ought to answer far more than I ever could on this blog.
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Business valuation is hardly connected to reality and sales prices can wildly swing depending on whether the industry is growing, if the technology is truly unique or it’s hard to find talent. Sadly, most companies look for a seller out of necessity not out of opportunity and are typically gutted of both valuable items and opportunities by the time they are forced into sell-or-fold. Recently we got a chance to review the offer sheet of one of our competitors as they put themselves on the market and I think it offers a valuable lesson for anyone building a business towards the valuable exit.
The Valuation Math
The key to valuation is knowing that bankers can smell the valuation padding. Mostly because the same guys that advise the seller to manipulate their financials are also unwinding it on the other side for the buyer.
When a company doubles in the last year, after barely breaking even for nearly a decade, all through one or two partners – through which it’s selling stuff at cost – it doesn’t paint a wildly successful company with growth potential, it paints a desperate one on the way out.
If a company is growing while it’s margins are imploding, that is not a growing business. It’s the very definition of churn.
If you look at your revenue/margin year over year and your profit margin is dwindling you either have to make a hard decision to chop off the golden anchor business that’s sinking you or come to terms that the profitless revenues won’t get it done. P.S. This is also a trick companies play on outside investors and banks – though it never works – they make it seem like they are growing where they are literally just giving it away. The excuse is “well, one day we’ll just raise prices” but if that was in the cards company wouldn’t be on sale.
Every software company I have ever looked at pretends to be Apple. Just because you run your office on a homebrew firmware on dd-wrt does not make you the next Cisco.
When a company derives most of it’s profits from licensing third party software and solutions.. it has no discernable value towards it’s tech. Maybe over time most hardware will qualify as vintage and will be highly valued on eBay or electronics clubs.. by someone..
If you are sitting on a ton of hardware, licensing, third party solution stacks and integration projects the core value of your company is significantly lower than what you think it is.
Finally, the monkey circus.
“Our people are geniuses and are highly respected in our field.”
Oh yeah? If they were so smart why are they working for you while you’re here trying to sell a box of fleas?
If the later part of that line is true, they have likely been sitting on the fence waiting for a major “buyout” so they can cash out and get the hell out of dodge for a long time. I’m sure they are fantastic but this isn’t Bell Labs with Nobel laureates – and they are itching to get away from this business as bad as you are.
The Client Base
The client base can tell you how the company is really doing.
Did most business come aboard recently? If so, at what profit margin?
Did the company retain any truly long term clients? How big are they and have they been growing?
Most companies, after they get redrawn for sale, make a mistake of scraping their legacy business for new business and in the process get a ton of new clients that aren’t very profitable and will likely switch as fast as humanly possible as soon as a more cost friendly solution came around anyhow.
Further complicating things is that the change in management often opens up the likelyhood that the clients will bolt under new management for something else. When you look at what you are buying and consider raising prices on the existing client base, what are the odds the clients stay on board? If both the price and management shift (and along with it the staff) then anything you added recently might be heading for the exit as well.
The Summary of Despair
People have emotional attachment to the things they built and feel that the value far exceeds what the company is currently worth. So instead of proving that, they are offended when they take it to a third party that has to do the hard work.
When you buy a software business, and an antispam company qualifies as that, you are essentially buying clients and contracts. And when the company is obviously struggling and brings in a lot of money that it’s making slim to nothing on – that’s not an opportunity, that’s a liability waiting to explode. Thinking that such a nightmare is worth millions isn’t even viable from the standpoint of basic arithmetic of just multiplying the profit numbers considering how much of it comes from few large resellers and distributors. Any one of whom can dip at any time.
MSPs need to do the exact opposite of what is “logical” when prepping for a business sale. Money needs to come from a lot of different areas, the staff has to be disposable, the liabilities and debt need to be damn near none and your profit margin needs to be climbing not disappearing.
But then again, if you ran your business like that in the first place you wouldn’t be the one being shopped around.
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Blogs and media alike have been on fire about opinions regarding Microsoft’s purchase of Nokia – everything from the largest trojan horse operation in corporate history to the typical armchair quarterbacking of what else Microsoft should have done. While entertaining, the true value here is the business lesson:
If you lack focus, you’ll always find something else you’re missing.
For the most successful software company.. ever.. Microsoft is at the same the worlds most insecure one. Not in a sense of IT security, in a sense of confidence in it’s people, solutions and market leadership. And it makes no sense – but it’s projected by the loud CEO Ballmer leadership to COO Turner’s frequent keynote digs at it’s competitors.
Microsoft, for as big as they are, makes the same mistakes us small business owners make all the time – lack of focus and preoccupation with the trends instead of core customer demands. When you don’t focus on delivering consistent, predictable, reliable services to your client base you end up losing their loyalty and losing their business entirely while you’re seemingly just one missing piece away from having everything figured out.
So Microsoft bought Nokia. They also bought Skype, Navision/Great Plains, aQuantive and while all generate cash for Microsoft none are projecting much of Microsoft’s core value to it’s existing client base to drive loyalty or additional business. If anything, these distractions are leading Microsoft to continue losing in all the key evolving areas to more nimble and focused competitors while Microsoft tries to be (poorly) everything to everyone.
Small business IT providers need to pay attention to these moves, to the communications and the vibe surrounding the customer perception of what is going on. Outside of Microsoft offices the company appears in peril with a lame duck CEO that is on a spending spree to save itself from a future of legacy computing while it’s competitors are building exciting products in a consumer friendly way. Microsoft says they are “transitioning” while so many of us bought their great solutions in the first place because they were incredible in the first place. Microsoft is seemingly abandoning those while telling many we just don’t know what we want from Office Ribbons to the Start bar the company is losing perspective of who it’s customers actually are for the customers it wishes it could have.
Business survival is dependent on serving the customer you have, not the one you wish you had. Subway doesn’t stop serving turkey subs because it thinks it could be selling burgers, it doesn’t put BBQ pulled chicken into a veggie sub because research shows you need more protein in your diet, it doesn’t lose it’s focus.
While every business should always work on it’s next great product/service it cannot do so at the expense of abandoning the products/services it currently provides. Microsoft has in the recent history been all-in about search, cloud, phones, tablets and is seemingly further from leading any category as it constantly loses focus over which competitor they can be better than. While consumer technology trends change as often as fashion trends, those of us in the small business IT need to remember that one of the greatest and most valuable pieces of the puzzle we bring to the solution is reliability and a sense of continuity. It is what made Windows and Office great and are to this day, while not sexy, cornerstones of the Microsoft business. We often wish Microsoft could stop losing sight of those but the lesson to be learned from Microsoft’s constant marketplace distraction is that we all seem to be chasing an uncertain future – but are we doing it at the expense of ignoring the customers that actually make up our business?
I may not be a billionaire (yet) but I will always take cash from the client that wants to do business with me today over an imaginary customer that may want to give me imaginary money tomorrow. Sure, I’ll market to them and pursue them with all my spare time, but winning in business is reflected in the bank statements.
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One of the qualities that I despise in office workers is that of mediocrity. Our jobs are not physically demanding, we’re not lifting stuff, there is no fatigue associated with sitting in an air conditioned office.. so there is no excuse for putting out shit effort and half assed stuff. Yet, I find myself doing it all the time.
The breakout moment in small business happens when you listen to your customer tell you about a service they are willing to pay you for.. and you aren’t offering it for any reason other than outright laziness.
The moment you mentally break out of thinking small & safe and start investing into big and growing is the moment all your perspectives change.
Small businesses, particularly those managed by their founders, hedge towards safety and conservatism because they are the ones that built it all in the first place. I built this shit, don’t tell me what I need to do. The problem is that this thinking is neither conservative nor safe – this unwillingness to make additional bets and diversify concentrates all the risk in the existing business lines, focuses exposure on the existing client base and anything stationary.. well.. you know.
Small business is at times just a matter of a state of mind. There is nothing wrong with thinking small until you build your value, team, process and strategy. Once you’re there the breakout moment will open you up to all the possibilities you aren’t pursuing.. and if you partner up with the right people you have no reason not to.
Customers are out there, begging you to take their money.
Partner with the right people. Hire the right people. Take the money.
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