Episode 107: The MSP business model makes cash flow easy

In this week’s episode

• Does cash flow keep you awake at night? If it does, this is definitely the episode for you. Paul explains how certain aspects of the MSP business model can improve your cash flow and your sleeping habits!
• Also, what’s the connection between a successful MSP and that 90s Keanu Reeves film about a runaway bus? Speed! This week Paul dives into the business benefits of being a fast-moving MSP
• Plus on the show this week, there’s a recommendation for an excellent book about bitesize growth. And Paul’s featured guest introduces you to a new way to sell cyber security

Featured guest

Thank you to Phylip Morgan from Pax8 for joining Paul to talk about how to sell cyber security without using fear, uncertainty, and doubt.

Connect with Phylip on LinkedIn.

Show notes

• Out every Tuesday on your favourite podcast platform
• Presented by Paul Green, an MSP marketing expert
• Thank you to Adrian Savage from Deliverability Dashboard for recommending the book the The Compound Effect by Darren Hardy
• In the next show on December 7th Paul will be joined by Stephen Rosenthal from Managed Services Platform talking about how MSPs can best implement technology roadmaps for clients
• Got a question from the show? Email Paul directly: hello@paulgreensmspmarketing.com

Episode transcription

Voiceover:
Fresh every Tuesday for MSPs around the world. This is Paul Green’s MSP Marketing Podcast.

Paul Green:
Hi, there and welcome back to the show. Here’s what we got coming up for you this week.

Phylip Morgan:
Fear, uncertainty, and doubt was the way to sell those products, right? A new way that we could maybe be so a cybersecurity.

Paul Green:
That’s Phylip Morgan from Pax8. He’s going to be here later on in the show. We’re also going to be talking about cashflow. If your cash flow isn’t quite as positive as you’d like it to be, maybe it’s because you haven’t fully embraced the MSP business model. I believe your business model should make your cash flow so beautiful that you’re literally licking the screen of your computer when you’re looking at your bank accounts.

Paul Green:
If you’re not, I’ll tell you later on in the show how you can make your cash flow so much better.

Voiceover:
Paul Green’s MSP Marketing Podcast.

Paul Green:
In the old days of business, I’m kind of talking in the last century, doesn’t that make you feel old? In the last century, business was a bit different. It was a case then that big beat small. It was all about being a big business, because that was how you beat your competitors. There’s so many examples of this in books and things that were written back in the ’80s, the ’90s, in the turn of the century. Big beats small. These days, of course, that’s completely changed. Being a big business is no longer a massive advantage.

Paul Green:
I mean, don’t get me wrong. Of course, it has advantages. You have more resources for a start, but these days it’s fast beats slow. So many examples around us of fast businesses beating slower businesses. I mean, just take Tesla, for example. I appreciate these days, Tesla is a big business. But it’s not the size of the business or even its market capitalisation that makes Tesla a formidable competitor. It’s just faster than its competitors.

Paul Green:
If you compare Tesla to Ford, General Motors, all of the other car companies, Tesla moves faster. It changes its cars faster. It can upgrade its cars over the air. It can make software changes. It’s literally simply faster, faster, faster, faster than all of its competitors. Its quality is actually a little bit lower than its competitors, but because it’s so fast and it’s built up such huge momentum and it’s exciting and sexy, that’s what makes Tesla the most feared car company.

Paul Green:
I certainly wouldn’t want to be running Ford right now. Would you? They’re trying desperately to catch up with Tesla. Well, all of them are in terms of electric vehicles and it’s good that there’s someone driving electric vehicles in this way. It’s what the planet needs. But you know what? I wouldn’t want to be running one of those old heritage car companies because they’re slow compared to Tesla. Tesla, of course, is coming at it as a tech company. Tech companies like Facebook, Google, Amazon, they’re fast.

Paul Green:
It’s all about the speed. And I believe within your MSP, you need to have that speed as well. I’ve recently been a client of two architects. I’m having some work done on my house. Well, I’d like to get some work done on my house, but first of all, I need to get planning permission. Here in the UK before you can make substantial changes to your house, you have to get planning permission. I live in what’s known as a conservation area, which basically means there are all sorts of limits.

Paul Green:
We’re right next to green belt. Lots of planning restrictions is basically what it means. We need an architect to do some plans. I hired an architect near the beginning of this year, and we agreed the plans and what we were going to do. He went off to draw them, and he came back fairly quick with his drawings. He was actually drawing them by hand, which is a bit bizarre because it’s 2021. But then we agreed some changes, and that was back in May and I haven’t heard from him since.

Paul Green:
I’ve texted him, and I’ve phoned him. I’ve sent him emails. I know he’s alive because my next door neighbour is a builder who sees him now and again, but I just haven’t had my plans back. I actually hired a second architect just a few weeks ago, and he had the plans done within a few weeks. It was literally a couple of weeks. He was using computers and CAD, which was one of the things that’s made him fast, but he’s just as experienced. He’s done exactly the same plans.

Paul Green:
It’s just he’s got it done faster, and our planning application went in a couple of weeks ago. Speed beats everything. This second architect, he’s actually more expensive than the first architect. Yet again there I’ve learned the lesson for about the 500th time about quality and cost being linked. If you pay less for something, you can expect the quality to be a little bit less. I’m sure the first architect is equally as good as the second architect.

Paul Green:
What they’re doing is that they’re not designing something that’s going to win awards here. It’s just a basic extension and a remodelling of the house. But the point is, I want to get it done. Come on, crack on. Let’s get it done. The second architect won my business. Of course, I’ll end up paying him a few thousand pounds more to go and do all the plans that the builders need and whatever else he has to do. And he’s got that work because he was fast. Speed, speed, speed.

Paul Green:
Being fast beats being slow. A question, look at your MSP, where are you slow? Where do you need to speed up? Where do you need to be faster? Is it frustrating your clients when they have to ring you because the phone just seems to go on and on, ring, ring, ring, and no one ever picks it up? If they submit a ticket, does it take hours for someone to acknowledge it? Are they chasing you up all the time because they perceive that you are slow?

Paul Green:
If someone inquires tomorrow and they want to become a client, how quickly do you get back to them? It should be that whenever someone rings up, because it’s not like this happens all the time, whenever someone emails you or rings up, there is someone available to talk to them immediately. Because this stuff is really important. Where are you slow within your MSP? How can you speed it up? How can you create a system to make things faster within the business? This is the goal because fast always, always beats slow.

Voiceover:
Here’s this week’s clever idea.

Paul Green:
No MSP should ever have to lie awake at four o’clock in the morning worrying about cash flow. Do you know what? I’ve been there. Obviously I’m not an MSP owner and I haven’t done it with this business, but my previous business, I had many, many sleepless night, because we didn’t have a great business model. In fact, there was one Christmas, it must be getting on for 10 years ago now, where I was actually sat in my hotel room while my team were out enjoying what was supposed to be our Christmas party.

Paul Green:
I realised I was £10,000 short of payroll. That was my worst ever Christmas party, actually having to sort of ring home and say, “I’ve got to take all every penny that we’ve got and I’ve got to take some more cash advances on a credit card just to pay the staff tomorrow.” That puts a bit of a damper on your Christmas party I imagine. But no MSP should ever have to be in that situation ever, because the MSP business model promotes a very positive cash flow.

Paul Green:
If you look at what the secret is of a great cash flow, it’s to collect money that’s owed to you as fast as possible and to slow down what you have to pay out without jeopardising your relationship with suppliers. And actually as an MSP, if you fully embrace the MSP model, this should be really easy for you for three core reasons. The first and most important of those reasons is our favourite, monthly recurring revenue. I love monthly recurring revenue. My entire business is built on it.

Paul Green:
I hope that your entire business is built on it. There is nothing better. Monthly recurring revenue is your life blood. You should be protecting it and growing it above all else. The only reason you take on a new client is to get monthly recurring revenue. The only reason you do a project is because it helps that client to move forward to retain that client so they can keep paying you monthly recurring revenue, or because it generates even more monthly recurring revenue.

Paul Green:
Monthly recurring revenue is everything. And this is the core thing that makes the MSP business model so, so beautiful. But it’s not just that. The second thing that makes it beautiful is that you should be paid upfront. All of that monthly recurring revenue, you should be collecting that at the beginning of the month before you do the work. And if that’s not the case right now, change it. Just tell your client it’s changing. Do the change in January or something.

Paul Green:
Say to them, “Hey, we’re changing this in blah, blah, blah, January, blah, blah, blah.” It doesn’t matter what the details are, but basically you’re paying upfront. You are not a bank. Are you? So why are you allowing people to pay in retrospect for work that you’ve done? They shouldn’t pay at the end of the month. They should pay at the beginning of the month. Monthly recurring revenue at the beginning of the month, no problems.

Paul Green:
And of course, if they don’t then pay, if they skip a payment or there’s a payment issue and they don’t communicate with you, then you don’t do any work for them. You don’t solve their problems. You switch off their 365. I know that’s a controversial thing to say, but again, you’re not a bank. If someone doesn’t pay, you must taketh away. That’s really how I feel about that. Now, don’t get me wrong.

Paul Green:
If someone’s in trouble and they can’t pay for whatever reason and they communicate with you, well, that’s a different kettle of fish, isn’t it? That’s someone who’s having an issue. You can bond with them there. You can help them. You can help them get through a tight spot. That’s the right thing to do. But there’s a big difference between someone who tells you they’re having problems and someone that just doesn’t pay and you can’t get hold of them on the phone.

Paul Green:
If they don’t pay, you should taketh away. You should also, just while we’re talking about getting paid upfront, you should also get paid upfront for any projects or any hardware you buy for them. You’re not a bank. I’ll say this again. You’re not a bank. You should not be funding their acquisitions. If they want a project, if they want hardware, then you should be paid upfront. Monthly recurring revenue is beautiful. Getting paid upfront is beautiful.

Paul Green:
The third and final great thing about the MSP business model is insane retention. I’ve never known, never known a world where clients stay with you so long. And I realise that part of that is because they love you. They’ve bonded with you. Another part of it is that, what do we call it, inertia loyalty, where it’s just perceptually too difficult to move somewhere else. But it doesn’t matter why they stay with you or not. That insane retention is that final thing that makes the MSP business model so, so beautiful.

Paul Green:
So listen, if you are still stuck doing a whole load of break fix, non-contracted revenue, or even just doing stuff for people now and again, you’ve got to get away from it. It’s not how you have a great cash flow. That great cash flow comes from fully, fully embracing the three major benefits of the MSP business model.

Voiceover:
Paul’s blatant plug.

Paul Green:
Question, has another MSP in your area beaten you to the MSP Marketing Edge, because it is the world’s leading marketing program for MSPs? You get so much stuff that you can use to market your MSP, the stuff you get monthly. The stuff you get weekly. There’s some insane tools and it’s only available to one MSP per area. We’ve made it really easy for you to get started, but only if someone else hasn’t beaten you to it. The first thing to do is to go and check.

Paul Green:
Now, if you’re in the UK or the US, you can go to mspmarketingedge.com. Put in your postcode or your zip code and it’ll tell you directly if your area is available. If you’re anywhere else in the world, you just got to drop us an email and we’ll let you know, because we’re in something like 20 countries now. We’re in lots of different countries. It’s just, we haven’t made it as easy for you to check your postcode or your zip code to see whether or not your area is available.

Paul Green:
So just drop us an email, hello@mspmarketingedge.com. But do not miss out on this, because once a competitor has locked your area, it could be years before you get the chance to try out the MSP Marketing Edge.

Voiceover:
The big interview.

Phylip Morgan:
Hi, I’m Phylip Morgan from Pax8, and I’m here to help MSPs understand a new way that we could maybe be selling cybersecurity.

Paul Green:
And I’m delighted to get you onto the podcast finally. You’ve been on my radar for a couple of years, Phylip. A different company, at a previous company before and now you’re at Pax8 and it’s really good to finally get you here onto the podcast. Because a lot of people tell me you have a lot of very sensible and interesting things to say. And talking about cybersecurity today, from the conversations you have with MSPs, and I see this as well, you believe that we as a sector, as a world, have a very negative approach to selling cybersecurity.

Phylip Morgan:
Dead right. And first of all, Paul, thanks for the opportunity to be on the podcast. Likewise, I’m an avid listener. I love the content that you put out there. Yeah, the approach at the moment is much like insurance and financial services were sold back in the early ’90s. Fear, uncertainty, and doubt was the way to sell those products, right?

Phylip Morgan:
What would happen is an independent financial advisor or maybe a bank, Paul, would speak to you and say, “Hey, what happened if you died of cancer,” or those kind of terminologies using fear, uncertainty, and doubt in order to move you to a posture that you would be purchasing the product or the service that they would be selling. These days though, we’ve noticed how the marketing has matured from those markets to now the conversation has changed.

Phylip Morgan:
Now, Paul, they would ask a question more like, “Hey, when you retire in 10, 15 years time, what kind of things would you like to be doing?” Approaching it from an aspirate perspective, they then move to protect that future for you, which inevitably leads to a conversation about life insurance. And in the same way, I feel that 90% that was definitely what it was like when I was at Continuum in my previous role.

Phylip Morgan:
And today at Pax8, I’m still finding people using dark web monitoring scans and You’ve Been Pwned as a key way to convince small business owners that they should be investing in cybersecurity. And that puts the fear of God into them, right? What I think people should be doing is using a different approach like financial services.

Paul Green:
You asked me a question there of do I see this, and yes, I do see it. Let me flip that question back at you, because by this point in the podcast, I’m a bit tired and I need the guest to do all the work. Why do you think most MSPs still rely on that fear driven marketing?

Phylip Morgan:
In the DNA of the typical MSP, and I’m putting myself there, right? I’m a former MSP owner myself. A lot of us are looking for the leadership from channel or from vendors in how to sell these products and services. They will come up with all the suggestions that they would in order to encourage us to sell the services. I think the challenge is most MSPs out there are using the methods that they’ve been using because they know no better.

Phylip Morgan:
Part of a cohesive approach I think to small business is basically asking customers where their business is going to be aspirationally post-pandemic, how are companies bouncing back and have those conversations and then develop a security conversation out of that vision that the business owner has for their organisation or company.

Paul Green:
So essentially you are saying to use security almost like a part of their growth plan. Because we all know in a good strategic review or quarterly business review, whatever you prefer to call it, that talking about the future and putting together a technology roadmap and being there as an integral partner as they move forward is the right thing to do. You believe that actually cybersecurity should just be a part of that.

Phylip Morgan:
Absolutely. More importantly, Paul, I believe you should lead on that. Peter Drucker, who is probably one of the most famous business writers ever, said there’s only four ways to grow your business. You can either do more. You can either do better. You can do faster, or you can do different. There’s four strategies that you can use to grow your business. Either way, whichever one of those four you want to use, so you might want to do more.

Phylip Morgan:
That business owner might want to open another restaurant or another bar or expand. They might want to do better. They want a higher kind of CSAT score or get more advocacy from their customers. They might want to go faster using technology and automation, or they might just want to do different and take their business in a different strategy that will require different technologies for them to achieve their goal.

Phylip Morgan:
Either way, whichever one an SMB customer selects, you have to start with security as part of the implication of having a conversation with a customer. Have you considered the security risks or the breach risk of you doing that? It was the aspiration rather than fear, uncertainty, and doubt to open up the conversation is what I’m advocating.

Paul Green:
But what do you do when the people you’re talking to, these ordinary business owners and managers, what do you do when they don’t see the value in cybersecurity, when they don’t understand that ransomware is terrifying?

Phylip Morgan:
Well, fundamentally, I think even if someone’s going to build a house tomorrow, a house that’s not built on firm foundations is worthless. In the same way, I think a business that has not protected itself first of all before it seeks to expand into new markets or change a strategy is one that’s already building their strategy on a shaky foundation.

Phylip Morgan:
I think it’s a conversation that we need to take time to help them understand that it’s not just big companies like Vodafone and Three and the big brands out there that are hacking targets today. On the contrary, we know is that they have strengthened and hardened their cybersecurity posture. The targets are coming lower and lower and lower down the food chain. The risk of a small business of three to five employees being hacked today is actually far higher than a big brand like a bank or an airline.

Paul Green:
Yes. I guess if you keep mentioning this again and again and again and again in every strategic review, eventually the business owner is going to realise, this is something I’ve got to take seriously.

Phylip Morgan:
Absolutely.

Paul Green:
We’re on the subject then of strategic reviews. Obviously you talk to loads of MSPs about all sorts of different subjects. What are some of the other things that are really hot right now within strategic reviews that you should be bringing up with your clients?

Phylip Morgan:
Like you, Paul, I’m a huge advocate for a QBR, particularly the key QBR. We talk a lot about this at our Pax8 mission briefings of how to stack your QBR up for the year. The key piece is getting the budget from the customer, right? And a lot of people, particularly MSPs, find it difficult to get at that budget, but they will have have a budget. They might not know it in their own head. And I always say, sit down with a customer of yours and ask them, how much did they spend on their it last year?

Phylip Morgan:
Because they will have a number that they can get at in their accounts that they will have spent. Use that budget to now form your QBRs going forward for the year. A key way for MSPs to open up the cybersecurity conversation more and to do it instead of using fear, uncertainty, and doubt, but to use aspiration is to ask them what automation tools are they using in their business today, what AI tools are they using. And a lot of people will kind of respond with a, “Well, we don’t use anything at all.”

Phylip Morgan:
A lot of small business owners in particular, Paul, they feel that AI tools are things that are all about IBM, Watson, and big enterprise using it to mine, data, et cetera. But every single day we are using AI tool, right? There are listeners to this podcast right now that have been grabbed by AI today. Maybe unfortunately, an automatic number plate recognition system that’s going to send them a fine from a smart motorway, right? All of that is automated today.

Phylip Morgan:
Equally, you’re parking at a Holiday Inn or a Hilton Hotel, the ANPR systems there, everything’s running on AI. Use that conversation to open up a conversation of how can we use AI. Well, a great place to start is scheduling. All of us spend countless hours if we don’t use an AI tool like FindTime or Calendly to actually put meetings in one of those diary. In fact, Paul, you and I did this podcast interview, we scheduled it all. It was in an AI tool, right?

Paul Green:
Yes, it was.

Phylip Morgan:
And that can save everybody’s time. Are we as MSPs advocating that they use these services that we can add value to them for free and just suggesting to them, well, this is how I do it. You could do it too. Put a FindTime link at the bottom of your signature and deliver some values to them. But at the same time, when you’re setting that up for them or they are setting it up, the key piece is they have to give access to the Office 365 tenant or their G Suite access to it.

Phylip Morgan:
They have to tick yes to allow that API to work. It’s from there that we’re able to open up the conversation about API calls and the importance of making sure that we’ve got multifactor authentication in place on our Office 365 tenant that is hardened. Because just like I can set it up here for you right now, other cybersecurity unethical actors could do the same.

Paul Green:
Thank you, Phylip. That’s incredibly useful. Tell us a little bit more about Pax8. How can we get in touch?

Phylip Morgan:
Get in touch with me and Pax8 is really easy. Just Google Phylip Morgan. I’m blessed to have a unique Welsh spelling of my name, which is P-H-Y-L-I-P. I’ll come up on the top there for either my website or LinkedIn. And then as far Pax8 are concerned, people can email met at pmorgan@pax8.com. We’re a global company, Paul. Although I’m responsible for channel here in the UK and in international, there’s a whole army of wing men, we’d be delighted to speak to anyone that is interested in Pax8.

Phylip Morgan:
We’re here to fix a lot of the problems that are in the distribution channel over the way that cloud is sold. We’re here to help MSPs put more cash back in their pocket and more time back in their diary with all the automation and tools, support, and enablement that we have to offer.

Voiceover:
Paul Green’s MSP Marketing Podcast. This week’s recommended book.

Adrian Savage:
Hi, I’m Adrian Savage. I’m a deliverability expert from DeliverabilityDashboard.com. The book I’m recommending today is The Compound Effect by Darren Hardy. It’s a good few years since I read this book, but the principles have stuck with me, because it’s not about just focusing on one thing and improving it. What it’s looking at is how if you make small improvements to many different parts of your business, then the compound effect is going to bring everything up and significantly revolutionise your performance.

Adrian Savage:
It’s a great principle to get behind. And even though it’s a while since I’ve read it, the principle stick with me because it really helps me make sure that everything I’m doing is just looking at… Even if it’s a minor improvement all the time is those minor improvements and those minor increases in performance that make the big difference to the business.

Voiceover:
Coming up next week.

Stephen Rosenthal:
Hi, this is Stephen Rosenthal with Managed Services Platform, and I will be on next week to talk to you about how you as an MSP need to implement technology roadmaps for your clients.

Paul Green:
We’re also going to be talking about problems. When you’ve got a problem within the business or your client has a problem, is it a real problem, or is it a perceived one? We’re going to look next week at how you can figure that out, what we mean, what the difference is between real problems and perceived problems, and how to easily fix perceived problems. We’re also going to be talking about controlling the chaos within your MSP. All businesses have chaos to a certain extent.

Paul Green:
It might be dramatic horrendous chaos, or it might be just a little area that isn’t quite as well organised as the rest of the business. Next week, we’ll look at how you identify the chaos and how you control it. I’m really looking forward to speaking to you again next week. Have a great one.

Voiceover:
Made in the UK for MSPs around the world, Paul Green’s MSP Marketing Podcast.