Today I’m talking to Jamie Warner about something he calls the Pyramid for MSP success.
Jamie is the co-founder of an Australian MSP called eNerds, as well as the CEO of Invarosoft, a software product for MSPs that he spun out of eNerds after building it for his own team.
Jamie grew eNerds organically from $3 million to $7 million in revenue in four years. The company made the MSPmentor501 for seven years in row. He credits that success to the tips and insights he’s going to share with us today.
This interview covers a lot of ground and you should walk away after listening to it with a number of practical tips for moving your MSP forward.
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Interview with Jamie Warner: The Pyramid for MSP Success
[03:36] After doing research, Jamie and his team concluded that most MSPs are small businesses. They asked themselves why and what they could do to push past into the upper tiers. The Pyramid for MSP Success was born from that quest.
[04:05] There are seven layers in Jamie’s Pyramid for MSP Success.
[04:36] With business model you have the choice of being a break-fix provider or a managed provider. If you go with the managed model, it’s easier to grow your business.
[05:15] You have no control over how much revenue you earn in a break-fix model.
[05:56] Jamie put all his clients on direct debit and it has been revolutionary for his business. Even when profit is down slightly, there’s no cash flow pressure. Expenses are matched to income.
[07:52] To encourage customers to switch to direct debit for payment, Jamie recommends offering a small discount—but remember to have an end date on that discount! No end date was a mistake Jamie made initially.
[08:46] The four key numbers to know when running an MSP are your customer churn rate, sales target number (to offset churn and grow), the lifetime value of a deal, and your customer acquisition cost.
[11:34] Layer two is people. It’s really important to have the right people on your team.
[12:30] Jamie talks about the company org structure he had in place when his company was 10 people, then what changed when they bumped to 20 people, and finally 40.
[14:21] Invest in a salesperson. When the CEO is selling, you’re resigning the sales function in your MSP to a part-time job. It feels scary to make your first sales hire but it will help you grow.
[14:54] Jamie talks about the kind of salesperson you want to hire, where to find those people, and what they should be focused on.
[17:05] Layer three is systems. You do need to get your stack right for operational efficiency.
[18:08] Layer four is product. Have a singular focus on signing up new support deals. To Jamie, a customer is not a customer unless they’re paying a monthly fee for support.
[18:49] Focus on the most profitable line item in your portfolio—that should always be managed support. Lead with that.
[20:01] Layer 5 is marketing strategy. If you aren’t doing Google AdWords definitely consider it. Referrals are number one but AdWords is really good.
[20:40] Then look at packaging your services in good, better, and best packages.
[22:38] Good and better are close in price, while the best package is way off to the side to make the other two look more affordable.
[23:19] These packages are also great for negotiating. You can offer the ‘great’ package at a ‘good’ price, for example. Or you can look at taking things out of the packages. You’ve got more options than simply dropping your price.
[25:12] Idea: Run a Dell or HP group buy campaign. eNerds does this once a year and is able to generate $250,000 to $350,000 in three months. He hasn’t seen any other MSP try it.
Frankly MSP listener challenge: Listen to how Jamie structures his group buy campaign, give it a try yourself, and report your results here in the comments.
[27:32] Layer six is vision. Why so high on the pyramid when it’s usually considered a foundational piece? You can take a lot of practical steps and start generating revenue without knowing your vision. Once the machine is running, then you can step back and ask what your purpose is.
[29:15] Vision is your destination and it needs to be measurable. Jamie talks about his ‘painted picture’ and how it serves as a shorthand summary for everyone in the company.
[31:32] At the tip of the pyramid is the purple cow. This is a concept from Seth Godin. A purple cow in a field of regular cows really stands out.
[31:51] You need to be as remarkable as a purple cow.
[33:41] It’s not just about your service being different. Your presentation and how you present yourself are part of your purple cow. How do you get your potential customer excited?
[34:38] Customers want to pick a provider that is a step up from the other ones.
Links from this episode
- Revenue is vanity, profit is sanity, cash is reality – Greg Savage
- Good to Great by Jim Collins
- The Five Dysfunctions of a Team by Patrick Lencioni
- Monetizing Innovation by Madhavan Ramanujam
- Purple Cow by Seth Godin
- eNerds
- Invarosoft (makers of ITSupportPanel)
- Jamie Warner (LinkedIn)
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