In this week’s episode
- Reading of physical books maybe declining, but if there’s just ONE book you check out (or even listen to on Audible), Paul explains how Influence by Robert Cialdini could transform the way you market your MSP
- Some of the best potential sales people in your MSP could be the technicians. However you may find they either don’t want to do it or aren’t very good at it. Paul talks about something called the Profit Matrix that can easily help everyone contribute towards increased net profit
- Did you know there’s a free book all about improving your MSP’s marketing? Paul has all the details
- Nearly every MSP wants to grow their business. Specialist accountant Rob Bowden joins Paul to explain how not all growth is good growth
- There’s a great question about the amount of time that should be spent on LinkedIn and Paul shares some tips on how best to use it
- Out every Tuesday on your favourite podcast platform
- Presented by Paul Green, an MSP marketing expert
- Here’s a link to the book Paul mentioned Influence by Dr Robert Cialdini
- You can find more interesting reading on the Profit Matrix here
- This is the link to order your free copy of Paul Green’s book Upgrading Servers Doesn’t Grow Your Business
- The special guest was Robert Bowden from MSP accounting specialist Brooklands Accountants. His website is mspaccountant.com
- Thank you to Kevin Ackland from Systems & Solutions for the great question about how much time to spend on LinkedIn
- Next week’s guest will be Andrew Eardley from MSP Easy Tools who will be explain how they developed a some tools that MSPs can re-sell for greater MRR
- Here’s a link to Paul’s Facebook group for MSP Marketing
Voiceover: Made in the UK, for MSPs around the world. This is Paul Green’s MSP marketing podcast.
Paul Green: Have I got a cracker of a show for you this week, here’s what’s coming up.
Robert Bowden: Can’t really turn around to your staff and say, “Well, I’m sorry guys, we’re not getting paid for 60 days on this. Can you wait until the end of next month and we’ll pay you double.”
Paul Green: We’re also going to be talking about how something called the profit matrix completely, totally changes the profit situation in any IT support business and I’m going to be answering a question later on about how long you should be spending on LinkedIn every single day.
Voiceover: Paul Green’s MSP marketing podcast.
Paul Green: One of the things that I’m most proud of when I greet new people into my house is my book collection. So we’ve got so many books as a family that we actually converted one of our spare rooms into a library, which sounds grand, but it’s just a whole load of bookshelves and we have, I mean we must have hundreds and hundreds and hundreds of books. My nine year old has an entire bookcase to herself. I’ve got a couple of bookcases. In fact, I’ve got books sort of almost in every single room of the house and mine tend to be more business and marketing books because for many, many years I’ve been in a pretty good habit of reading a book a week. Got to be honest actually the last few years it’s been more listening to books than reading books. Audible, it’s such a low investment of perhaps seven, eight pounds, probably I’d guess around the same dollars each month and you get one or two or three books a month depending on which package you subscribe to.
Paul Green: So I listen to a lot of books, but if I really enjoy a book, I will go out there and buy it. And throughout the course of this podcast, however many months or years I’ll do this podcast, I will throw out to you some of the best books that I’ve read because there are some amazing books that make a real difference. I’ve got one that I’m going to recommend to you today. It’s one of my all time favourites, business and marketing books and it’s called Influence by Dr. Robert Cialdini. Now, Dr. Cialdini is a professor of psychology based in New York, but he’s dedicated his professional career to the psychology of sales and marketing and Influence was written, I think it was some time in the in the 1980s or early 1990s and it’s about how you can influence people to do things using a number of of different weapons. And the six weapons or the six principles of influence are reciprocity, consistency, social proof, liking, authority, and scarcity.
Paul Green: And I’m going to go back over those and explain those in a second and you’ll have heard of some of these. You’ll certainly have heard of social proof. In fact, I believe that Cialdini, was the first person to coin the phrase social proof. Social proof describes our psychological need to do what most other people are doing. Now, not everyone acts like this, but the vast majority of us do. And it’s because at our core we are still, in our brains, using the programming that we had when we lived in caves a hundred thousand years ago. At that time, the safest thing to do was to stay with a group and stick together because if you were in big numbers you were less likely to be picked off by dinosaurs or saber tooth tigers or whatsoever. And we still have that programming today. So you’ll see this happen where you’re in a group of people and they’re doing something.
Paul Green: It’s safer and easier to just go along with the group and do that. And in fact we feel sometimes a little uncomfortable if we’re doing something different to what most of the people are doing. So that’s what social proof is. It’s why you need more testimonials. It’s why you need more case studies, more videos of your clients on your website and in your marketing material talking about you and your business. Because then your prospects can see that other people like them trust you. Can you see the power of that? That’s the power of social proof. And by the way, if you’re one of those people who thinks, “Oh, that’s social proof, all those testimonials, it doesn’t work.” It might not work on you, but the vast majority of people, social proof does influence them.
Paul Green: Let’s look at Cialdini’s other principles, and reciprocity is one, when you give something to someone, it sets up a need for them to reciprocate, for them to give you something back. It’s why freebies work very well, sampling. If you’re going to a supermarket and they give you something for free, a little taste of something, sales of that item go up. We don’t all buy it, but some of us do. And in actual fact, in a marketing terms, people have been doing sampling and dropping off vouchers and all that sort of stuff for over a hundred years and it has worked consistently throughout all of that time. How you would use that in an MSP is, I mean, I’m a big fan of giving away a book. I have a book to give away, so I’m going to plug in about four minutes time and you’re welcome to request a free copy of it. Does that set up a reciprocity? Maybe, maybe not. Is it generally just good marketing? Absolutely it is. So you would, within your MSP, you would certainly look to give away information.
Paul Green: Consistency is another one of Cialdini’s principles. Consistency is where we prefer to be consistent with our own vision of ourselves. Well, here’s a great example, if you’ve got a bit overweight and you’ve decided to go to a gym, you’re much more likely to keep going to that gym and to succeed at losing weight if you have a gym buddy. What happens is you convince yourself that you mustn’t let that person down. You’ve got to be consistent with the declaration that you made with that person to go to the gym every day, week, whatever it is. We see where I worked with a mastermind groups, MSP mastermind groups where I have noncompeting business owners all doing the same thing, all running IT sport companies and we have them in the room and when people talk about they’re going to do something, whether that be fire someone or introduce a new service or whatsoever, they’re much more likely to do it because they’ve declared it to a bunch of people.
Paul Green: They care about their opinion and people like to be consistent with the commitment that they have made. Then we’ve got another principle that of liking. Put it bluntly, if you’re a likable person, you’ll sell more because we’ve talked before on this podcast about how the people you want to sell to, they can’t tell a good MSP from a bad MSP, not at a cognitive level so it all comes down to an emotional decision. And when someone is more likable, when you are more likable to someone, it makes the emotional decision easier. The prospects, even the people running big companies are picking a new MSP or not picking a new MSP based on how much they like or dislike the person. It’s as simple as that. So you should be doing everything within your power to be more likable. And then the final principle of influence is scarcity.
Paul Green: And scarcity is perhaps the greatest of all of these principles of influence because when there is less of something left and it is clearly finite and it is going to run out, we want more of it. In Easter Island for example, where there’s the great big Easter Island statues and as the resources started to dwindle and the indigenous population of Easter Island faced with the inability to bring in resources from elsewhere, but their resources were going down. As the resources dwindled, they build bigger and bigger and bigger Easter Island heads. And the reason they did that was to show off to each other and you can kind of see it now in humanity as our resources are starting to dwindle and become more scarce, we’re using more and more and more of them. And it is a human condition to do that. Now, the greatest scarcity that you’ve got within your MSP is of course that there’s only a finite amount of time.
Paul Green: And particularly as we look at something like the 2020 problem, which of course is coming up in January. Most of that Microsoft software is expiring in January. You’ve only got a finite amount of time between now and then to pop all those new Windows 10 computers in to replace servers or move people to the cloud or whatever you do. And really at this point at this stage of the year with that deadline so close, this is what you should be pushing the most is, “Hey, we physically only got this many man hours or Mondays left. If you want to do this before the deadline, before this software reaches the end of life, you need to make a decision now. We can do it for you in January or February, but you’re at risk of being breached because of course your software will be out of life.” If you only read one business book a year, this is the book you really should read.
Paul Green: It’s Influence by Dr. Robert Cialdini an absolutely top read and so, so handy in your business’ marketing as well.
Voiceover: Here’s this week’s clever idea.
Paul Green: I’m yet to meet an MSP owner who doesn’t want more net profit out of the business. Net profit being of course the bottom line figure that’s yours. You pay your tax on it and then that’s yours to take out and spend. And the quickest way to grow net profit in any MSP is to use something called the profit matrix. Now the profit matrix is a very, very simple device, but it’s a very powerful device because it takes information that you’ve already got, but it’s locked up in your PSA. It extracts that information out and it puts it in a place where you and your team are kind of forced to use it every single day. So the profit matrix at its most basic is a grid.
Paul Green: And if you imagine a grid with sort of two axes along the top, you would write the monthly recurring revenue services that you sell and down the left hand side you’d put your clients. And the idea is that if you’ve got, let’s say client one and they buy additional service number one, they buy additional service number two, but they don’t buy numbers three and four so you’d put a little dots in their box. So client number one buys service one, buys service two and then you come on to client number two. Well they don’t buy additional service number one but they do buy number three. So you’d have a little dot in that number three and you do that for all of your clients. And the idea is that you build up this giant board and you can physically see exactly which clients are buying which service.
Paul Green: Now I appreciate you have already got this in your PSA, but what we want to do is we want to extract this out, not put it in a spreadsheet, not put it up on a screen anywhere, but put it in on a board, on a physical whiteboard or on a bit of paper or draw it on a wall or something. And the beauty of this at a glance, we can instantly see not only who’s buying what, but really more importantly who’s not buying what. Because the power of the profit matrix is about having that information in front of people every single day. And there are three particular ways to use it to grow your net profit. So the first way is, and I would put that profit matrix in front of your technicians because the first thing is when they’re on the phone to the people that they’re supporting and they’re talking to them, they can literally look up and glance and see, is client number 17 buying service three, let’s have a look.
Paul Green: No they’re not. And they can start conversations with the clients like, “Do you know what? We do actually have a premium service that would stop this kind of thing from happening and it would just take all of this away. Is this something you want me to get one of my team to have a chat with you about?” Because we all know getting technicians to actually sell over the phone is pretty hard. But it is certainly a lot easier to get them to generate leads, generate opportunities, and pass them to someone within the business to follow them up. And again, I know that information is there in the PSA and believe me, I’ve had so many discussions and debates with IT owners about, “Well, why would I want to replicate this information or pull it out the PSA?” Even though it’s in the PSA, it’s not presented in exactly the same way.
Paul Green: Even when it’s on an Excel spreadsheet, it’s not presented in the same way. There is something magical and physical and it just brings it alive when you physically put it on a wall. So that’s your first opportunity. You get your technicians to just look and to think and to refer for sales. Now the second opportunity to grow the profit matrix is when you do strategic reviews with clients. A big fan of strategic reviews, we’ll cover off exactly how a strategic review should go in a future podcast. But I believe when you sit down with your clients and you have a review of them, of course you’re not looking backwards at tickets and stuff, you’re looking forwards at their business. What’s going to happen in their business in the next six to 12 months? And the more and more more you get them talking about their business, the more chances there are for you to sell them a monthly recurring revenue service that will help them, that will help them grow, have less pain and avoid problems, which is what everyone wants.
Paul Green: Now that profit matrix becomes something that you study before you go out. Because for example, if you know by looking at the profit matrix, you can see, “Hmm, we’ve got basic backup, but they don’t have the premium backup.” We don’t have any kind of on prem backup. So the speed would be an issue if we had to restore and then you can look at the security services and it gives you an idea of where you want to steer the conversation because of course in your strategic view, you wouldn’t jump in and just be as unsubtle as, “Oh, I notice you haven’t got the premium backup.”
Paul Green: But you might, for example, ask them a series of open ended questions about the speed of recovery. If a computer died and it took six hours to recover the data and restore that to a new computer, how much of a problem would that be when even that’s a bit of a blunt question, but you get the idea so when you know what they’re not buying, you can take the conversation off down those lines. And I have clients that have generated 40,000 pounds and more of new recurring revenue every single month just from existing clients just using this profit matrix in exactly the way I’ve just talked about it there, that you get the technicians to generate opportunities and pass them up the chain and then of course you act on them quickly and taking clients for strategic reviews.
Paul Green: Now the third opportunity to grow the profit matrix is very simply to extend the number of services and you add more monthly recurring revenue services. I have a client who has more than a hundred recurring revenue services, which is quite a lot to keep up with. Lots of different options in there of course, but most of my clients when they do these profit matrix, they realise that actually they could add a premium service for this or they could add a bit of that or they could add something else and often it’s just different flavors of the same thing. But remember, clients like choice. Some people will always buy the best option just because it’s available and sometimes we don’t realise that we don’t have those best options available. So the profit matrix is such a powerful tool. But remember, the key to making it work is you’ve got to get it off a screen and you’ve got to get it onto a wall somewhere.
Paul Green: It’s a bit of a fun project to do. It becomes something that you really should be spending time on every day. And the reward for this is just more money for you to spend on you and your family.
Voiceover: Paul’s blatant plug.
Paul Green: Earlier on when I was talking about the great business book called Influence by Robert Cialdini, I said that I’ve got a book and it’s called Updating Servers Doesn’t Grow Your Business and I wrote it back two, three years ago. It’s absolutely designed for the owners of IT support businesses. And, as the title suggests, it’s really, it’s kind of a manifesto, a treaty for you spending more time working on your business than you do working in your business because that’s really the only way to grow the business. We talk in that book about how to get more new clients, how to spend more time with your family and how to go and take more holidays or just do more of the stuff that you enjoy doing.
Paul Green: The good news is I have free copies of this book to give away, loads of free copies. Now if you’re in the UK, which is where I’m based, I will physically post you a paperback copy of this book completely free. Anywhere else in the world, I’ll just give you a PDF copy of that book. I hope you understand that’s just to keep our postage costs under control. If you want to get that free copy, the link’s in the show notes so you can just go to paulgreensmspmarketing.com/podcastbook. That’s paulgreensmspmarketing.com/podcastbook.
Voiceover: The big interview.
Robert Bowden: My name’s Robert Bowden. I run a firm of accountants called Brooklands Accountants and we specialise in dealing with MSPs and fast growing businesses.
Paul Green: Now Rob is actually my accountant and over the years I’ve introduced him to so many MSPs that he has developed a speciality of being an MSP accountant and I asked Rob about the common problems that MSPs encounter as they’re growing their business. And one of the common problems is that growth is expensive. So on the surface and MSP can be doing very well, but actually underneath the growth is really starting to hurt them in some way.
Robert Bowden: The strain of growth is a different animal to the strain of not having enough work. So not having enough work you can actually soldier on for quite a while because you ultimately can borrow your money from the VAT. You can borrow your money from the tax man. And these are all guys who need paying periodically, but their terms of contract tend to be much longer than suppliers or staff. So people who tend to grow very quickly tend to have two resources. They tend to need to buy in hardware, which they’re reselling or they tend to need to buy in labour and skill charges, which are then recharged down. Both of these guys tend to want paying before you start receiving the money. So the consequence can be is you do a lot more work before you get paid, but you’ve actually got a lot more costs are involved and it’s can suck money out of the system very, very quickly.
Paul Green: So when you start working with an MSP, what do you suggest that they put in place in order that they don’t overgrow, go too fast and find themselves in a bad cash situation?
Robert Bowden: Well, let me think for an accountant to say, but I’ve never been a fan of working out 12 month projections because ultimately things can change very, very quickly. So we would ultimately recommend is probably looking ahead three to six months, working out what’s coming up, working out simple things like your due dates for the VAT, due dates for your corporation tax, working out the implications of if you do take on a member of staff and what happens if someone takes three months to pay you, how far have you actually got to bridge this? At least working out what the working cashflow cycle is, what you ultimately need in reserve to be able to work your way through what is going to happen as you grow. And as I say, you start seeing the outflow of cash from the system. You’ve got to manage that through, so it’s very much a case of looking ahead probably month to month, but also taking a slightly longer term view over the next three to six months and just working out what happens if you are as successful as you expect to be.
Paul Green: And what are the symptoms that a business is starting to get into trouble, if you like the early warning signs?
Robert Bowden: Early warning signs tend to be that you’re making a lot more profit but you seem to have no cash. That’s one of the most common questions we’re asked is, “If we’re earning all this money, where is it?” Quite often it tends to be tied up in your debtors and in other people’s bank accounts and the signs that will start to come through is A, you have cash in the bank, but you start to notice your cash balance going down and then when you start find things like your VAT bill starts to come along, you start finding it actually, it’s higher than you expect it to be. And it also becomes a bit more of a struggle to find it. And these things gradually build over a period of time until eventually you get a VAT bill through that you can’t necessarily afford to pay or you find that you can’t pay your suppliers quickly enough to get the equipment that you need to be able to do a job further on down the line.
Paul Green: So I’ve always thought that the MSP model was the best model in the world because you’ve got all of this monthly recurring revenue coming in and you’ve got a huge retention with your clients. But do you see, from the MSPs that you work with, do you see that actually, is it the projects that causes problems? Is it, as the clients are expanding and spending so much money? Is that where the issues lie?
Robert Bowden: Well, yeah, I mean, I suppose as much like accountancy in that model in the, we have your recurring income, which is your standard, your core base, your contracts. It’s nice recurring income the generates each month for you. But let’s just say you’re a fast growing MSP and you decide to take on a project that is 50,000 pounds. It’s going to cost you 30,000 pounds for the equipment and 20,000 pound for your guys. The upside you’re going to have to pay for that 30,000 pounds worth of equipment quicker than you can get paid by your customer for it because your customer’s typically going to be a larger customer.
Robert Bowden: They’re going to be expecting to be paying or 60 or 90 days whereas once you’ve expanded out and you started taking more from your supplier, they’re going to expect payments on 30 because their risk’s increasing because they’re selling you more equipment. Likewise, you can’t really turn around to staff and say, “Well sorry guys, we’re not getting paid for 60 days on this. Can you wait until the end of next month and we’ll pay you double.” Simply doesn’t work that way, so you have all these costs incurred in there. There are really things that you can do to manage that though and ensure that your cashflow faces a much smoother progress through it.
Paul Green: Okay, final question, Rob. If there was one thing that you wished all of your MSP clients did, what would that one thing be?
Robert Bowden: The one thing that I’d ask or say to all MSP clients is that not all growth is good growth. Once you have a team of people, once you have a fully functioning business and you’ve reached a certain size and you continue to grow what you suddenly have as a cost of overhead and there’s always a danger that you’ll go chasing turnover rather than profit at that point. One thing I’d like any MSP, any business ultimately is the best advice we can do is try and match your income to your expenditure. It’s try and get some money up front because at the end of the day you’re undertaking all of the risk. You’re taking all of the risks with these guys, with big customers, manage the risk, ask them for a deposit, ask them to match your payment terms on what’s going on here. Try and match the income to the expenditure and don’t confuse all growth as being good growth. Unless you manage it is going to cause you an exponential number of problems in the future.
Paul Green: Okay. Thank you, Rob. How can we get in touch with you?
Robert Bowden: If you’d like to get in touch with us, you can go to our website which is www.mspaccountant.com
Voiceover: Paul Green’s MSP marketing podcast. Ask Paul anything.
Kevin: Hi, my name is Kevin Ackland from Systems and Solutions in Whitney. I’ve got a question. Could you tell me how long you should be spending on LinkedIn every single day?
Paul Green: Thanks Kevin. I think the key thing there is doing something every single day because LinkedIn is such a powerful platform for MSPs right around the world, but only if you work it properly and I am think 20 to 30 minutes every single day would make you … Well, it would change everything with LinkedIn because there were three things you want to be doing. There’s connect, content, and call. Connecting to more and more people and just growing your network, which is easier done on a daily basis than trying to do a great big chunk once a week. Then you’ve got content, so just putting content on sharing things because LinkedIn these days is a much more like Facebook. It’s a much more content driven platform and then you’ve got call, which is just shaking your tree, working your network, literally picking up the phone and calling people and treating it not as cold calling. It’s slightly warmer calling because you are connected to these people in this network. If you can do 30 minutes everyday, which is two and a half hours a week, which works out at 10 hours a month, which works out at over a hundred hours a year just on LinkedIn, then that becomes a very powerful source of activity and marketing activity and a very powerful place for prospects to come from.
Paul Green: Now, if you personally just don’t have the time for this, or you just don’t have the passion, then this is something that can be either in sourced or outsourced. You can either get someone within the business to do this for you so they would do it in your name because you always want the LinkedIn activities you’d be done in the name of the owner. That’s primarily a protective thing. You don’t want one of your employees spending two years building up their own personal LinkedIn profile and then leaving because they’ll be taking all of that hard work with them, so whoever’s doing it, it should always be done in the name of the owner. You can either get someone in the business to do this for you or you could outsource it and there are plenty of people out there. There might be a VA, a virtual assistant in your area that could do this for you.
Paul Green: You might find someone on Fiverr with two R’s. Fiverr.com or peopleperhour.com the principle being there’s always more people out there looking for this kind of work than there is that amount of work available. Just make sure to you give that person your log ins to LinkedIn. You just need to make sure you know who that person is and that you trust them. 30 minutes on LinkedIn can change everything in just a few months.
Voiceover: How to contribute to the show.
Paul Green: So whether you’ve been listening for a while now or this is your first listen to my podcast, I’d love to hear your feedback. You can drop me an email anytime email@example.com
Voiceover: Coming up next week.
Andrew Eardley: In terms of security, I’m sleeping way better at night because I’m no longer worrying about if a client gets breached and the staff threatened us with court action.
Paul Green: That’s Andrew Eardley. He’s an MSP owner just like you. And he’s developed a set of tools that you can use to make life easy for your technicians and also generate some more valuable monthly recurring revenue. And we’re also going to be telling you about something that you can embed into your website, which will give you an insight into how people really use your site. In fact, it will scare you just how little they’re engaging with your stuff.
Voiceover: Made in the UK, for MSPs around the world. Paul Green’s, MSP marketing podcasts.