01 Mar Growing vs Evolving: MSP Business Owner Zach Mesel’s Journey Through the MSP Space
Editor’s Note: Zach Mesel, President of Wooden Spoon Technologies, shares how adding a business partner, changing his mindset when evaluating potential new clients, and improving his employee recruitment skills have all contributed to his new philosophy of “evolving,” rather than merely “growing,” his MSP.
Ted Hulsy: Zach, thanks for making the time today.
Zach Mesel: Thanks Ted.
Ted Hulsy: Why don’t you start by telling us a little bit about their MSP practice. You know how long you guys have been in business, how do you specialize, that sort of thing. So, tell us about Wooden Spoon.
Zach Mesel: Sure. So, this has actually been a year of some pretty big changes for my company. Up until this year, starting in 2003 and until this year, I had owned the company myself. I’d gone through waves of either having employees or not and still been able to grow my practice throughout that time, and then over most of that time, I had be courting a guy who I had met, oh probably 2005 time frame, trying to get him on board. And finally had success in doing that, and we actually launched our joint venture at the beginning of this year. And I can say that I don’t know how it worked out this way, but one plus one is greater than two. And having a true partner in the business has been absolutely amazing. We’ve experienced some really great growth this year especially in our managed practice. We still do a little bit of break/fix. We do project work and then we have our monthly recurring and things are going really well. We’ve certainly seen a lot of growth in the business in the last two to three years and even during the downtown in the economy business was stable. It didn’t grow very much, but we’ve certainly seen an upturn in the last two years or so. So, things are going really well.
Ted Hulsy: And then where do you guys, I mean, share with our audience a little bit about Santa Rosa, where you are, and kind of California, and what kind of clients do you specialize in?
Zach Mesel: Sure. So Santa Rosa is a a little town by a big town. Santa Rosa being a county seat of Sonoma County. Wine country. Very agriculturally oriented. But also, a fair amount of high tech industry here. The big town that we’re close to; we’re about 50 miles north of San Francisco. So, we do get some overflow from that, but most of our clients are in this area and there’s a strong spirit of entrepreneurship here. Interestingly, there’s some large employers in the area. HP, Agilent have been a big employer here. As they kind of went away or downsized their operations, a lot of their folks started businesses. And curiously you know the mix of the long-term people who had been in business here, as well as the people who started businesses I would say in the last 10 to 15 years since the technology troubles of the dot com bust, have led to a lot of small business in the area. So geographically we’ve been able to keep our clients relatively close. We’ve got a couple little outliers here and there, but most of our clients are pretty close by. One of the things that we’re discovering is, you know we’ve had this kind of belief for a long time that in order for a client to really want to use our services that they would need to be of a particular size. And very curiously in the last couple of months we’ve had a couple of clients say yes to our managed offering even though I would call them undersubscribed. They’re smaller than I would have expected to be willing to pay our monthly fee, our minimum monthly fee. So, I don’t know quite how to explain that either I’m just an amazing salesperson which I’m okay. I don’t’ know that I’m that good. But the business environment is changing and even smaller business owners are really seeing the value in the kinds of services that we provide and the idea that getting as close to a fixed price way of looking at IT support really benefits the small business owner. So, that’s been really gratifying.
Ted Hulsy: So could we maybe dig in there a little bit. I mean specifically like where is your kind of client sweet spot today in terms of size? And then tell us a little bit more about this lower boundary of client sizes for managed services that’s surprising to you. I mean how many folks are we talking? What’s an engagement like that look like?
Zach Mesel: Right. So, a typical sweet spot client for us has been in the 20 to 30 users range. In my conversations with other MSP owners that seems to be relatively common. And so, in my communication, you know I belong to a business networking group, and in my communication to them, in communication with my other referral partners, typically I’m talking about you know the 15 to 50. That’s usually how I’ve couched it especially over the last five years or so. And what we’re noticing is companies with eight, nine, ten users are actually willing to pay our minimum monthly fee. Now granted our minimum monthly is $1500 bucks. So, you know it’s not outrageous. But we had an eight-user client say yes in our first meeting with them. They were absolutely psyched. They’re an electrical contractor and they have a guy, an employee, who is an electrical technician who had built their network, and the owner finally realized if something happened to that guy, they were kind of screwed and he really needed that guy to be off doing project work for him. And so, having the conversation about a commercially supportable network ended up being a very, very easy conversation and he just went for it. That just… That was very surprising to me. Uh, it’s not something that we’ve experienced and part of is we’ve… I think we’ve shied away. Like I’ve… In my communications to my referral partners you know I’ve been very clear. You know if it’s less than 15, it probably isn’t going to be a good fit, and so the modification to that is hey we’re actually willing to talk to any successful business owner. Typically, this is what we work with, but that doesn’t mean that you know typically if we’re working with 15 to 50, it doesn’t mean that if somebody is smaller than that or larger than that; that they’re going to say no.
Ted Hulsy: It’s almost as if it’s really more of like a psychological outlook of the business owner than necessarily the number of employees. It seems to me it’s do they view technology as strategic and do they want it done, right? I mean if you take this electrical contractor, it was maybe done right, but maybe they were just clearly concerned about the medium term that if they lost this one employee or we’re not putting them to use in the proper way, then maybe that proper use of technology would go away at some point and they’d have a big problem on their hands. So…
Zach Mesel: Right.
Ted Hulsy: It’s kind of interesting. I mean are you guys; are you guys doing anything concrete to kind of change your marketing message?
Zach Mesel: Uh, so this is recent and in my verbal communications with my referral partners, yeah, I have told them the same story and kind of related the idea. And what I’m kind of taking away from this is, like you’re saying, it doesn’t really matter what the size is. If they are successful and even if they’re growing slowly, if they view IT strategically, then they very well may be a good client for us and it’s certainly worth a conversation. And that is a marked change from how I’ve been couching this for, God I mean at this point, I’m not even sure how long you know. Four years, five years. So, it’s a… You know you were talking about it being kind of… It depends on the mindset of the business owner. The client business owner. It also is a change in my own mindset. In my own beliefs about who would be a potential good client because it makes me wonder whether I’ve actually turned away or just turned down meetings with people who could potentially be good clients you know.
Ted Hulsy: Well, I think it’s always important we just did a good webinar series with Robin Robins this last week, and one of the big takeaways is you always have to be kind of refining and revisiting what your niche is and are you sufficiently focused? Is it sufficiently well defined? Are you going where you want to be going or you kind of making compromises by taking on clients who you maybe uh you know shouldn’t have and that sort of thing. So, it’s always an organic process, but it needs to be; I think her big takeaway is that it’s got to be an intentional process.
Zach Mesel: Yeah. No doubt. I would completely agree with that.
Ted Hulsy: Yeah. So, talk to me a little bit about you’ve mentioned a couple times your referral partners. Who are they? And tell us a little bit about that process.
Zach Mesel: Sure. So, my number one guy is actually a copier dealer and I met him right about the time he was starting his own business. It was actually the third business. The third copier business he was starting. He had worked for other people and finally decided that he was going to set up his own shop. And just based on the vibe, if you will, we actually provided the networking component, the network installation component, for his machines. These are you know multifunction copiers. For probably about two years maybe even longer than that. So, we did a couple hundred installations for him which you know it’s challenging. I look at that in terms of classifying it. I look at that as T&M work. But it was T&M work in service to building a relationship with somebody who was in my opinion pretty likely to come in contact with clients who were within our target market.
Ted Hulsy: Right.
Zach Mesel: And for the most part that’s exactly how that’s worked out. And while we don’t do… He now has the technical staff in house who can do the lion’s share of his installations which is fantastic, and we only get involved when things get gnarly, he connects us with people either in his client base or in his prospect base who he thinks are potentially potential good clients for us. And this kind of goes back to what I was saying before about, and I’ll use the verbiage that he used with me. You know he would try to refer me to certain clients and he said you know he was kind of frustrated because I would turn my nose up at them. Because they weren’t in the size range that I had in mind. And it was very funny the way that it worked. We had a conversation where you know he gave me one of those “well you might want to consider” that some of these other clients which are smaller than I might think; smaller than I might think would be a good client, may actually be good clients. And it was shortly after that I’d gotten a referral from a different referral source which was; he’s a guy whose is another IT guy, but who typically does dental office installations, and he does not want to do other types of small businesses. He referred me to this electrical contractor. And it was funny. Just the timing of it all was kind of funny. So, I’ve got my copier guy. I’ve got an officer furniture installation guy, sales and installation guy, who is in contact with all kinds of different businesses. Interestingly if a company needs cubicles, and that’s usually what he sells, that typically ends up being a good prospect for us whether they have an IT support company yet or not.
Ted Hulsy: Um hmmm.
Zach Mesel: That generally is a good bellwether of you know is this about the right size because they have a need for putting a bunch of people in a small space.
Ted Hulsy: Right.
Zach Mesel: And that works out well for us. So, and then I’ve got a couple other IT guys in the area some of which are smaller, and they’re not equipped to deal with a customer request for an MSP offering, and they’re still pretty much just doing break/fix. So, I refer break/fix work to them as much as I can and they refer me to larger clients who want monthly support.
Ted Hulsy: So that kind of leads into my next question is how formal are these relationships? I mean do you have some sort of bounty program or agency program or a referral fee? How does it work in practice?
Zach Mesel: In practice it’s been strictly a referral basis and that seems to work well. My buddy who has the copier company for some period of time he was paying me a commission for copiers and you know frankly I told him (there were a couple little times where he was in a cash crunch) and I’m like look I don’t need you to pay me for these. That’s okay. I would much rather you just keep your eyes open for the referrals. And I’m not saying that getting paid for referrals is necessarily a bad thing. I certainly… Clearly, I’ve had a relationship where that was in play. I also… I think that it is just as valid, excuse me, to have a relationship where it really just is about the relationship and about the referrals. And what I find, it’s interesting; it can be interesting in the way that you characterize it to the prospect. Because sometimes I’ll get that question… I’ll get that question directly from a prospect. You know are you guys scratching each other’s backs? And it’s like, well yes from the standpoint that we’re introducing each other to each other’s clients.
Ted Hulsy: Right.
Zach Mesel: But there’s no money involved. And that seems to have a net positive effect typically on the smaller business owner. Either the owners or managers of larger business, I think that they’re more circumspect about it, and it doesn’t have as much of an effect. But on some of the smaller clients, they like that a lot. And they’ve probably experienced that in some form or another in their own business. So, I think that might be why they why they can relate to it.
Ted Hulsy: Yeah. I think the larger you are the more comfortable you might be with kind of a formal operation around these sorts of things, but it certainly is disarming if you can say to a prospect, “No. This is just about we have complementary businesses.” To me the amazing thing is that it’s quite impressive what you’re doing, because I don’t hear enough of this going on with eFolder partners I talk to. I mean normally the copier dealer conversation is, “Oh, there coming in to my market. They’re going to try to come eat my lunch.” And the reality is the skill sets, the vendor relationships, the kind of the depth of knowledge and experience on product lines, it’s so quite different that there’s probably far more kind of complementary relationships you can have out there, and you have to kind of keep a very open mind on that. But I mean I think you gave three great examples. You have a dental at MSP who is focused on the dental vertical, but comes across any number of different kinds of clients. Office furniture and copiers. It’s like if you don’t want a penny of revenue from the copier side of things or the print side of things, and you don’t want to touch furniture, those are great relationships to have.
Zach Mesel: Yeah. Absolutely. I mean it’s funny. Even we’ve got a phone guy who does not do IT at all. He does IP phones and he’ll install you know the occasional router or wireless access point. But he has no skills and doesn’t want to develop them especially in the Windows networking or I’ll call it the computer networking infrastructure. And so, that’s another great referral partner. But this is something for me I joined a business networking group right around the time I opened my business and it opened my eyes a lot to this idea of how businesses can support each other. And I’ll admit there are times where I have scarcity thinking and you know a prospect will come up and I’ll think oh I really need the business. I need to take that for myself. But I really try to stop myself and check my mindset about it. And ask myself would this client be better served with somebody else? Would my business be better served by not taking them on? And would it really help one of my referral partners who’s also in the IT business? And in fact, you know in my group, in my business networking group, which is ostensibly one person per profession, I actually have asked for you know a home computing guy or a SoHo business support guy, a MAC guy. You know I view those guys as potential referral sources; I do not view them as competition. So, I think not only does it have to do with… It especially has to do with your own mindset with respect to how you view competition.
Ted Hulsy: Well, and I think it’s the… I mean I’m kind of this… This Robin Robins webinar, two-part webinar series, is kind of fresh in my mind. But you know as I mentioned one of her key messages is focus. And you can focus in a lot of different ways. You can focus by vertical, you can focus by solution and category, you can focus by size of client, but it’s very liberating, I think, if you’ve got focus and you know what you’re looking for that you have kind of mutual alliances with other companies where you can refer business to them and you know you’re going to get… You know you’re going to kind of pay if forward if you will.
Zach Mesel: Yep. Absolutely!
Ted Hulsy: And you’re going to see it back, but it’s also liberating to know that you can say what if you come across interesting things, you’re not kind of tortured with this… You’re not tortured with the temptation of taking on business that doesn’t fit your model, because you have a better home for it as you come across it, and they’re going to be better served, you’re going to build alliances and referral relationships, and you’re going to keep your focus which is I think in this business it’s… You know technology can solve so many problems, there’s a real danger that you end of with kind of a hodgepodge of different kinds of solutions and clients and sizes and everything else, and you lose that focus.
Zach Mesel: Yeah. Absolutely. And you know the other part is you know I live… I have friends who live you know in San Francisco or other cities, and they tease me a little bit about living in Mayberry! And on some level, it’s true. You know we live in a city of 150,000. Probably 180,000. The county is about 500,000. So, the bulk of the people are concentrated in Santa Rosa. There are a couple of other smaller burgs that surround us. But it is a small town, and you know I’m quite certain that I’ve met other MSPs that aren’t from these big metro areas. They’re from smaller towns. And maintaining a cordial business relationship with other IT people and people in complementary businesses, it’s really important. It’s really, really important. And you know if you want to peacefully coexist and occasionally help out your other fellow business owners, you know it really does take keeping that right mindset and realizing him and there’s plenty of business to go around. There really is!
Ted Hulsy: So tell me a little bit about this change of taking on a new business partner. What are their complementary skills they’re bringing to the table and what’s the kind of backstory on that?
Zach Mesel: So my partner, whose name is Christian, what he said to me when we were contemplating this, he said, “If you will sell it, I will build it.” And so, that kind of summarizes it. He is the guy who if (and you know he ran his own IT support company) didn’t really have any kind of MSP offering. He was really focused on T&M. He really didn’t like sales. If he could just you know sit in a dark room and be a networking admin and just be able to do that all the time, he would be completely stoked. Now he sells himself short because he’s great with clients. He’s got a wonderful personality and he’s very reassuring to people when talking about technical things. He just doesn’t want to deal with the sales and marketing and HR and legal and all that stuff. And I’m fine dealing with that. So, from a division of labor standpoint, I typically take on you know the parts of the business that require the softer skills (let’s call them), and he takes on the ones that require the harder technical skills. I will say that you know I’ve been in the IT industry since 1986. So, 30 years. And this may be getting a little bit afield of where you were wanting to go, but I think it’s applicable. This idea that a large part of my identity is wrapped up in being a technician about somebody who can solve technical problems and please the client in that way. And so, forming an alliance with somebody and we’re actually starting to hire technicians again which is something I haven’t had in a while. It’s very interesting because it diverges from what I’m comfortable with or most at ease with. And it takes a different skill set to really truly focus on running the business and growing the business and really moving away from doing technical work. And so far, it’s been just the synergy… I think I was saying earlier you know somehow one plus one doesn’t equal two. It equals more like two and a half or three! Without growing in headcount, we have grown our business. We’ve done… You know we set our forecast at the beginning of the year based solely upon what the combined revenue was between our two former companies and I think we’ve already exceeded it, or just about to, and we have a quarter left in the year. And that’s just not something that I would have expected. So, I would say to people who are contemplating it, you know choose carefully, but if you’ve got the right person, and it is the right match of skills, you can actually… You can get a lot more done and this goes back to focusing. I’m focusing on building the business. He’s focusing on doing the technical part of the business, and we’re not both kind of left with one foot in each arena.
Ted Hulsy: Great. Great. So, let’s talk a little bit about hiring. It sounds like that’s kind of next? You have enough business coming in the door that you want to add some techs to the staff.
Zach Mesel: Um hmmm.
Ted Hulsy: What’s going well and what’s challenging on the hiring and recruitment front?
Zach Mesel: Well, so fortunately I mean I will say this is… In fact, I just sent out the offer letter today. It was not a hire without interviewing, but it was a hire without recruiting. This was a… We hired a gentleman or we’re attempting to hire a gentleman who we’ve known. He’s an IT guy. A local IT guy who does break/fix. And we were introduced by my buddy who has the copier business and hit it off. And it was one of those situations where you know I kind of evaluated his skills. We had him help us on a couple of projects. We had a couple of lunch dates. We decided to go through a more formal interview type process. We did a… It’s a I don’t know whether you call it… It’s kind of a behavioral and skills assessment on him. Did a follow-up interview based on the results of that. And on one hand we think that he is slightly over qualified. He’s a very, very bright guy. We think he’s slightly over qualified for the job, but the idea would be hire him in, have him work for a year or so as our primary technician, then bump him up into more of a network admin type role that he certainly has the aptitude for. But we’ll have some time to evaluate you know over the next year whether that really makes sense. He’ll have some time to figure out does he want to continue working with us. But let me back up a little bit. As opposed to in the past where somebody would introduce somebody to me, it’s like, “Oh, hi. How you doing? Oh, you have a pulse. Oh, you’re somewhat presentable. Great. Come to work for me.” Which resulted in nothing but heartache and pain and expense, and it was probably one of the most difficult periods of being a business owner is having somebody in who you realize; I realized I didn’t do my due diligence in hiring the person, they weren’t working out, and I was going to have to let them go, and that just sucks. That will suck all the fun out of being a business owner and being in this business. And ultimately, you know, through the school of hard knocks you know what’s clear is, you’ve got to do your due diligence. And you’ve got to learn how to ask the right questions. And what I found was I don’t really feel like that was… I’ve never really felt like that was something that was that I had naturally from the standpoint of interviewing. And so, I hired people. I hired contractors to you know outside help, uh outside HR help, to help me figure out you know what does my process need to be? Oh, I need to write a job description. Oh, okay. Oh, I need to write a training plan. Oh, okay great. Oh, I need to do some assessment on employees to validate, or it would be a good idea to validate somewhat as objectively as possible what I think may be the truth, with a little bit more hard objective data. Because I’m a pushover. I’m a total softie. You know I want to help people out and I need somebody and I’m immediately thinking “Oh wow! How can I fit them into my business?”
Ted Hulsy: Right.
Zach Mesel: And that may not be the best way to go. In fact, I can pretty much assure you it’s not the best way to go. That it takes asking some hard questions and some willingness to be willing to take the candidate through some scenarios and really try to get a beat on when you put somebody under stress, how are they going to act? Because they’re going to tell you exactly what they want to hear. Or they’re going to tell you exactly what you want to hear in an interview in a nice air conditioned room where everything is cool and the phone isn’t ringing and nobody’s upset at anybody. But when you get a client that’s you know distressed because their systems are down. Or something’s happened because the tech has made a mistake. Or something’s going on in their life that has them off kilter. Or I’m upset. Or my partner’s upset about something. How do we deal with it? And so, trying to root that out has been a very interesting process. And I would just say to people who are considering hiring, if you’re not comfortable with it, ask professionals for help.
Ted Hulsy: Yeah. I mean we’re almost out of time here, but it sounds like it’s a good topic for a whole other conversation.
Zach Mesel: Oh my gosh. Totally!
Ted Hulsy: So it sounds like so you’re almost to the finish line with this new candidate which is the starting line of the next part of the relationship. But it sounds like you’ve put in place a whole number of kind of recruitment and assessment techniques that you didn’t have you know previously when it sounds like before maybe you were flying by the seat of your pants a little bit.
Zach Mesel: Totally.
Ted Hulsy: Can you give our audience some concrete tips on maybe where there are some books or there some companies or is it a special kind of consultant that you look to to help you formalize this process?
Zach Mesel: So I had of a number… I did not use it, but I’ve heard of the Wonderlic test that I know that a number of people out there are using. If you have not done you know the work on yourself. DISC assessment, Myers Briggs kind of stuff, go do that. And don’t be afraid to put your candidates through that. I’m using a company. It’s based in Santa Rosa. It’s called Winning Workforce. And they use a series of assessments. I don’t remember off the top of my head who does the assessments themselves. But one of them is called the Profile XT, and basically what it does is it is an industry generic assessment of a person that evaluates them on eight different categories in terms of their ability to learn, their verbal reasoning, their mathematical reasoning, their independence, their manageability. All of those kinds of things. So, I would look into that. If you google Profile XT, you’re probably going to come up with whoever the local consultant in your area is that does that. And if not and you want to talk to the guy that I used here in Santa Rosa. Again, the name of the company is Winning Workforce. So, I would say kind of going back just a little bit, know yourself, do your work on yourself, know what gets you worked up about things, and then try to find somebody who is a good match for both your company and you personally.
Ted Hulsy: Well, I think that’s great. I mean those are some great tips and leads for our listeners to go kind of double down on recruitment process. Because I know for sure that this is an area where there’s a lot of pain out in the IT channel and in the MSP community. Topic comes up all the time. And bringing on new employees in a methodical way that’s documented and well thought out and leveraging some outside expertise I think would help everybody.
Zach Mesel: Do we have another 60 seconds Ted?
Ted Hulsy: Yeah. Absolutely. Sure.
Zach Mesel: So I just want to relay a conversation I had at a conference earlier in the year. You know my own mania is around you know hearing; one of the things that we hear in the channel all the time for MSPs is grow your business, grow your business, grow your business, grow your business. And one of the ways that I hear that is add more employees, add more employees, add more employees. And I bristle at that, and I was talking with some folks, and for those of you out there that are still small and that are reluctant to hire people or who have had bad experiences hiring people, this idea of somebody said to me replace the word “grow” with “evolve.” And when I heard that it actually was very soothing to me. Because it has this connotation of you know you don’t have to be a 10 person MSP in order to be competitive in just about any environment. Like I said earlier there’s plenty of work for everybody. Figure out what you want. Figure out what you want your business to look like. And you know my idea of kind of nirvana right now is you know that there would be four, maybe five of us total, you know max, and that we can do a ton of business very, very profitably and stay small. Grow does not necessarily mean be enormous. It just means evolve, keep your business interesting for yourself and for your employees, keep it engaging, and give people opportunity to grow. And that just really hit home with me.
Ted Hulsy: I think that’s great advice and I think we’ll leave it with that. Thank you very much Zach for joining us for today’s interview.
Zach Mesel: Okay Ted. Thanks for having me. I really appreciate the opportunity.