Unfriendly Cancellation Policies

 An emerging theme for me has become, Treat your clients as you want vendors to treat you! That's a pretty good way to measure both your vendors' and your own company policies.

The most recent example for me has become licenses. You all know the kerfuffle around Microsoft moving to annual licensing with little flexibility. I've had similar experiences inside and outside the world of tech.

We are deep into the subscription economy. Whether it's easy on/off services like Netflix or impossible to negotiate licensing like Kaseya or Egnyte, we are also in the era of license management. Here's a simply way to hold a mirror up to your own company policies:

• Keep track whenever you find yourself furious with a vendor about license renewal

• Break it apart. What do you specifically hate about the license (renewal/cancel) process? Was it communication, ease of making changes, friendliness, being treated like a dollar stream instead of a valued customer?

• Okay - Now, how do YOUR policies stack up against that? Do you force clients into long-term contracts become some wonk onstage told you it would improve resale value? Do you give advance notice of renewal to avoid big surprises? Is your communication focused on people or money? How do you handle it when clients have been charged and do not want to renew?

Unfortunately, you are stuck in the middle. Many vendors are 99.7% focused on revenue extraction as their highest priority. So making you happy is irrelevant for one simple reason: If you cannot cancel before the end of this quarter, they meet their numbers and everybody probably gets to keep their job.

When you business horizon is somewhere between three months and twelve months, the long-term relationship of a customer is irrelevant.

But you don't have customers. You have clients. If your business is going to be successful and profitable in the long term, you cannot focus on a strategy of 20% growth every year, adding more and more and more licenses until the number of licenses is the only thing that matters. You need to keep human beings happy in a sustainable and profitable manner. Pissing them off is not in your best interest.

In the long-term, I hope that vendors realize that there's money to be make with doing the right thing and treating people well is the best, most profitable path. But that would require a massive turnover in decision makers at the top for many, many vendors.

In the meantime, you need to stay vigilant, pick vendors carefully, and do what you can to manage the client relationships that will keep your business successful. When vendors lock you in, they lock in your clients as well. You need to manage both those relationships.

Good luck! It's going to be a long time before this era is over.

AI Won't Replace MSPs - But It Will Redefine Them

Here's the framing I keep coming back to when I talk about AI and the managed services industry: this isn't really a question of whether MSPs survive. It's a question of which version of an MSP thrives as the landscape shifts. That's a meaningfully different conversation — and a more useful one, because it opens up decisions you can actually make rather than threats you can only worry about.

Start Here: Where Does Your Time Actually Go?

Before getting into the broader picture, there's a diagnostic worth running on your own business. Look honestly at where your team's time actually goes — not where you think it goes, but where it actually goes. A useful proxy: in the last quarter, how many client conversations did your team initiate that weren't triggered by a ticket, an alert, or a renewal notice? If the answer is close to zero, that's a signal. It doesn't mean the business is in trouble — it means the relationship is structured around reaction rather than partnership, and that structure is harder to defend when a client starts wondering what they're paying for. MSPs in a strong position right now can point to specific proactive conversations they've had with clients about the client's business — not their own service metrics.

What's Shifting, and Why It Matters

The traditional MSP value proposition has two components: technical expertise and customer service. AI is gradually changing the economics of the first one. Routine troubleshooting, documentation, alert triage, basic configuration — these are areas where AI is improving steadily, and where clients are beginning to ask questions about efficiency and cost. This isn't a sudden disruption. It's slow pressure, the kind that's easy to dismiss in any given quarter but that tends to surface first in pricing conversations and renewals, before it shows up anywhere more visible. The better time to address that is well before the renewal, when you have room to reframe the relationship rather than defend the invoice.

The Skill Worth Developing

What I see becoming more valuable — consistently, across conversations with operators who are doing well — is workflow expertise, and I want to be specific about what that looks like in practice.

Consider a common scenario: a small professional services firm where invoices are created in one system, time is tracked in another, and someone on the team manually reconciles the two every week. The MSP has kept both systems running reliably for years. But nobody has ever asked why the reconciliation step exists, whether it could be automated, or what it costs the firm in staff time every month. That question — "walk me through how that actually works" — is a workflow conversation. It doesn't require a new service offering to initiate. It requires curiosity about the client's operations rather than just their infrastructure. And when that conversation leads to a solution — even a simple one — the client's experience of the relationship changes. You're no longer the vendor who keeps the lights on. You're the person who found something and fixed it. That's a meaningfully harder relationship to put out to bid.

The Conversation You Want to Be Having

There's a version of this that shows up directly in how you talk about your services. Consider two approaches to describing essentially the same work: "We make sure your technology runs reliably" versus "We help your business get more out of its technology over time." These aren't just different pitches — they establish different renewal dynamics. The first positions you around uptime and response. Clients measuring you on those terms will periodically wonder whether they're getting value, especially as AI tools start handling more of the routine work they associate with your service. The second positions you around outcomes, and that framing tends to produce more stable, longer-term relationships.

The renewal conversation is where this difference becomes concrete. An MSP leading with metrics shows up to a renewal with a report: uptime percentage, average response time, tickets closed. An MSP leading with outcomes shows up with a different kind of conversation: here's the reconciliation process we automated, here's what that freed up for your team, here's what we're looking at next. One of those conversations is easier to have, and harder to win. The other takes longer to build toward, but the client is rarely shopping around by the time you get there.

The Longer View

Industry transitions like this one have historical precedent — the shift from break/fix to managed services, and from on-premise to cloud, both played out over years rather than quarters. The operators who navigated those prior shifts well were generally the ones who saw the direction early and made gradual adjustments, rather than waiting for the pressure to become acute. The same pattern is likely to hold here, which means the work of shifting your positioning and building a more advisory orientation into your practice is work that compounds over time. It doesn't require abandoning what's working. It means adding a layer — one client conversation at a time — that will matter when the renewals get harder and the pricing questions get sharper.

Stick to the Absolute, Absolute, Absolute Basics!

I have always maintained, since Day One, that the most important thing we do in IT management is to verify backups. (Day one for me was October 1995, when I went into consulting full time.) 

In my last real job before I went into consulting, we had to back up systems across three states. These included HP MPEX operating systems in two states, Windows server in two states, and Novell in one state. And the entire systems in New York and California were big, beefy, and roomy enough to serve as the total-system failover to each other in an massive, unforeseeable emergency. 

In the first consulting job I took, one of the teams I managed was the team that backed up all of the mission critical servers at a major corporation's campus serving 5,000 desktop users. Tapes went offsite every night for a 365 rotation. It is nearly impossible for the human mind to imagine how many DAT-72 takes that is! 

And in the world of SMB IT consulting, our number one rule above every thing we ever did was: The most important thing we do is test backups! 

TESTING backups is the most important thing we do because the ability to get a client back in business in short order is the most important service we provide. And testing a backup by restoring data is the only way to guarantee we can do that. 

Too many people in this industry have lost sight of that. "We get a screen shot of a successful automated system mount" is absolutely and definitely NOT testing the backup. Monitoring and looking for green lights is NOT testing the backup. 

There are three important reasons you need your team to do a test restore on any backup system. First, you make sure that you can actually get the data of the backup (cloud/drive/BDR/tape/whatever). Second, you verify that you team knows how to do this with each client and each system. Even if those systems are 99.44% identical, they are not identical. Third, everyone on your team should see all of this when it's NOT an emergency. 

As I wrote recently, there's no such thing as set it and forget it with backup. Over the twenty-five years that I managed IT companies, almost exactly half of all new clients had no working backup, whether they knew it or not. And this never improved over time. 

For about fifteen years now, I have preached that there is NO EXCUSE for ransomware to take down a client - especially in small business. Why? Because you should be able to restore everything within a day or so. If you spend enough money, you might do it faster. With less money, it will take longer. But there is no excuse to not have a working backup. Ransomware? Nuke and pave is the ultimate safety valve. You might have lots of other security stuff in place. But everything else fails, the greatest tool you have is a backup you've verified recently. 

Make this you highest priority: Verify each client's ability to restore from backup every month. Yes, that's a lot of work. But since it's the highest priority thing you need to do, is must be done. 

And maybe you don't need to buy every security tool you see. Just sayin.

Wear All of Your Owner Hats

When I teach the course on Managing Your Service Board, I make the point that the service manager has to wear a lot of hats - trainer, organizer, parent, friend, coach, mentor, customer service rep, department manager, sales consultant, and more. 

The owner has more hats than that. The owner has primary responsibility for strategy, budgeting, sales, vision, culture, and the success or failure of the entire operation. At the end of the day, the service manager can take all those hats and go somewhere else. But the owner stays through everything, good or bad. 

And just like everybody else, owners enjoy some of those roles and don't enjoy others. I love marketing, for instance, but I hate sales. So, guess what? I don't do as much sales as I should. Like most human weaknesses, I am completely aware of it and behave this way anyway. 

A few years ago, I recorded a webinar called The Seven Stages of Wealth and the Economy. Two of the stages, where most IT professionals spend most of their careers, are re-jiggering the business and working the system. 

Once we find a wonderful combination of products, services, clients, and employees, the best thing we can do is just to work that magic day after day for as long as you can. For many folks, the last four years have been a period of getting everyone working remotely and moved to Office 365. Work it, work it, work it. 

Then, from time to time, you need to re-tool the business. Figure out the next magic combination, then work the new system for the next four or five years. Michel Gerber referred to this behavior as working ON your business. The Hardest Part of moving from "working" the system to re-tooling your business is that you have to work on the next version or iteration of your business today. Because the working stage is working, you are happy and making money. So it can be difficult to spend time on creating a future when you may not be experiencing problems today. 

Here are a few tips to keep in mind about working on tomorrow today: 

1. It's a lot like marketing. You can't start marketing when things slow down. You need to start marketing before things slow down. Both marketing and looking into the future take some time! 

2. The future is just around the corner. It's always just around the corner. And you CAN see it. But you have to lift your head and look around. You won't find the future in your day to day - especially when you're focused completely on "working it" today. 

3. Conferences, classes, webinars, and peer groups all help you gather ideas. And see glimpses of the future. 

4. Humility goes a long ways. Be honest: What do others know that you don't? Well, go learn that! And while you might be the smartest person in the room, pretend you're not - and go find someone who knows more about something than you do. 

I am a big fan of always looking ahead. Sometimes that leads me down the wrong path. More than once, I've moved too fast. But I rarely move too slow. I try to read blogs and listen to podcasts, attend events and webinars, and generally stay informed. Yes, it takes a lot of work. But so does catching up with everyone else. 

 Feedback welcome.

Local Marketing – Seminar Promotion is a Goldmine

You Don't Have to Hold a Seminar for it to be Profitable

- Lessons Learned, episode 65

by Karl W. Palachuk

 

When I started consulting fulltime, it never occurred to me that I’d be holding marketing events such as seminars and “tech days.” But sometimes, timing is everything. There are three ways that I used local seminars to attract new clients. I’ll cover one of those in this installment and the other two in the next two installments of “Lessons Learned.”

Y2K Seminars. In 1998-1999, the world was getting ready for the big Y2K rollover with the fear that the world would come to an end, or something akin to that. Today many people call this a fear-based “nothing” event. In reality, it was one of the first big examples of IT consultants saving their clients so successfully that there were no big disasters.

Having recently left the world of “big iron” mainframes, reel-to-reel tapes, and Cobol programming, I assure you that big companies spent billions of dollars fixing legitimate problems before the old code caused major problems. And that was back when a billion dollars was a lot of money. 😊

For smaller businesses, built primarily on old Novell networks and newer Windows-based networks, there were only two big things to worry about. First, old hardware simply had no way to store four-digit years at the CMOS level. Second, really old programs, often ported over from Cobol-era programming, did not account for four-digit years. These were generally easy to find so business owners could address the problem.

We made a lot of money running very simple software that detected 99.44% of these problems and generated a nice report that could be presented to a business owner. The easiest (and only permanent long-term) solution for the hardware was to simply replace it. So we made a lot of money selling new hardware, primarily desktop machines.

Software issues needed some coding attention, which could be quite expensive. Business owners often felt obligated to do this. Luckily for some, newer software and off-the-shelf software updates fixed a lot of problems. Again, we made a lot of money.

When it became obvious that we would be busy with these fixes, I decided to hold Y2K preparation seminars. I had a very good but unexpected response: Several business owners contacted me to tell me they were too busy to attend the seminar, but wanted me to come by and evaluate their preparedness. They assumed I was the one to call since I was putting on seminars for this stuff.

By the time 2000 rolled around, we had added several new clients to our “as needed” client list and a few signed contracts because we promoted our Y2K seminars. And we never actually held a seminar. We would have held them, but no one signed up. They just hired us!

 

The primary lesson I learned from this is that you can always position yourself effectively if you are willing to take on a new challenge and offer to address the big problems. People will assume you are competent until you prove otherwise. And somewhat related to that: If you offer to stand up in front of a room and teach people about something, they will assume you are the expert who knows about this stuff.

I cannot say it was my strategy to not hold these seminars. I fully intended to, and had prepared materials and handouts. And I was surprised but pleased when the first business owner asked me to just do the work rather than make him sit through a seminar. Overall, it was a great lesson about positioning my expertise.

It also solidified something I already believed: Business owners value their time more than anything else. If you can solve a problem so that they can confidently just turn it over to you and spend zero time worrying about it, they will happily pay for that.

 

In the next installment, I learn some lessons from being part of someone else’s seminars. Stay tuned for that.

 

Feedback always welcome.

-- -- --

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page. 

Leave comments and questions below. And join me for the next installation, right here.

Subscribe to the blog so you don't miss a thing.

 

Karl W. Palachuk is an executive coach and author of several books, including Managed Services in a Month and Relax Focus Succeed. He has built, bought, and sold several businesses, including two successful managed service businesses in Sacramento, CA. He advocates a holistic view of business, viewing the company as a system. You can find him at karlpalachuk.com or on LinkedIn. No artificial intelligence apps were used in the writing of this post.

:-)

What Happened to Long Term Vision?

One of the most famous research projects is known simply as the Stanford Experiment. You've probably heard of it as the Marshmallow Test or something like that.

Here's the simple experiment: Put a kid alone in a room with one marshmallow. The rules are:

1. You can eat the marshmallow anytime you want.

2. We're going to leave you in the room for fifteen minutes.

3. If you do not eat the marshmallow during that time, we will give you a second marshmallow.

The goal was to learn about delayed gratification in preschoolers. This research has been repeated many, many times and with dozens of variations. In addition, there have been follow-up studies to track the effect of delayed gratification on future performance.

One of the key findings in the studies is that delaying gratification is highly corrollated with long-term success. But even in the short-term, the truth is pretty obvious: You can have a small treat immediately, and a larger treat if you are able to wait a little while.

And that brings us to a number of the large vendors in our industry today. More and more, the largest vendors seem incapable of delaying gratification at all. They eat every marshmallow as fast as they can.

As you probably know, most of these vendors are funded by private equity companies. These companies sometimes claim that they're long-term investors. But, realistically, the folks who fund these investments have only a four or five year commitment. In that time, they want high profits and all of their original investment back . . . so they can move on the next adventure. Their idea of "recurring revenue" is to get huge payouts in short order.

The best the investment fund can hope for is that a big investor with a three or four year timeline will renew their commitment for another three or four years. If "long-term" means ten or twenty or thirty years, then there are no long-term investors. 

Anything and everything they can do to increase short-term profit is done in service of these payouts. Actions frequently include cutting staff, increasing prices, and cutting development programs. In other words, what "investors" want is revenue extraction.

A secondary objective is to increase the appearance of guaranteed long-term income. This results in three year contracts (absolutely a horrible expectation in a high-tech industry unless you're selling hardware), unfriendly pricing models, and extreme difficulty in getting out of a contract or even reducing your license commitment. In other words, things that are bad for the customer (in this case, reseller/partner/MSP) increase the perceived long-term value of the organization.

Why do they want this perception of increased future revenue? Because it allows them to get another round of "funding" from new investors. Sometimes, this comes from bank loans. More often, it comes from investors who have been over-promised results. Those investors have a four or five year timeline to get back all their money and a lot of profit.

It's not quite a Ponzi scheme, but if you were to imagine an increasing pyramid of debt, commitments, and promises that seem to grow until they collapse in on themselves, you would be forgiven. 

Missing from this equation, of course, are the end user client, the success of the resellers and MSPs, customer service, innovation, good governance, fiscal responsibility, and a healthy business model.

Eat the marshmallow. There may never be another one!

In my January State of the Nation Address for SMB IT, I said that I think the clock is ticking. I believe we have five years or less before there's a major economic catastrophe for one of these mega vendors. Well, we're about six months into that five years. So far, I have no reason to reconsider that projection.

If your primary vendors have unsustainable business models, this could be a major problem for your company. There is an intoxication with revenue extraction that is hard to resist. But there has to be a limit. If all a company does is extract money from the industry, something has to collapse.

The good news is very good. If YOU have a good, sustainable business model that can last for twenty years, then you can survive anything. You will need to partner with great vendor partners who also have sustainable business models. And you'll need to put a lot of attention on great service and great employees. Those are very manageable if you've got a great business model.

Wait for it. With a little delayed gratification, the treat will be bigger in the long run.

Profitable Is Enough

The most important data point in managed services right now comes from Service Leadership — the largest database of MSP financial performance, covering 15,000 to 20,000 IT services companies quarterly. It's owned by ConnectWise, so this isn't a vendor's marketing estimate. It's the closest thing the channel has to ground truth.

The number: roughly one in three MSPs is break-even or losing money every quarter.

That's not the uncomfortable part. The uncomfortable part is that you can't tell which ones by looking. They're at the same conferences, talking the same talk, selling the same stack. The MSP channel has no licensing, no registration, no financial transparency requirements. There's more regulation on the person who cuts your hair than on the company backing up your clients' data. Anyone can declare themselves an MSP — and plenty do, right up until the moment they can't make payroll.

The Question Nobody Asks Out Loud

Here's what doesn't get said enough: profitable is enough.

The channel has a growth fetish. Revenue targets. Headcount milestones. Acquisition multiples. Embedded in all of it is an implicit judgment about what a successful MSP looks like. It's the wrong frame for most operators.

A business that clears a consistent profitability floor, pays its people well, serves its clients reliably, and gives its owner control over their time — that is a successful business. It may not generate keynote material. But it's what most people who started an MSP actually wanted when they started it.

The channel's conventional wisdom isn't built around that goal. And that misalignment has real financial consequences.

The Revenue Mix Myth

For years, the conventional wisdom has been that 80% recurring revenue is the target. Maximize MRR, minimize project work, optimize for predictability. It sounds like financial discipline. Service Leadership data says otherwise.

A healthier mix is closer to 60% managed services and 40% professional services — because professional services drives growth. Project work brings in new clients, expands scope inside existing accounts, and funds capacity for more recurring work. MSPs who chase 80% MRR often do it by cutting the very work that would have made them more profitable.

The 80% number gets repeated often enough that it starts to feel like settled science. It isn't. It's a benchmark that got detached from the context that made it meaningful, and it's been doing quiet damage ever since.

What Operational Health Actually Looks Like

Revenue mix matters. So does the discipline underneath it.

Watch your collection cycle. An MSP consistently collecting on Net 15 terms in under two weeks — year after year — is one where financial discipline is built into the culture, not bolted on in a bad quarter. That consistency is the result of treating cash flow as seriously as ticket closure rates.

The profitability floor is related. It's not just a financial target — it's a forcing function. When you've set the minimum return below which you won't operate, it changes how you price, how you scope, and which clients you keep. That's one of the clearest lines between MSPs who are building something durable and MSPs who are just busy.

The Real Separator: What You're Selling

The gap between the profitable third and the losing third isn't primarily a pricing or toolset problem. It's a positioning problem.

Two MSPs can offer identical services. One says: I'll make sure your computers are working, flat monthly rate. The other says: I'm going to use technology to help your business grow, and you'll measure my value against that outcome. Same service. Completely different financial trajectory.

The first gets measured on cost. Every ticket is evidence for or against renewal. The second gets measured on outcomes — loyalty and pricing power, simultaneously.

Most MSPs know this. Most still sell on features and uptime. The gap between knowing it and doing it is where the bottom third lives.

The Bottom Line

81% of MSPs do less than $10 million in revenue. 67% do less than $5 million. At that scale there's no bench, no finance function, no one running a cash flow model. The owner is doing the work, selling the work, and trying to make sense of the financials on a Sunday night.

This is why the bottom third is so persistent — not incompetence, but structure. Financial discipline is hard to sustain without intention when there's always something more urgent in front of you.

The answer is to treat profitability as a non-negotiable from the start. Not a reward you'll get to once growth is solved. A floor you set and defend. Know your revenue mix. Track your receivables. Have a number below which you won't operate.

One in three MSPs isn't making money. The dominant narrative is about growth — who's acquiring, who's scaling, who's hitting what multiple. But underneath it is a simpler idea: a profitable business, run well, on your own terms, is the point. Not a stepping stone. Not a consolation prize. The point.

The data exists to know where you stand. The question is whether you're treating profitability as the goal — or as something you'll get around to after you're done chasing the wrong target.

Do You Have a "Relationship" with Suppliers or Vendors?

This question popped into my head because I've had a few irritating interactions recently. One was simply adding yet another impossible-to-change-licensing vendor to a growing list (most recently, Egnyte). Another was an online software/service that cannot seem to get the folks in tech support to talk to the folks who run the repetitive and useless forums to talk to each other. One team can't fix it, the other says there's no problem. I'd go into details, but everyone reading this has had similar problems. 

Forever.  

One of the challenges of technology is that we're always working with evolving systems. Stability is always in question. New development can't break anything. Promises are made. Everything changes. 

In such environments, developing relationships with software suppliers and vendors is difficult. Add a number of economic variables, the vast differences in company size, and the growing trend to extract money first and worry about the future someday, and ongoing relationships become nearly impossible. 

As humans, we crave a certain level of certainty. Yes, everything changes all the time, but it would be nice to know which products and services I'll be selling tomorrow. The same is true with the software and services we use internally. And that brings us to the real question about relationships. 

Relationships have good days and bad days. Ups and downs. And sometimes friends grow apart. 

For the "small and medium" business market, we often project a relationship when none exists. The size difference and business model difference between HUGE vendors and tiny consultants is impossible to overcome. If a company is worth a billion dollars, or a trillion dollars, or even three trillion dollars, they don't know you exist. They do not and cannot care about you. The value of the paperclips they accidently sweep into the garbage each year exceeds your net worth. 

To these mega corporations, any relationship they have with "customers" is simply a mathematical extraction. It's a bit like quantum mechanics. You don't exist in reality. And, in fact, your company's effect on their finances is so small that it cannot be measured in a meaningful way. You exist (if you exist) as a mathematical probability. Nothing personal. 

Very often, we trick ourselves into thinking that we have a relationship with these companies when we do not. I say we because I certainly include myself. Over the years, I have fooled myself into thinking I had relationships with Microsoft, HP, Intel, and others. But when we took their logos off our business cards and off our web site, they didn't notice. They didn't care. Who is there to care? 

Remember: You should never have more loyalty to a vendor than they have for you.  

When vendors are small, you CAN and should have a relationship with them. You can meet the leadership. And they might well remember your name, and even your loyalty. But never forget that they are on a path.  

When they're small, you are a "partner" who can help them along the way. But their ultimate goals and business model may not include you. If they're successful, they'll grow too large to focus on tiny partners. And if they're successful, they'll get "funding" that removes the people you know from direct contact with users. Eventually, they will be gone altogether. 

As a business owner, you need to remember that suppliers and tool makers are not your partners. We use that term, but they are business associates. They have goals, and a relationship with you plays a role in their business model. And your relationship with them should play a role in your business model. 

So keep in mind: Is this vendor or suppliers playing the role *I* need them to play? Am I getting what I need for my company's long-term success? Remove the emotions and ask yourself, "If I were choosing vendors today, is this someone I would choose?" And keep in mind that relationships change. The answer could have been yes five years ago. But that doesn't mean the answer is still yes today. -- -- --  

Personally, I don't like to change vendors, suppliers, or tools very often. I know some people always seem to be trying the security product of the week, or the new RMM of the month. In a perfect world, I will keep a relationship like this for about five years and then decide to go another five years. But sometimes, enough is enough. 

Also, don't waste a lot of time after you've made the decision. Especially with mega corporations: They won't even know you're gone. 

Comments welcome.

Private Equity Is Not Your Business Advisor

There's a lot of noise right now about private equity in the MSP space. Acquisitions, roll-ups, platform plays, revenue multiples. It can feel like the whole industry is being reshaped by people with very large checkbooks.

Maybe it is. But here's what I keep coming back to: none of that changes what makes a small business healthy.

I've watched vendor after vendor enter the MSP market with serious capital behind them and get absolutely humbled by it. The SMB market doesn't care how much money you raised. It has its own rhythm — high volume, relationship-driven, with a sales and support cycle that looks nothing like enterprise. The clients are smaller, the margins are tighter, the relationships are more personal, and the tolerance for getting it wrong is lower. You either learn that or you pay for it. A lot of well-funded companies have paid for it.

PE investors are smart people. They do serious research. But there's a meaningful difference between understanding a market well enough to place a bet on it and actually knowing how to run a business inside it. One is pattern recognition at scale. The other is knowing what to do when a key tech leaves on a Friday afternoon and three clients are down. Those are not the same skill set, and confusing them is an easy mistake to make when you're looking at the industry from the outside.

Here's where I think the PE-influenced narrative has done real damage to small MSPs: the push toward 80% recurring managed services revenue as the gold standard. It sounds right. Recurring revenue is predictable, it models cleanly, and it tells a good story in an acquisition conversation. If you're building a business to sell, it's a reasonable thing to optimize for.

But most MSPs aren't building to sell. They're building to run. And Service Leadership data shows that the healthiest, fastest-growing MSPs tend to run closer to 60% managed services and 40% professional services. The professional services work isn't a problem to be solved — it's often what funds growth, deepens client relationships, and keeps the business financially flexible. A well-timed project can do things for your P&L that a managed services contract simply can't.

The 80/20 target wasn't designed for operators. It was designed for deal sheets. That's not a criticism — it's just worth knowing whose interests a given piece of advice is actually serving.

And that's the core issue. When you optimize your business for how it looks to an outside buyer rather than how it actually runs, you can make decisions that quietly hurt you. You might under-invest in project work that your clients actually need. You might chase a revenue structure that sounds sophisticated but doesn't fit your market, your team, or your clients. You might spend energy on the wrong things while the basics quietly slip.

The fundamentals don't care about any of this. A clean balance sheet matters. A well-managed P&L matters. Knowing your margins, controlling your costs, understanding which clients are actually profitable and which ones are quietly draining you — that's the work. It was the work before PE started buying up MSPs and it will be the work long after the current wave of consolidation settles out.

Thirty percent of MSPs are running at break-even or losing money. That's not a PE problem or an AI problem or a competitive landscape problem. That's a business fundamentals problem. And no amount of industry narrative about multiples and recurring revenue ratios fixes it. The only thing that fixes it is doing the unglamorous work of understanding your own numbers and managing to them.

That's not exciting advice. There's no acquisition story attached to it. But the MSPs I've seen build something durable over time — something that actually serves their clients and supports their own lives — are almost always the ones who never stopped paying attention to the basics. Clean books. Managed costs. Profitable clients. A P&L that tells the truth.

If your books are clean and your business is profitable, you're in a stronger position than most — regardless of what's happening at the top of the market. If they're not, that's the thing worth fixing first. Not your revenue mix ratio. Not your acquisition readiness. Your books.

The noise will keep coming. The fundamentals will keep being the fundamentals.

Inspiration Everywhere

 When you're in the mood to learn, there's inspiration everywhere. One of my favorite examples goes back thirty years. When I was getting ready to convert a house to rental property, I picked up a book on how to be a successful landlord.

I was surprised and pleased that the book started out with an impassioned chapter on running a small business. After all, rental property involves income, expenses, marketing, sales, maintenance, taxes, record keeping, and sometimes outsourced labor. In the end, the chapter was all about doing things the right way and taking your business seriously. 

As I cruise YouTube and blogs for tips on making small projects, I came across a video that started with four full minutes of inspiration along the lines of, "Lots of people have done this, and you can, too. Whatever your excuse, someone else has a better one. So get started!" 

Maybe it's just serendipity, but I find inspiration wherever I look. And, in particular, in everything I read. I know for a fact that I find ideas because I am always open to ideas. And that's related to another bit of found wisdom that applies to almost everything in life:

 It's not a race. Slow down. Take your time. Do it right. 

What do YOU read for inspiration? (Or watch. Or listen to. Or ...?) 

[ If you haven't read my posts on the reticular activating system, today's a good day to do that. See https://relaxfocussucceed.com/2018/07/priming-your-brain-part-1/ ]