Sunday, September 30, 2007

Self Interest Properly Understood

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

I wrote the following article on the day before I was named SBSer of the Year. I considered not posting it because of the timing. Then I figured, what the heck. This is a blog, and this is what's on my mind. So here you are:

Self Interest Properly Understood

Why, you might ask, do I want you to be a Managed Service Provider? Why do I care if Cyber Goober Guys of Pig's Knuckle, Arkansas provides managed services? What does KPEnterprises (Sacramento's Premier Microsoft Small Business Specialist) get out of that?

In his excellent book Democracy in America, Alexis de Tocqueville coined the phrase "self interest properly understood."

The basic argument is that we participate in communities and contribute to the bigger picture because, in the long run, we will get more out of it.

And what's the "more" I want out of this long-range view? That's easy: I want our entire profession to be more professional. I want clients to expect more out of us (all of us). I want us to expect more from ourselves and each other.

I want our entire industry to take one huge step up. I want us all to deliver a higher level of service.

And to get paid accordingly.

Many people adjust the air in their car tires and top off their wiper fluid. But they don't call themselves mechanics. And many people fix their cars and help their neighbors, but they know they're hobbyists; they know they're not mechanics.

But somehow, when it comes to computers, anyone who knows how to change a screen saver considers himself a computer consultant.

Clients don't know the difference between a $40 firewall and a $3,000 firewall. Fine. It's not their job. But when a "consultant" doesn't know the difference, there's a problem.

Remember our friend Tocqueville? He was writing to his friends in France about the march of democracy. His conclusion was this: It's coming and you can't stop it. If you fight it, you'll lose. But even though you can't stop it from coming, you can jump in and participate -- and help affect what democracy looks like as it takes hold.

We're in the same boat: I believe the future is one of professionalism. You can fight it, but you'll lose. You can ignore it and be left behind. Or you can participate and help mold the future of your chosen profession.

I've never been one for fighting against the inevitable.

The choice, then, is between 1) responding to an evolving business environment or 2) influencing the evolving business environment. I choose the latter.


How Was Your Month?

Well, lots people started the month of September with me -- on the trail to managed services. I've received dozens of emails from people who are giving it a try. And I've received several success stories.

But where's everyone else?

Remember lesson #1:

Get Off Your Butt.

Stop stalling. Don't delay. Do it. Do it. Do it.

If you're stuck, send me a note. I can't solve all your problmes, but I can give you a little perspective, point you to some resources, and be your cheerleader.

No. I won't wear tights.

An Open Letter to the Community

An Open Letter to the Community, my staff, my wife, Harry, Bob, Bob, and Arlin.

On Saturday Sept 29, I was asked to play a minor role in Jay Weiss's magic act at SMB Nation. Great show. My job was to put on an oversized shirt and a Yoda mask while Jay miraculously made me appear before a crowd of 700 attendees.

Fine. I'm no stranger to embarassment.

So right before the fun starts, Bob Hood informs me that I've been awarded SBSer of the Year.

Thank you, Bob, for giving me a little warning. While I still appeared like an idiot, at least I had some time to compose myself before I "popped out." Thank you to Bob Hood and Arlin Sorensen, the previous SBSers of the Year. Both have been spectacular guys, contributing all their time to this community. They are inspirations to me and, it is no coincidence, two of the first people I met when I was introduced to the SMB Nation community in 2004.

Please let this email serve as the blubbering thank you note that I was too stunned to give at the time.

This community -- SBS and SMB consultants around the world -- is spectacular. I'm pleased and honored to be a part of it. I'm pleased to contribute in some way.

You may not know me from anything other than my blog and my books. But believe me when I tell you this: I don't do anything for very long that I don't enjoy. I don't "have to" do any of what I do. I don't have to run a consulting practice to put food on the table. I don't have to travel all over the world. I don't have to sell books. I don't have to hock other peoples' stuff.

I am the luckiest person in the world because I wake up every day and do something I enjoy. Period.

So, whatever I do for the community is done because I think it's fun.

Having said that, let me be very clear: no one achieves the level of success I've achieved without amazing love and support at every level. With that in mind, let me introduce you to my perspective of the world.

My wife is the most supportive, loving, understanding, and forgiving person I know.

"You FORGOT you have two conferences in May?"

"You're selling a book that you KNOW can't make any money?"

"Do we really NEED 1,000 foam hammers?"

Thank you, Laura, for being the absolute foundation of everything I've achieved in the last 16+ years.

No one does this stuff alone.

My staff, led by Manuel and Nicko and Jennifer, have made it possible for me to build my business, improve my business, and take everything to the next level. They've stuck in there with all the craziness and hair-brained schemes. They've made it possible for me to take vacations, dissappear, work at home, write books, and do whatever else I decide to do. At this point, they are more "KPEnterprises" than I am.

The community as a whole is truly unbelievable. I have friends and associates on six continents! As a kid from a small town, this is the most amazing thing to me. When people come to town from across the country (and sometimes across "the pond") they contact me and we get together. Business is business, but business is built on people. And the people in the SMB community are the best people I know.

In that community, the biggest help to me on a daily and weekly basis is Bob Nitrio, the co-president of our Sacramento User Group. Bob is always energetic, positive, and willing to contribute. When my wife steps in at home, Bob steps in for the user group. He has allowed me to travel more freely because I know things will be taken care of.

I also thank all the dozens of people who help promote my activities, including Vlad Mazek, Erick Simpson, Amy Luby, Jeff Middleton, and literally dozens of others. Please forgive me for not mentioning everyone.

And finally, I owe more to Harry Brelsford than anyone else. Harry has been a friend, an inspiration, a business partner, and more. Harry had faith in my first book. And that led to the book, and the first tour, and the engagement in the community, and everything else that has happened. I think sometimes you don't really understand a business partner until you fail together. Harry and I have had so many projects and plans and schemes that some have been, well, not as successful as we had hoped. But through it all we just kept plugging along.

Thank you, Harry, for everything.

And thank you, to the community, for being there. I love this community and I hope to see you all (again) real soon.

Monday, September 24, 2007

Project Planner Goes On Sale

My latest (e-) book is now for sale at It is called The Super Good Project Planner for Technical Consultants.

The Super Good Project Planner for Technical Consultants covers the basics of what you need to do to create and manage successful projects in the SMB space. Unlike more formal training in project management, this guide is "straight to the point."

What don't we cover? Well, we don't talk about coordinating teams of people, lengthy meetings to discuss ROI, or budgeting for offsites to discuss balancing stakeholder objectives.

This book focuses entirely on the step-by-step process of defining clear objectives, outlining the steps needed to accomplish the goals, and keeping track of the whole process.

The "book" is actually a kit. It is delivered electronically and consists of two files. One is the book itself -- 133 pages in 8.5x11" format. The other file contains the forms you'll need to build your project binder (another 20 pages).

As with my earlier books, these forms are customizable. You can put your logo on them if you find it useful. But since these are primarily for use inside your company, you might not have a need to customize them in that manner.


The Super Good Project Planner for Technical Consultants will be released officially on Friday, September 28th at the SMB Nation pre-day.

It will have a special price during the SMB Nation conference, and for the entire month of October.

In addition, The Super Good Project Planner for Technical Consultants will be part of the Success Bundle available for a special special price only during the SMB Nation conference.

If you're going to SMB Nation, please plan to buy the Project Planner there as part of the Success Bundle.

If you're not going to SMB Nation, please visit and buy The Super Good Project Planner for Technical Consultants today.

You can download the product and start using it right away!


If you're undecided, you can also download the table to contents, the first three pages of the introduction, and the first three pages of Chapter Five.

Kick the tires and see what you think.

At just $79.99, you only have to save one hour's time to pay for this kit.

Saturday, September 22, 2007

Handling Prepayments

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Alexander from Miami writes . . .

    In Part 1, you mention that customers either pay for the first month with credit card, or they pay for three months in advance with check. If they go the check route, does this mean that they pay quarterly? If so, how soon would you recommend sending out the next quarter's invoice before it's due? Should the escape clause within the contract then be written to be a three month advisory? I look forward to hearing from you, and delving a lot more into the different websites/blogs you have.

The primary goal is to be prepaid for the flat-fee portion of service.

We let the three months start anytime (on the first of the month). So if you sign today, you'd pay for Oct, Nov, Dec. This is actually good because we stagger the inflow of money. Over time it should be randomly distributed. As long as you keep track of it, you're good.

We send out invoices about 10-14 days before the first of the month so that everyone gets them in plenty of time. But the service agreement plainly states that the amount is due and payable whether you've received an invoice or not. Just like the rent.

For people who pay every three months, we generate three invoices (oct, nov, dec). We don't adjust the escape clause because we're just holding that money until the month gets here. With accrual accounting, that money is not taxable income until it's invoiced. So we just hold the money in the meantime.

So you have to make sure you don't spend it until the month gets here. If someone were to cancel, we would need to come up with monthly fees they've prepaid. Of course we would also convert that sum to an amount "on account" to pay for any other services until the client was completely off our books.

Some clients will ask for a discount for pre-paying. We don't do this for the standard 3-month prepay because there's nothing unusual or special about it. It's what we do and that's built into the price.

We used to give a free month is someone prepaid for the whole year, but that turned out to be more trouble than it was worth.

So, we don't discount for that either.

Basically, we have some flexibility in the setup fees, but not in much else.


Keep those emails coming! Let me know how you're doing out there.

The month is 3/4 over. Plenty of time left!

Wednesday, September 19, 2007

Book Review: Makowicz on Sales

Book: A Guide to SELLING Managed Services
by Matt Makowicz

I first met Matt Makowicz in 2004 when he was evangelizing consultants on the concept of selling technical consulting services for a flat monthly fee. In addition to being ahead of his time, it was clear that Matt was also a great salesman.

I was quite eager to get my hands on Matt's book -- and I was not dissappointed. I thought this was a book on sales techniques, but Matt doesn't get to sales until Section III! He starts with a great discussion of managed services and an extremely thorough littany of products and services you should be offering clients to build continuing streams of money: recurring revenue.

And believe me, this is not a long-winded philosophical discussion. Matt's descriptions of products and services are literally one paragraph each on who, what, where, when, why, and how. He packs a huge amount of information into a nice compact discussion.

Finally, in Chapter Ten, my patience is rewarded with a spectacular discussion of successful sales techniques. Page after page of great recommendations. But wait: it gets better. Matt's sales process is marvelous. Most people just do whatever they do to sell services. They really don't have any "process" at all. Matt lays out a great framework perspective that you can start learning and practicing right away.

If your business is growing, you'll particularly like the discussion about moving from an owner as salesman to a hired salesman model.

I could go on. Matt covers more areas of the sales process than I knew existed before. And he provides one strategy after another. They won't all fit my business, but they're all great information.

The technology industry is filled with processes and procedures. Well, at least that's true in the Technology Department. But the Sales Department tends to only have techniques, not processes. Matt presents detailed sales processes that are documented and repeatable. Just as you have a variety of technical skills available to use on a job, Matt gives you a variety of sales processes to have at your disposal. After all, sales isn't something that happens, it's something you make happen.

Matt's book is a great resource for any small business consultant. It's so jam-packed with great strategies, processes, procedures, and techniques, it will take me a year to implement them all!

Overall, I was surprised and pleased with _A Guide to SELLING Managed Services_. I was surprised that is was so much more than sales. Perhaps the key to a great process for sales is to start with a great framework in which to make those sales. This is an excellent how-to book on organizing your overall business, deciding what to sell, and then selling it consistently.

A great book that will be a great addition to your business library!


Disclaimer: You might think that I'm being compensated now or in the future for pushing Matt's book. OK. You got me. I hope some day that I'll own a company that distributes this book. But in the meantime, I'm hoping that enough people buy this so that Matt will be totally guilt-tripped into buying me a beer at SMB Nation.

The book is $99.95.
I'm sure it will be less at SMB Nation.

But here is my absolute bottom line:
You need to save less than one hour of labor or sell less than one hour of labor to make this book pay for itself.
I personally guarantee that you will either save or make one hour's labor based on the ideas in this book.

I don't even have a link for you today: Matt's on a boat drinking stuff out of a blender and watching his toes wrinkle in the water.

But when you find this book, buy it.


You'll find 50-100 great ideas.

Just find it and buy it.

You may have to wait two weeks.

Monday, September 17, 2007

Final Thoughts: Managed Services In a Month

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Well, there you have it. The Karl Palachuk Brain Dump on Managed Services.

It's not everything, of course. And it's not perfect, of course. But it really should be enough to kick-start your life as a managed service provider.

Please don't forget two key messages here:

1) Get off your butt.

2) Managed service is not a fad or a thing you do. It's the future.

Ten years ago "remote support" consisted of telephone support for everyone except the largest corporations. It was very rare in the mid-market and virtually unheard of in the SMB space. Now Cousin Larry the Trunk Slammer does remote support with ease.

Patch management of any kind used to be a labor intensive pain in the neck. Now there are competing tools all over the place, ranging from free to absurdly expensive.

Just as technology changes, so does the business process and the business of delivering service.

Unfortunately, our business will always be full of part-timers and amateurs. But I believe our future is one in which the SMB market will be segmented between clients who can tolerate downtime and clients who can't. Those that can't will eventually all move to what we now call managed services.

Depending on how long you've been in this business, you might remember when clients argued about whether they needed anti-virus software. Not so many years ago, we put that on quotes and clients argued about whether it was really necessary. Today it's just part of what it means to have a computer connected to the internet.

Managed service, including remote monitoring, patch management, and remote support will be as ubiquitous as anti-virus in five years.

What kind of business doesn't have anti-virus today? The kind that's not your client!

What kind of business won't use a managed service provider in the future? Same answer.

The future is coming. Every day it becomes a little clearer.

Someday you'll have Office 2007 on every desktop.
Someday you'll have Vista on every desktop.
Someday you'll have 64 bit on every desktop.
Someday you'll have a managed service client on every desktop.

And when you're using Office 2011 and whatever 64/128 bit operating system comes after Vista (Voyeur?), you will be providing "managed services." Whether you call it that or not.

There's no better time to get in this business. Truth is, you're already in this business whether you've formalized that or not.

Pick your tools. Make a plan. Get a contract. Weed your garden. And sign 'em up!

Now get off your butt.


I didn't try to keep track of who's trying this program. The month is now more than half over.

But many of you have emailed me with your success stories. I'm sure many others have had just as much success, but haven't said a word.

The traffic on the blog site has been phenomenal. I hope you stick with it. There's some difficult "stuff" to go through. But when you come out the other end with lots of recurring revenue, it will be worth it.

Good luck.

And don't forget to email me with success stories!

Sunday, September 16, 2007

Managed Services in a Month - Part Eight

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

We're almost done!

I hope you've signed a deal or two. Many people have been emailing me with their successes: Keep it up!

If you haven't inked a deal yet, keep working the plan.

It will happen.

Do it. Do it. Do it.


Topic Nine: The Right Tools for the Job

I can't leave you hanging.

When you've got five clients on Platinum, three on Gold, and seven on Silver, how are you going to get all that work done?

Managed services is not about flat fee pricing.

Managed services is not about all you can eat.

Managed services is not a fad that will disappear in the next year or so, allowing you to go back to being break/fix and disorganized.

Managed Services means that you use modern tools to provide a higher level of support that un-professional, un-trained, un-connected, techno-goobers cannot provide.

Managed services involves using top-notch tools to run your company and to provide a higher level of service than you could before. The more automated the better. It means leveraging these tools to make more money with less labor than before.

People ask "Why do you use Zenith?" Well, we make money with Zenith.

Why do you use Autotask? What do you think? We make money with Autotask.

The basic model is this:

1) Provide clients with a higher level of preventive maintenance,
-- and monitoring
-- and patch management
-- and quick response.

2) Automate all of those to the extent possible. So clients either don't know there's a problem, or find out after it's fixed.

3) Increase your profit margin by using remote tools, automated patching and fixing, and reduced overhead.

4) And change your financial model to one of recurring revenue.

Remember way back at the beginning of the series, I asked you to set up your simple but powerful categories in QuickBooks. If you did that, you started tracking hourly labor on one line and recurring MSA revenue on another line. Recurring Revenue started out as zero. Then you signed a deal. And another. And another.

Recurring revenue went from zero percent of your income to 1%, 3%, 5%. With luck it will go to 50%.

It is an awesome thing when 60% of your labor revenue is invoiced automatically on the first day of the month! It's even more awesome when all that is expected to be paid on the first day of the month. So, with credit card settling, you've got more than half your cash for the month in the bank on day three.

That's the future, baby! Let's go do that.


Let's Talk Tools

I said that, in this series, I wasn't going to try to be balanced. So I'm not going to mention Shockey Monkey, Autotask, Level Platforms, etc. Ooops. Okay, I'll mention them. But I won't TALK about them because I don't know anything about them.

Here I'm going to tell you about the tools we use.

When I started buying these tools, I was concerned with getting the best tools out there. That mattered more then than it does now, particularly with the "delivery" tools.

Here are the tools you need:

- A Money Tool. (QuickBooks)

- A Practice Management tool or Professional Services Administration (PSA) tool.

- A Delivery tool (to deliver monitoring, patch management, etc.).

- Added bonus tools.

Let's examine them in turn.

First, A Money Tool.
--> Use QuickBooks.

Everyone else does. End of discussion. That was easy.

Second, A Practice Management tool or Professional Services Administration (PSA) tool

[update: In Q4 2008, KPEnterprises switched to using Zenith Infotech and Autotask. We no longer use Kaseya or ConnectWise.]

[I originally wrote that switching PSA tools would be a big pain. But we switched to Autotask in late 2008 and found it surprisingly easy. See]

[Way back when, ConnectWise was the best tool out there. Now they have lots of competition.]

We did some research with other tools. They all sucked out loud at the time.

Now, that's not the case anymore. Many of the other tools have apparently grown up and do a great job. Plus we have a new category of "Starter" tools. For example, Shockey Monkey is designed specifically to get you started, but not intended for a ten-person shop. And my understanding is that it's also designed around the concept that you will move to a bigger product when your business grows.

But I don't know the details, so I'm not saying anything else.

Today, we use Autotask and we love it.

Some people say these tools are expensive (I'm one of those people). Yeah, they cost money. But it's an investment.

I have a project management book that costs a lot of money. Oh, and a network documentation book that costs a lot of money. I buy Robin Robins' stuff and it costs a lot of money.

But they also save you money. One project and the book's paid for. One client documentation and the other book's paid for. One more client and RR's paid for.

A new PSA license pays for itself the first month it is used. It keeps technicians scheduled and productive. It keeps track of time so we don't give it away. It keeps track of progress so we can tell the client exactly what we did.

Believe me. Do it.

Third, A Delivery tool

I was well-known, awhile back, for pushing Kaseya.

Again, when I fished around for tools, I wanted the best. I asked people what they used.

At the low end, people did what we were doing: A little hfnetcheck, SBS monitoring, ServersAlive, RDP. It was the exact "roll your own" model I mention in my Service Agreements book.

A tiny percentage used some other product.

And everyone else used Kaseya. Why? Well, everyone else's sales pitch was "We're just like Kaseya, except . . .." What about this feature? "We'll have that in the Fall [or next Spring/next release/some day]."

In other words, Kaseya was clearly "it" and everyone else wanted to be it.

We tried Level Platforms because it was less per month, but was not ready for general release at the time. So we dropped it.

And we bought Kaseya.

It took years for the rest of the industry to catch up. I think most patch management, monitoring, and remote control tools now do 95-98% of what Kaseya does.

So, depending on the need, it became clear that we may not need Kaseya for all clients or all circumstances. As a result, I have become much more agnostic about service delivery tools.

Beginning this year we have added Zenith InfoTech to our toolbox. In addition to some awesome monitoring and reporting, they add an actual "back office" support capability. We can ask them to do chores for us and they will fix the problems. We can set clients as monitor only or monitor and fix.

[Again: We dropped Kaseya in late 2008 and now use Zenith exclusively.]

We can assign tickets to them in Autotask and they will work the tickets. If it's a billable event, we charge our clients for that.

What we do:

Originally, we put both Kaseya and Zenith agents on our servers. We put Kaseya only on desktops.

If you don't have a delivery tool, get one. Remember that this is an easily reversible decision. But here's an important safety tip: Look at total costs for the first three years. This is always a good calculation to do with any business decision (telephones, employees, building maintenance, managed service tools, etc.).

Kaseya licenses are flat fee. Once you finish buying the license you own it and can use it forever. You just need to pay maintenance. So lay out initial fee, monthly fees, and maintenance. What's the total price for three years for 100 licenses?

Zenith is $8/desktop/month. So that's easy: $8 x 36 months. Times 100 licenses.

Other plans are a bit more convoluted. Doesn't matter. Figure out all total outlay for 100 licenses for three years.

In every case we've looked at, Kaseya is the least expensive in the long run. The trouble for most people is that 1) they can't see making a "big" payment every month. I'll do a separate posting on this some day. 2) Kaseya's sales model is to screw the client for the highest possible number of licenses at every opportunity. It's just like printing envelopes. $100 for 1,000 envelopes; $125 for 2,000 envelopes; $250 for 5,000 envelopes; $400 for 10,000 envelopes.

I've talked to SO MANY people that got talked into 1,000 or even 10,000 Kaseya licenses before they had any use for them. Don't do this. If the salesman wants Chrome Spinners for his Lexus, he's going to have to get them off of someone other than you. Buy the minimum number of licenses you can (100?). Get a great discount by being an ASCII member.

Buy what you need. Even today, we only buy 250 Kaseya licenses at a time. I could easily drop the cost per license below $100 if I bought more. But I only buy what I need. Why make payments for three years on licenses that aren't bringing in money?

Nuf said.

Fourth, Added bonus tools

If you plan to include additional services in the Platinum plan, you'll have to pick them carefully. Remember, your life will be easier if you have the same products on all client machines and the same services on all clients.

The two most popular add-ons are anti-virus/anti-spyware and spam filtering. We don't include the AV/AS. But we do include Exchange Defender spam filtering.

Actually, we include Exchange Defender for more than fighting spam. One of the greatest advantages for small businesses is caching of email offsite. Barracuda, in addition to being massively expensive, caches the email onsite. So if your server is down, it saves email and delivers when the server is up. But if your ISP is down, your email bounces.

With Exchange Defender, email is cached off in the ether and no one gets bounced. It also makes moving to a new ISP or a new building a lot easier. So much easier that we can afford to include that labor in the Platinum plan!

Exchange Defender is also a selling point for us. We sell it at $4 per mailbox per month. So if a client has ten mailboxes, they pay $40/month. "But if you sign platinum today, that $40 charge goes away!" For ten clients, the difference between Gold and Platinum is $150/month. Take $40 out of that and you're down to one hour of labor per month.


Whether you work on cars, work in the garden, or provide managed services, having the right tools makes all the difference.

These are my biases. The right tools for me may not be the right tools for you.

But, once again, do not delay because you need to find the right tools. Get out there and ink a deal. Then you'll have to get off your butt and make a decision about tools.


This is the last "real" post in this series.

Hope you enjoyed it.

I will have one more "blah, blah, blah" final summary post.

Then I'll go do something else with my life.


Friday, September 14, 2007

Managed Services in a Month - Part Seven

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Topic Eight: After the Sale
Status Check:

You've just inked a deal.



Immediately send an email to [email protected] and say "I did it!"

Log on to the Managed Services Yahoo Group and proclaim your victory.

Sub Topic One: Practical Little Stuff

Now we have to take care of some very practical stuff.

The client sit-down isn't over until you take care of the long list of piddly little stuff that needs to be done.

How does Karl handle this? Here's a surprise: we have a checklist!

First, make a coverpage that includes the following data:
  • Client Name
  • Date
  • Deal (circle one) Silver - Gold - Platinum
  • # of Servers / Cost for Servers
  • # of Workstations / Cost for workstation
  • Monthly Total
  • Setup Fees
  • Setup to be paid by (circle one) Check / Credit Card
  • Monthly to be paid by (circle one) Check / Credit Card
  • Correct Billing Information

On the next page you'll start a list with actions that need to take place, who is responsible for each, and date completed. You might even use this document as a "routing" slip to make sure each person or department does what they need to do.

If you're the only one, you still need to make this list and you still need to take care of all these things.

Of course this is just a fictional example and does not in any way represent exactly what we do in our company.

Your List:
  • Check to see that the names match how they want to be billed for services (Autotask, QuickBooks, Mailing List)
  • Create Invoices for Setup / monthly
  • Calculate first month fees + setup
  • Collect Money:
    • If Credit Card
      • Collect Credit Card form
      • Charge Credit card: initial setup fees/first month
      • Apply payments in QB
      • Set up Autopay & Monthly recurring

    • If Check
      • Collect check from client (3 months + setup)
      • Apply payments in QB
      • Make sure check is deposited

  • File all paperwork (e.g., service agreement)
  • Update list of clients on MSA
  • Create credits as needed for Exchange Defender and other services that are now included in MSA
  • Expire old service agreements in Autotask
  • Create new service agreements in Autotask
  • Create Kaseya Executive Summary Report
  • Create Service Request to set up client in Zenith & Kaseya
  • Set up Monitoring, Schedule Patches, Fixes
  • Set up Exchange Defender, if appropriate
  • Train Client on Exchange Defender
  • Install Kaseya agent on client PCs (create SR)
  • Install Zenith agent on server (create SR)
  • Set LAN watch to run initially on server and then scheduled daily after that
  • Add server to Kaseya and Zenith daily monitoring
  • Add server to Kaseya patch management group
  • Set up back up jobs to email to KPE monitor
  • Update daily monitoring sheet to include new client requirements
  • Tutor client contact re: Autotask client service portal
  • Tutor client contact re: KPE SR process
  • Send intro letter to client


Edited for public consumption. :-)

You'll edit again for your tools/procedures.


[ Sidebar rant: ]

Do you see all the crap you have to do in order to provide spectacular support? And this list doesn't include maintaining your PSA system and setting things up with Zenith, managing portals and passwords, creating documentation flyers and powerpoints.

You're not a trunk-slamming fly-by-night interloper. You're a trained technical professional, running a business to provide top-shelf technical support to people who are willing to outsource their I.T. department.

So, no. You don't have time to deal with break/fix junk on six-year old servers. Those aren't your clients.

[ /rant ]


Sub Topic Two: Revisiting Weeding Your Garden

There's always trepidation over the topic of saying goodbye to "good" clients.

That's why we structured the meetings as we did. After you meet with three or four Suspected Silver clients, you'll have two or three signed agreements. You'll have immediately increased your recurring revenue. And you'll have money in the bank: Monthly prepays, first months, and setup fees.

Now you see the value of this business model. Now you see that clients who you thought would drop have signed up for Platinum! Who knew? These clients have not just drunk the kool-aid: They have told you with financial commitment that they believe in your new model.

The future is a brighter place because of you.

I'm not kidding.

This is the way technical support should be bought and sold and delivered. This is the future. And you and your clients are going to go there together.

So if you've heard a client say that they don't value preventive maintenance, and they just want break/fix, you're not going to be very sympathetic.

You're going to realize, after about three service agreements, that you have clients who have literally placed their business in your hands. They trust you and rely on you. And when their servers go down, or their email stops, you're going to take care of it. You have accepted a higher level of liability in exchange for money.

Meanwhile, Cousin Larry wants to do his own tech support and call you in when he's broken something so bad he can't fix it. When you've got two or three service agreements under your belt, you'll understand that you can't provide Cousin Larry with ad hoc support when you've got clients who've stepped up to the next level.

You can't leave a contract client waiting while you go work on some snakepit of a server that you don't maintain, don't manage, don't monitor, and don't know what's been done to it.

You will come to believe that your future is with clients who value your services.

And that will make it easier to be committed to walking away from clients who just want break/fix.

If you don't believe me yet, wait until you've signed some agreements. This really is your future.

So now you can go into meetings with a much higher level air of confidence. When someone says they don't want to sign, you won't be offended and you won't be upset. And you won't retreat to a mentality of poverty. You'll simply, casually, say "That's no problem. We work with the local I.T. Pro group. We can help you find a Small Business Specialist who is still providing break/fix work.

When you're willing to walk away, you don't have to give in.

And when you honestly believe in your heart that you don't need every dollar that walks in the door, your business will move to the next level.


Next we'll cover Topic Nine: The tools you need to provide managed services.

Comments on Again

Sorry for the inconvenience.

I'd rather not filter comments here. And I'd rather not force people to log in in order to make a comment.

But pointless abusive comments don't contribute to anything.

With luck we're done with that now.

Thursday, September 13, 2007

Comments off temporarily

Had to clean up some very abusive comments from a viewer in London with the ip address of just now.

As a result, comments are temporarily being moderated.

I'll respond to Isilra when I get a minute.

Sorry for the inconvenience.

Wednesday, September 12, 2007

Managed Services in a Month - Part Six

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Note: This is a continuation of Topic Seven: Client Sit-Downs

We talked last time about
  • Gathering your data.
  • Preparing your binders.
  • Making the Appointment.
  • Gathering all the "relationship" information you need before your appointment.

Now you are ready to go. Absolutely itching to get out the door and have a sit-down. So today we're going to discuss:
  • The actual meeting.
  • Setup Fees
  • Prepayments


The Meeting
[Play dramatic music.]

Okay. You're ready. You have your awesome three-tiered plan. You have a newly-minted Managed Service Agreement. You have client financial data. You know about requirements to signing, customer service issues, and technical status.

Your head is filled with practice speeches. Stop it.

You know these people. You've worked with them. You have a good relationship.

This ain't nothin' but a thing.

And what's going on in the client's head? Think about it. Their assumption is that you're about to drop an important announcement on them. You're quitting business. You're raising your rates. You're dropping them as a client.

Whatever the case, they are curious. Especially since you insisted on a face-to-face meeting and set a time, etc. It's a bit more formal than your regular relationship.

So the good news is: Clients know you're meeting to raise rates. They are prepared for that. Don't be afraid of that. It's an unspoken agreement before you show up.

Walk in. Show up early. Get comfortable. Say hello. Exchange some pleasantries. So what can I do for you today?

And here's your pitch.

"We're moving to a new system. Our company is investing in products that allow us to provide a much higher level of support at a great price."

"We're moving to a system with three different options, depending on what your needs are."

"I'll start with the Silver Plan because it covers the fewest things. Everything else builds from that."

Discuss Silver. Move up to Gold. And for just a bit more, move up to Platinum.

"We think Platinum is your best bet because it gives you total coverage. We'll be managing everything."

"Over the last year, you spent about . . .. That's right in line with (plan) . . .."

Shut up.

Insert silence

Don't talk.

Don't fear the silence.

Answer all their questions. (Take notes for your next meeting. You might even compile an FAQ.)

Ask for the Sale

Don't leave it hanging.

"I'd like to sign you up for (Platinum). We can get started today."

Setup Fees

There are setup fees. Here's the lowdown:

You should charge a setup fee. There's value to what you're doing. And if you are paying for Kaseya, ConnectWise, Level Platforms, Autotask, Exchange Defender, Zenith, etc. you have overhead. It costs money to do what you're doing to do.

Even if you haven't bought the tools yet (future topic), you'll have the expense of setting up SBS or Server monitoring by other means.

At the same time, the setup fee can be flexible. Some people won't make a deal until you give back something. Anything. A free pen. A shiny penny. The money is irrelevant. They pride themselves on always getting a deal. They ask for a little something off when they go to the grocery store. They can't help themselves.

For argument's sake, I'll assume your setup fee is 50% of the monthly fee. Could be 100%.

You can waive this for any reason that pops into your head. Or you can round it down. Or use it to provide complete services until the end of the current month.

If it's early in the month, or mid-month, and it's an average client, by all means collect that setup fee.

If a client has been a pain in the neck, refused to sign, then changed their mind: Full setup fee, no questions asked.

If they sign on the third day of the month, ding the MSA for a full month and waive the setup fee.

You get the picture. Just one more variable.

One More Thing

There's just one more thing to tell the client: In the new system, all of these plans are pre-paid. So we can put this on a credit card each month, or you can prepay for three months in advance by check. The choice is yours.

Don't argue with me on this. See earlier discussions of cash flow. Also see the cable bill, phone bill, copy machine bill, rent, electrical, insurance, alarm company, etc. We live in a world where that's how it's done. You're just catching up with the 21st Century. Welcome aboard.


Finish the Meeting

Okay. So at the end of the meeting you should have a signed agreement. Sign two copies, one for each of you. Calculate the setup fees and monthly fees.

Don't forget the credit card authorization if they're paying by credit card.

If they're paying by check you'll collect a check for three months.

Thank them profusely. Assure the client that they will be very happy and that you're going to take care of them better than they ever imagined. Because that's true.

IF, for whatever reason, you leave without a signed agreement, set a date certain when you will find out what they plan to do. Make it soon -- no more than two weeks.

They have to make a decision. If you find yourself calling and writing and not getting a response, then you'll have to write a goodbye letter. Be professional and respectful. Invite them back when they decide they need professional technical assitance.

"No Decision" is not an option.
Next time we'll talk about all the paperwork you have to do after the sale.

For now, enjoy your victories!

Tuesday, September 11, 2007

Mike Writes about Right-Sizing

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Mike asks some great questions in response to the Sept. 8th posting.

His concerns:

1) Clients are very small (Under $1,000/year).

2) Client typical setup is under 10 seats; XP pro; peer to peer; desktop acting as a server; no backup; no RAID; no redunant power supplies; web and email hosted outside.

3) Stepping up to SBS means more headaches and more expenses. "My perception is that Managed Services is glorified babysistting."


Mike, I guess the first thing I'd say is what I say in my presentations:

It's just as easy to fall in love with a rich man as a poor man.

Which is to say: You'll work just as hard getting a technology-dependent client as a break/fix client who places no real value on technology.

Both types of clients will exist forever. They both need some level of technical support. Remember: no matter what a client looks like from a distance, there are those who spend money and those who don't. There are those who need serious technical support and those who don't.

As of December 31st of last year, our average client had Twelve employees with perhaps 14 total machines (including laptops) and one server. They had a domain with SBS, a tape backup, and at least email onsite. Perhaps a web server onsite as well.

So, you see, one can easily build a business with small clients who only have twelve or fewer seats.

Whatever group you can come up with, you'll find people who rely on technology and are willing to invest in it.
In the same group you'll find people who don't see the point of technology and are unwilling to invest in it.

This is true of any group: doctors, lawyers, accountants, associations, etc.

Here's a perfect illustration:

The first flat-fee managed service contract we signed was to a client with nine desktops and one server. $6,000/year.

Then just last friday I talked to someone who has ten desktops and a Small Biz Server. He said the he didn't care if his server was down for a day or two. He wants to make sure his documents are backed up, but if he lost a few, that would be okay.

What could I say to him? "Well, if you don't care about your company's technology, I'm sure not going to."

The first person is still a client. The second one isn't.


My assumption on this blog is always that the reader wishes to grow a business. Grow the number of clients. Grow the income per client. Grow the profit. Grow in professionalism. Grow in skill and ability. Grow to the next level, whatever that is.

I know that's not the case for every SMB consultant.

My opinions may or may not be useful to anyone else. They are intended for an audience that wants to grow a business enough to become wealthy owning a technology consulting company.


I also get a sense that you are not personally sold on the need for (and value of) managed services.

I don't over-sell clients and I don't think I've ever met a decent SMB consultant who does.

Just because someone moves from peer-to-peer to server and domain doesn't mean they've been sold more than they need.

In fact, it's far more common for consultants to under-sell: they assume the client doesn't want to spend money. So they don't sell a server when the client needs one. They let their clients hang on to old technology and under-powered machines that cost more than they save. They leave clients running to fifteen different desktops every time a password changes rather than having a simple domain controller.


So back to the question at hand: how do you get over the hump?

Start by reading the book The Dip by Seth Godin:

You're not going over a hump: you're going through a dip!

Recipe for Success
Honest to goodness, here's what I'd do.

First, define what your minimal client looks like.

Second, set your intentions. Convince yourself that you don't have to take every dollar that comes your way.

And turn down every client opportunity that doesn't fit your profile.

You won't be out any money because you'll still get all the money you're getting today.

. . .

But the day that you find a client who meets your criteria -- poof -- you've stepped up. And you have your first managed service client.

It's hard to turn away that money, but the truth is that clients like the ones you have are keeping you down. They're keeping you very busy helping people who could be served perfectly by Best Buy or Fry's.

If you want to get over the hump, simply start looking for clients who are interested and willing to get a server.

The magic question for many people is security. Sell the server as a secure place to store all their data, back it up from one location, and manage all users.

But you can't take on a bunch more clients who look just like your old clients. They're keeping you out of the game!

Monday, September 10, 2007

Managed Services in a Month - Part Five

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Where we've been:

Topic One: Start making a plan
Topic Two: Create a three-tiered pricing structure
Topic Three: Weed your client garden
Topic Four: Finish the plan
Topic Five: Write a service agreement and have it reviewed by an attorney
Topic Six: Print up your new pricing plan

And now (perhaps the most important topic of all):

Topic Seven: Client Sit-Downs

If you're not a Soprano's fan, don't visit

Satriale's Pork Store.

That's one of the places Tony would go to have a sit-down. He'd draw a line and after that the relationship was refreshed and re-defined going forward.

Here's the lowdown. You have to have a sit-down with your clients. That means face to face. That means in person. That means you and not an employee.

You started this relationship. You're the contact, and the personality, and the company. You're the beginning and then end of the business.

If you want to lose a client for sure, email your new pricing sheet and wait for an answer. [Insert slow hold music here.]

Here's an overview of the sit-down process:
  • Gather your data.
  • Prep your binders.
  • You'll meet with each of your clients.
  • You'll have them pick one of the new plans.
  • You'll drop any client who does not sign a new agreement.

Stop: I'm serious. You honestly and sincerely, deep in your heart have to be ready to walk away.

Look at what you've been through already: You've defined your ideal client, and your pricing structure, and your service agreement. You've got an awesome 3-tiered price sheet. You know what you want and you've defined it quantitatively. You've listed services and put a price on them.

You're 100% ready to go.

Now you just have to have the guts to walk away.

Important negotiation tip: If you're not willing to walk away, you will lose (or pay too much, or get too little).

So, we're going to help you get to the point where you have the self-confidence, experience, and gumption to walk away.

Sort Your Clients
You already did this: In Part Three you made three sets of lists. We'll call them Platinum, Gold, and Silver. Now try to guess which agreement each client will sign, based on past performance.

The result is: a new list with three columns. The columns are "Most Likely to Sign Silver," "Most Likely to Sign Gold," and "Most Likely to Sign Platinum."

Gather Data, Prep Your Binders

For each client, you're going to show up with a nice presentation folder. If you already have them, great. If not, scoot over to Staples and get some. I wouldn't have any printed just for this. But whatever you want to do is fine.

At a minimum, show up with a nice presentation binder with your business on the front and your card inside.

Remember that report on labor sales per client? You're going to run that report for the last 12 full months. Print up two copies so you can go over this with the client. The report shows all the money this client has paid you for labor over the last 12 full months.

Note: If the client basically spends nothing, skip this report. We went to one client who had spent about $1,000 over the last year. We believed 99% that they would drop, but we wanted to let them make the decision. They signed for $500/month. That's $6,000/year. Happy to have them onboard!

Also in this binder, you will put two copies of your newly-minted Service Agreement, two copies of the price list, and one copy of your credit card agreement for recurring billing. You'll need this if they pay by credit card.

That's it. No marketing material (they know who you are).

Clean and simple.

Make Appointments

The order in which you talk to your clients is extremely important. You've got your three tiers: Most Likely Platinum, ML Gold, ML Silver.

You're going to start at the low end (most likely Silver) for several reasons.

First, you believe many of these people won't sign at all.

Second, these people are really the least likely to sign.

Third, if they sign, they'll probably sign Silver.

Here's the strategy: You haven't pitched your awesome new plan before. So you're going to start with the least likely clients. You're going to explain your model, and the features of each level. And you're going to say the words "We think Platinum is best for you."

And you're going to listen. You're going to write down every question, every objection, and every time they say "That's a good point."

In other words, the strategy is that these silver suspects are going to teach you how to sell this product to the next level of clients. You'll learn all the sticking points and questions. And you'll develop answers.

Along the way, you'll develop absolute confidence in your new system. In justifying it to everyone else, you'll justify it to yourself. You'll drink as much kool-aid as you serve up to others.

For now, only make appointments with Silver Suspects. You'll schedule Gold Suspects after you're about half done with the Silver.

Important safety tip: You have to make these appointments!!! They cannot be over the phone. You can't email the price list.

This is a sit-down.

Your business will come to a stop for 15-30 minutes while you sit across the table from your client and talk about how your refreshed relationship is going to work. Similarly, your client's business will come to a stop for 15-30 minutes. You'll force them to stop, sit down, and go over this.

Don't get discouraged if clients don't jump at the opportunity to meet with you. They're busy and you're just another vendor. Plus, they might suspect bad news or a price increase. But mostly they're just busy.

Don't meet with the office manager or your primary contact unless that person has the ability to sign a contract.

Don't meet with anyone who can't say yes.

Lots of people can say no. But only one or two people can say yes.

Don't meet with anyone who can't say yes.

Part of redefining this relationship is that you have to have an owner-to-owner discussion. You're going to tell them what the new system is and they're going to pick a plan.

If you give your pitch to anyone who can't say yes, they're going to interpret your offering, and your pricing, and your past relationship. And even if they're an advocate, they may not convince "the powers that be" to sign your deal.

Don't meet with anyone who can't say yes.

If you show up and the person who can say yes is not there, be polite and ask to reschedule. Don't go through your pitch.

Don't meet with anyone who can't say yes.

[Can I stop kicking the dead horse yet? Don't meet with anyone who can't say yes.]

Prepare for your meeting

You need just a few more things before you show up for your meeting. This is extremely important if you are not a one-person shop.

Before you show up to any appointment, make some client-specific notes. You already have the money printout. Now you need to make sure you have information on the following:

1) Are there any outstanding billing issues? Did the client recently question an invoice, overpay something, underpay something, etc. Anything. Just be aware.

2) Are there any recent technical issues that are "sticky?" In other words, are you walking into a sales meeting while the server's down and email's not flowing? That would suck. Similarly, was there a recent issue where your team did a spectacular job?

3) Are there any other client relationship issues outstanding that you should be aware of? If you go into the first five sit-downs and all five clients say that response time is really suffering, you better pay attention and take that back to the shop for fixing.

4) Are there any technical requirements that must be met before the client can get on a plan? For example, one of the first clients we signed had resisted paying good money for a professional backup system. They were using plain old NT Backup. So, one of our conditions was that they needed to buy Backup Exec, which they did!

5) Was there a recent incident that would have been covered? This is particularly good for the Platinum Plan. That 10-hour ordeal with the ISP when they changed your IPs? That would have been covered. Cha-ching.

All these things can be distractions. You're going into a high-level meeting with someone who can say Yes. And that person has a right to bring up anything and everything related to your relationship going forward (or backward). Don't get surprised. Don't get hijacked.

After all, you're going to start out by saying "I trust everything's going smoothly." You want to do whatever you can to make the answer "Oh, yes, we're extremely happy with the service."


To Be Continued.

Sorry this topic is so long. But it's super important. This is where it all comes together for your goal: Sign at least one agreement this month!


Part Six will get right to the actual meeting. Aren't you tingling all over?

Saturday, September 08, 2007

Managed Services in a Month - Part Four

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Context: This post follows on the previous four.
Start at and work your way forword from there.

Note: The response to this series has been overwhelming. Lots of people have emailed me. They're taking the challenge.

Don't forget to email me when you sign your first deal!


Today's Topics:

- Write a service agreement and have it reviewed by an attorney

- Print up your new pricing plan

Topic Five: Write a Service Agreement and Have It Reviewed By An Attorney

Oddly enough, I'm not going to spend a long time on your service agreement.

I could go on and on about why you need to do this, how important it is, and why you shouldn't wait.

But way back in the first post in this series, I promised to get to the point. So here it is.

The point is: Just do this. Don't delay. And don't even begin to form an excuse.

If you want to be a Managed Services Provider, you need a service agreement.

Thousands of businesses do this every day. It's the easiest thing in the world. Just do it.


Your life will be a lot easier if you don't start from scratch. Use a template. There are plenty around. Some managed services software vendors can give you a sample. (Of course, early on you were instructed to buy my book or Erick Simpson's book, so you've got templates there as well). I think there's even one somewhere on the Microsoft site.

But the "secret sauce" isn't in the template. If there's a secret sauce, it's in your intimate understanding of your business, your clients, your rates, your policies, and how they all work together. No one but you can outline your service agreement.

Notes on Lawyers:

Yes, you have to use a lawyer.

If the lawyer says she won't start with your draft, but wants to work from scratch, find another lawyer. 99.9% of all lawyers now subscribe to services that provide them with generic forms to customize. Starting with your draft isn't dramatically different from this.

In the case of drawing up a service agreement, a good lawyer will take a "template" and then interview you and find out what's important to your business and how it should be incorporated in your agreement.


Review and review and review.

Remember a couple of assignments back when I said you needed to carry a pencil and paper? Well, it should be full of notes related to pricing, plans, clients, and everything else.

Put it all together the best you can. But don't put it off until it's perfect. It will never be perfect. Finish it, take it to a lawyer, and get it approved for consumption. Then print it up and get ready for client interviews (next lesson).



Yes. Lawyers cost money. Hundreds of dollars per hour.

Guess what? Technical consultants cost money. Hundreds of dollars per hour.

You are going to have to lay out some money here. But think about it this way: ONE client will pay for your lawyer to review this service agreement. And if she finds that you have two contradicting sections, or tried to enforce something that's not allowed in your state? Well, they it's all money well spent.

[ Insert whatever justification you need here. ]


Topic Six: Print Up Your New Pricing Plan

We talked before about your price list. See Part Two in this series.

There you developed your now-famous three-tiered pricing structure.

Once you've absolutely settled on what you're doing to do with pricing and the three tiers, then you're ready to print it up, hand it to your staff, and get ready to show it to your clients.

Legal note: Make sure your agreement can be amended by a 30 day notice from you regarding pricing and what's included. You'll actually attach this 3-tiered pricing handout as the final page of your agreement.

Make it nice and professional. If you're not good with Word tables, find someone who is.

Here are a few notes on pricing:

First, state your non-contract rate (e.g., $150/hour standard; $300/hr after 5PM or on weekends). This makes your labor rate under the service agreement look better (e.g., $135/hr; $270/hr).

Second, have as few rates as possible. For example, don't have different rates for after hours support, weekend support, emergency support, and holiday support. Make regular support one rate and everything else the other rate. For example, $135 and $270.

Your little one-page handout will have a huge number of variables. Don't make pricing complicated.

Third, make sure the bottom rate (the most tempting) is pretty bare bones. For example, monitor and patch the server, but don't provide a kitchen sink solution for $500.

Note on client tendencies: Clients generally don't see desktops as a "problem" area. They want to cover servers because you've told them how important the servers are. And they want to get rid of all the hassles with spam and ISPs and network crap. Don't offer a Servers and Network only option. It could be a nightmare and will only encourage them to try to manage the desktops themselves.

We recommend that you do basic server support as tier one. Do server and desktops as tier two, and do all-you-can-eat as tier three.

It's a lot like cable TV. Basic cable is $12.95 and no one buys it. You want HBO, but you can't get basic+HBO. You have to buy Standard Cable, which is $49.95 and then you can add HBO. If a client wants the network and printers covered, they can't get that as an add-on to server support. You'll sell them hours, of course, but it's not included.

In our case, servers only is $500/month. If they go to servers and desktops, the server becomes $350/month and desktops are $45 each. So, if they've got ten desktops, they've gone from $500/mo to $800/mo. Moving from there to Platinum is really just another $150/mo (it's $60/desktop). Platinum for one server and ten desktops would be $950/month. That's $11,400/year.

Not bad. And the more automated you are, the more profitable you are.

With a structure along these lines, you might never sell a gold contract: only silver and Platinum!


Why not go with a Cafeteria Plan?

We started out this way. We always signed contracts, but slowly worked our way into flat-rate products. Remote monitoring, etc. The problem is: Overwhelmingly, clients want to cover one server and not the other. If given a choice, they don't want to cover workstations. But they do like the idea of never having to deal with the ISP again. So they want a donut. And they don't want to cover all that stuff in the middle where all the users live.

If you only cover a single server, you need to be ruthless about hourly charges. You will find yourself arguing about what's covered and what's not. And that's not good for the relationship.

Even on the Silver Plan, you have to cover all servers.
On Gold and Platinum, you have to cover all workstations.

Clients who pick and choose will pick the machines that are troublesome (they're not stupid). So you'll be stuck giving flat-rate support to a bunch of high-maintenance machines.

The system works because it's based on the average cost to maintain a bunch of machines.

If the client gets to pick a handful of machines to cover, you could probably double your monthly rate and still not make money on those machines.

Just my opinion. Remember when I said I'm not going to try to be balanced here? Trust me and just don't do a cafeteria plan.



With luck you have an attorney with a quick turn-around, and who won't send you an invoice for replying to your email. "Not done yet. Please remit $75 to cover the cost of this email."

Next time we're going to cover your sit-down strategy with each of your clients. So after you send the service agreement off to the attorney, and after you've printed your new price sheets, gather the info you'll need for next time:
  • Client spending reports from Part One
  • Spreadsheet you created from Part Three (guesses about where clients will land)


You're THIS close to your first Managed Service Agreement.

But there's a strategy. You can't just show up with one of those goofy oversized pens and sign the big deal.

Next time we'll walk through the sit-down strategy.

I can hardly wait!

Thursday, September 06, 2007

Updates: Webinar / Pre-Day / Hotel discount for SMB Nation

I don't normall cross-post to my email list and blog, but I have a few annoucements regarding SMB Nation that need some air time.

If you're looking for a room at a discount, see below.

First, I have an event to announce.

I'm going to be a guest on Harry Brelsford's "First Call" webinar. Stats:

September 13th
9:00 AM PST

For information and to register, go to:

We'll talk about what we're up to, and what we'll be presenting at the big SMB Nation Pre-Day event.

Register today!


Second, I'm sorry, but you can't pre-order the new Project Binder book before it's launched. I appreciate the blind faith support. But this thing will be launched on September 28th. You can order online -- and download it -- that day. But not today. And you can't bribe me.

But I'm flattered.

Stay tuned. The days are growing shorter.


If you need a hotel for SMB Nation, I've got your number.

Krista Joyce, Director of Sales for the Redmond Inn sent me an email. She said people were calling her asking for Karl's SMB Information Fest special price. Trouble is, there is no such thing.

Where do you people come up with this?

Anyway, since the Marriott is full and you gotta stay somewhere, here's a deal at the Redmond Inn.

From Krista's email:

I believe Marriott was quoting $119.00 plus tax per night. I would be happy to offer $99.00 plus tax, that's approximately 15% off Marriott's rate! Plus we also offer all of the bells & whistles your Guests will love… complimentary breakfast, internet, parking and hotel shuttle just to name the most popular.

If you could kindly post our toll free reservation number (800) 634 -8080 for telephone reservations or Guest's can also make their reservations on our website @ . Click on our reservations page first and to access our special rate; simply type in PRESMB in the corporate access code text box at the bottom of the page.

And, hey: If you do stay at the Redmond Inn, thank Krista for being a real entrepreneur who tracked the down and put together this deal!

Disclaimer: I'm not making any money off this. I've never met her. She didn't even buy book from me. I'm just passing along a deal for homeless SMB Nation types.


Anyway, SMB Nation is getting closer all the time.

Please join us and have a great time.

It's the last big bash of the year, and the granddaddy of all SMB events.



- Register for "First Call" with Harry B. September 13th ; 9:00 AM PST ;

- No, you can't buy the Project Binder yet

- If you need a hotel for SMB Nation, check out and use the code PRESMB.

Managed Services in a Month - Part Three

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Context: This post follows on the previous three.
Start at and work your way forword from there.

Today's Topics: Weed Your Client Garden and Finish The Plan

See also the post at

Where we've been:
- Topic One: Start making a plan
Sub One: Rules / Policies
Sub Two: Know What You Know
- Topic Two: Create a three-tiered pricing structure

Now, here's Topic Three: Weed Your Client Garden.

That means you're going to draw some lines, set some rules, and probably drop a few clients.

It's possible that you won't drop any clients. But the process is still useful because you need to know that you want to keep those clients!

Revisit the Plan

We started out by starting to work on a plan. Since then you've learned a lot about where your money comes from, the services you offer, and what you want your clients to look like.

I hope by now you've finalized that Pricing Sheet with the three tiers. Get some good 24 lb. paper and print it in color. Eventually, when you're totally convinced that it's set in stone (for the next 12 months anyway), you can print some at Vista Print on nice paper.

Your pricing sheet is really a summary of what you offer and what it costs.

So now let's take our first stab at guessing what your clients will do.

First, do you have any client that you just plain want to get rid of? Maybe they don't pay on time. Or every little visit turns into a major (unprofitable) project. Or they're not nice to work with.

Whatever. That's easy. Write a letter and tell them that you can't provide them technical support anymore. If you feel you can hand them off to another consultant with a good conscience, do so.

Second, make three sets of lists. You guessed it: Platinum, Gold, and Silver. Now try to guess which agreement each client will sign, based on past performance.

Don't forget: Past performance is no guarantee of future results.

We were pleasantly surprised at some of the clients who signed when we thought they'd leave. But, hey: if they're willing to play by the rules you set out on your price sheet, then they're certainly welcome, right?

Keep this list. We'll come back to it in a couple of days. For now, just try to firm up who you think will sign at each level, and the probability they they will do so.

Now rethink that plan again. Does it feel right? Have you defined the clients you want to keep, and built a system around them? Is the pricing good?

Note: If you've given any passing thought to raising your rates in the last year, that's a good sign that it's over-due. So you need to raise two rates. The non-contract rate and the preferred rate your clients get when they sign a service agreement with you. Since no one will ever be charged the non-contract rate, make it whatever you want. If the norm in your city is $125, make it $150. Then you can make the preferred rate $135.

If you think the clients will resist, ASK THEM. Don't have both sides of the conversation and guess what your clients will think: Let them participate in their half of the conversation.

Anyway, set your rates.

Now you've defined who you are, what you offer, who your clients are, the services you sell, and the prices you'll charge.

And that, in a nutshell, is what goes into your service agreement!

[ Note on Poverty ]

You don't need every penny. You just don't. Very small consultants start out taking every dollar and every job they stumble across. But you don't have to stay that way.

Maintaining any client has overhead. It takes time to send out invoices. And when a critical system you're responsible for goes down, you need to attend to it, even if the client buys $500 worth of labor in a year.

As you move forward with managed services, you will have scheduled work (what a concept) and big-paying clients who rely on you. Don't put yourself in the position of having to leave a $1,000/month client to run after a $500/year client because something broke.

At the same time, you can't drop this guy when he calls and says the server's smoking. You need to pass him off before that, so that when he needs help, he has someone to call.

Remember in Part One when we ran the reports (see section called Know What You Know About What You Sell)? Go get those reports.

On the list of clients sorted by labor sales/year, draw a line at $500/year. Draw another line at $1,000/year. How many clients are below $500? How many are below $1,000?

More importantly, how much money is above each of these lines? That is, how many tens of thousands of dollars come from clients that are worth more than $500 or $1,000 per year?

Most consultants have a few anchor clients and lots of smaller clients. If you dropped all the tiny clients, you would have a lot of hours to sell to your higher-end clients.

Know What You Know About What You Sell. You don't need every penny that walks in the door.

[ / note on poverty ]

Now, Topic Four: Finish The Plan!

Finishing the plan is simple: Tell someone about it.

Start with one of your technicians. Or your spouse. Or a favored client. Or another consultant.

Explain what you want to do. Sounds simple. Trust me, it's not.

Why do you want to make these changes? How does the client benefit? Why can't I get free network support on the Gold plan? Why does everyone have to prepay? Why are prices going up? Do you have to install something on every computer? Is this a promise about what I'll pay each month?

I hope you get the picture.

You've been mostly living in your own head about this project. Telling someone else makes it more real, and exposes you to all the questions you're going to get. It actively pulls all these pieces together at one time and forces you to see the big picture.

Plus, as you may know, teaching someone else is the best way to make sure you have mastery of a subject. Plus, when you answer a bunch of questions from someone who's not inside your head, they'll point out (perceived?) inconsistencies you'll need to address.

When you master the understanding of your new Managed Services offering, then you'll be able to whip out a service agreement in no time at all.

And that will be our next topic.

Homework: If you haven't somehow acquired a sample Service Agreement or two, your work will be a lot harder. I'm not telling you to go buy my book. But get something.

If you've been following this series, then things are moving at a nice pace. Keep it up. Don't Stop.

If you have to write a service agreement from scratch, that will cause a major delay in your progress.

Remember, you're going to sign at least one agreement by the end of September. With luck you'll sign five or ten!

But not if you don't have an agreement.

So you go do your homework and get ready for Part Four in the series.

Wednesday, September 05, 2007

We Get Email

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

We Get Email

Michael asks two questions by email. NOTE: I mentioned that you need to carry a pad of paper and a pencil with you while you go through this. Add these thoughts to that tablet and see how it fits with your organization.

    Question 1. In part two you want us to compile a list of all the services we provide. Are you meaning to list only the services that would be part of managed services?

    Which then begs the question what items should be part of the managed services? . . . But surely there are some things that would be excluded? . . . What happens when a disaster recovery is needed, is this included?

Well, primarily, you need to list all the services you would be providing under an MSA (managed service agreement). But, as you suggest, how do you know what that is until you've made the list?

I would start by listing everything you do on a regular basis. You can make three lists: Definitely on MSA, definitely not on MSA, and maybe on MSA. If you do a special kind of security audit that costs a lot of money, for example, put that on the definitely not list. But if you also have the ability to run a quick checkup that costs you little or nothing and provides some value to the client, you might throw that in once a year.

The important part is to list anything of value to the client. Don't throw in lots of stuff they don't care about. You're primarily looking at

- Maintenance
- Patch management
- Monitoring
- Fixing software when it breaks

Think about the 90% of what you do every day for 90% of your clients. That probably does include setting up a new outlook signature, but probably doesn't include installing a new network printer for everyone in the office.

Remember: you want to keep this to a one-page table.

And you generally want to throw in as much value as possible.

Important safety tip: If there's something you can throw in that costs you little or nothing, makes the overall maintenance easier, and provides value to the client -- do it. For example, our Platinum clients can have Exchange Defender if they want it. Cheap to us, provides spam filtering and caching of email when the ISP goes offline.

As for Disaster Recovery:

It's all up to you. Hardware failures are not included. If we're maintaining a system, and a disaster occurs, the part that's related to getting the software and operating system back in business is covered. So, for example, replacing a drive controller is not covered. But all work 8AM - 5PM to restore data and even reinstall the operating system is covered. If the client says to work all night, that's all at the after hours rate. For people who can wait an extra day to get back in business, the incident could be mostly covered. If they're in a hurry, it could be very expensive.

Also: Only Platinum Plan includes onsite labor. Silver and Gold are remote only. So disaster recovery onsite is all billable.

Your mileage may vary.


    Question 2. How do you position the changes to clients who are already on a semi-managed service package? i.e: How do I tell them that they now need to pay $1000/mo, when they are paying $500/mo for exactly the same thing?

A future topic will deal with your Client "Sit-Downs." But here are some thoughts for now.

We actually had a situation similar to what you are talking about. We started doing flat-fee services many years ago by offering remote monitoring for $125/month per server. We have also done a monthly maintenance for clients for more than ten years. So that's one to two hours per month per server ($135-270 for clients under service agreement).

So the average small client is paying about $300/month for monitoring and monthly maintenance.

Our silver plan is $500/month and is our entry level plan. It includes daily monitoring, monthly maintenance, and two hours of remote labor. So the sell is pretty easy.

I suspect your $1,000/month client will be at a level other than Silver. OR your rates are higher than mine.

In Part Five we'll talk about putting clients into the right plans and how you organize your pitch.

But also consider what your business looks like and what you're leaving behind. It is very likely that you have a different agreement (written or not) with each client. Some get one set of services and some get another. Some are at one rate, some at another. Even your "semi-managed services" are probably different for each.

Life will be much easier for you when there are three boxes and everyone fits in a box. It will be easier to explain to clients, technicians, and sales people. Even if it's just you right now, being able to have three nice categories will make growth that much easier.

Hope that helps!

Tuesday, September 04, 2007

Managed Services in a Month - Part Two

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Context: This post follows on the previous two. See and

Today's Topic: Create a three-tiered pricing structure

Last time we got the project started, presented some financial policies you'll use going forward, and generated some reports about where your money comes from.

Today we're going to create your three-tiered pricing structure.

This is not particularly difficult, but it is particularly important. And it's important for three reasons.

First, you will use it to define what your company sells. Prior to this it is likely that you simply sold whatever you wanted to sell. Well, from now on you're going to sell things that make sense, reflect what your company does, and make money.

Second, you will use this price structure in the sales process. You'll be able to hand it to a client and say "Pick One." Whichever one they pick, you'll make money. Better still, once a client picks one, you'll sign a service agreement and move them to prepaid billing status.

Third, you will use this pricing structure to organize the rest of your transition to becoming a Managed Services Provider. We literally have this posted on the wall in from of our desks. It guides invoicing decisions (is this covered labor?). It helps clients make decisions (e.g., If we do the work remotely, it's covered. If we're on site, we charge by the hour.). And so forth.

Get Started

Okay, so how do you put together your three-tiered structure?

First, you have to have names. Stupid as it sounds, you gotta have something at the top of each column. We use Platinum, Gold, and Silver. You could use Gold, Silver, Bronze. Or, for that matter, Parka, Coat, Sweater.

Why three tiers? I don't know. There's something magical and simple about three options. Some people want the "best," whatever it is. Some want the cheapest. People don't like to be sold, but they love to shop. With three tiers they can pick the one they want. Depending on how you structure it, the option they pick will reflect where they put the focus on technical support.

Truth is, we have a fourth column called Pyrite -- fool's gold. Pyrite lists our services without a service agreement: Much higher hourly rate. No monitoring, no on site support, no after hours support, no patching, etc. In fact, Pyrite is really just break/fix work at the highest price and is not really an option.

The best way to get started is to list all the services you provide. I think it's best to categorize these in terms of
- services on the server/domain
- services on the desktop or workstation
- other services (network, printers, ISP, etc.)

In our case, Silver covers servers only. Gold covers servers and workstations. Platinum covers everything we could throw in the mix.

So list all the services you provide. Remote support, remote monitoring, patch management, etc.

Don't worry that you don't have six pages of items. In fact, it should fit on one page! Your entire offerings and pricing list should be one page. One sided.

Our list is very simple. We list on site labor, remote labor, after-hours labor, and emergency labor. After that, it's what we do on servers, what we do on desktops, and what we do on the network.

You already have some tools for delivering managed services. At a minimum, you have SBS reporting. You might have free tools like Servers Alive. You might be using SCE and MOM from Microsoft. Or you may have invested in Zenith Infotech, Kaseya, or LPI.

Whatever you have, put it down as remote monitoring and patch management. You may wish to make these two separate categories.

If you have other services that you offer to your clients already, consider throwing them into the highest-level offering. That's what we've done with Exchange Defender. Platinum level clients can get this for free. They don't all want to, but it allows us to point to that add-on as extra value for their money.

Sort It Out

Now you have a list of the services you offer. And you have the headings for three columns. You know the rest. List your services on the left hand side of the page and put check marks or stars for the service offerings that include these services.

You may need to go through this several times. There's no magic here. You might need to fine-tune a bit.

Now consider what it costs to deliver these services. Remember that you're going to make more money providing remote support than on site. This is particularly true if you don't charge for travel. Throwing unbillable half-hour blocks of driving time into your day can be very expensive. What can you put into the Silver and Gold packages that's remote-only and as automated as possible?

Also consider what you need to charge for the Platinum package and how close you can get to "all you can eat" or "everything's included."

Remember that there will always be additional labor. Depending on how your structure your deals, you might selling twenty or thirty percent over the base of the flat-fee agreement. With a handful of clients you might double the base. For now, and for sales purposes, plan on 25%. So an agreement that has a flat fee component of $10,000 might actually bring in about $12,500 in labor.

Break Out the Excel

In both my Service Agreements book you'll find spreadsheets for figuring out what you'll get from various pricing structures. You'll find the Excel files on the CD.

Again, no brain surgery here. You simply enter the following variables:

- Client name
- Number of Servers
- Number of Desktops/Laptops
- Price you will charge per server
- Price you will charge per desktop

Run the numbers. Adjust price per device until you get in the ballpark of what clients are paying now.

From our last session, you have printouts of what each client paid for labor in the last year.

One lesson I learned after years of doing this: Don't go for the middle or lower end. Don't try to make your product cheap in order to keep these people. Set your sites on the top tier clients. You want to keep your best clients. And if you're happy with the money you get from them, then gear the pricing structure accordingly.

You might lose some lower-end clients, but you were going to do that anyway. It's more important to focus on the future: Your next ten new clients are going to be willing to buy a package that looks like your current top-tier clients.

Anyway, play with Excel. Noodle it one way and another. Play.

But don't use Excel as an excuse to not move forward! Pick a price and write it down.

You probably don't work in Sacramento, so my numbers are irrelevant. But just so you have some ballpark, our Platinum plan is $60 per desktop and $350 per server per month. We also have all the right tools (Autotask, Zenith Infotech). If you have a more manual process, you will need to charge more money.

Finalize Your Pricing

Print it up. Talk to a couple of your best clients. Talk to staff. Talk to other consultants (buy them lunch).

This is an iterative process. You're going to quickly cycle through what you've done so far. Next we'll look at weeding your garden. Then tick through it all again. Don't dawdle. Don't put it off. Just keep moving forward.

Ta Dah! You have a new pricing structure for your business. Congratulations. you also have a succinct description of what you offer and what it costs. Good job.


Next time we'll talk about weeding your client garden. That means coming to terms with the fact that you're going to get rid of some clients.

Remember, last time we adopted the rule that all clients must sign service agreements. So that means, very simply, that clients who don't/won't sign an agreement aren't your client any more.

Think about that. You don't need to take action today.

Instead, get to work building your pricing table.

Monday, September 03, 2007

Response re: Goodbye

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at ]

Luis asked some great questions about communications during the transition process. In particular, how do you say goodbye.

First, the transition process.

We have a monthly newsletter for our clients. We put a brief note in there.

Immediately, we started requiring prepayment for hardware, software, etc. No one batted an eye at this. It is very reasonable and that's just the way it is with hardware and software.

The transition to prepayment of the service agreement was a little different. When we wrote the new service agreements, we simply put those terms in there. When we wrote our new Price List ((((( Stay Tuned: This is Tomorrow's Topic ))))), we simply put an asterisk at the bottom that says all flat-fee monthly services must be paid by credit card monthly, or prepaid by check for three months.

After we did the client sit-down ((((( future topic ))))), we mention quite casually that we're moving to a prepayment model. One client -- ONE -- had a question about this.

I know this sounds like a broken record, but I'm not kidding you: People who you thought were just cheapos that will never sign end up signing for Platinum and prepaying for three months. Because you asked them to. They know you, they love you, they want your services. You decided to start treating your business professinally: Great. They're happy for you.

Second, the goodbye process.

How do you say goodbye?

We'll come back to this (future topic).

But, basically, you set a time limit for signing the new deal. If they hint that they don't want to sign the new deal, just very casually say "That's not a problem. We know this isn't for everyone. We work with the local SBS group and we can help you find a qualified technician who provides the kind of break/fix support you want."

Once they know you're serious about leaving, they'll seriously consider whether they want you to go.

If you don't hear back, you send the following letter:


Dear Mr. Schmoe,

As you know, we are reformulating our service to provide managed services to all of our clients.

We have enjoyed working with you in the last few months, but since you have decided not to sign an agreement with KPEnterprises for ongoing managed services, we are not be able to continue to provide service to your organization.

Per our existing service agreement, please let this letter serve as your thirty day notice that we are terminating the agreement between our companies. Of course we will address any outstanding issues, starting with the highest priority items.

We will also help you make a smooth transition to another service provider.

If we can help you find another technical support provider, we are happy to do so. I am closely linked to the local Small Business Server Technology Users Group in Sacramento, so I can help you find someone in short order.

It is very important that you find someone who is a Microsoft Certified Small Business Specialist.

Good luck in your future endeavors. If you ever decide that you would like to have ongoing support for your system, please don't hesitate to give us a call.

Thank you for your business. I wish you tremendous success in the future.

Super-Talented Consultant


We had one client we all agreed was marginal. Didn't seem interested. Cancelled the sit-down meeting twice. Never got back to us.

We sent this letter and he called the next day to say "Don't drop me. I'm signing the agreement now."


Thanks for the great questions. But don't get too far ahead. Finish the reports and research in Part One so you'll be ready for Part Two.

Tomorrow we tackle Creating a Three-Tiered Pricing Structure.