What was your biggest hurdle when starting out?
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Then there are deadbeat customers. They come in drives, hopping from one service provider to another. There is an entire parasitic ecosystem around this. Bad customers figure out that MSPs don't trade information about bad customers and so they go from one to another claiming that the last provider treated them badly when, in fact, they never paid for any service so nothing god was ever completed for them. They are just hoping that they will get enough service from you, before you demand that they pay you, to keep them afloat until they can find the next sucker company. It is amazing how common this is in the SMB market where often customers operate in an unscrupulous and "nothing to lose" state where they are unprofitable and survive only by breaking the law, skirting the law and taking advantage of others.
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And then there is accounts receivable.... even paying customers in the SMB often stall on payments . This can be NET90 or worse. We've had customers delay one to two years on payments and then dispute the bill trying to get a discount on services they no longer remember. This is really tough - they know that my not paying you that they have made you desperate for the money and they hope that they have you backed into a corner once you have waiting so long for it. Not only do they lower the cost of your services through the normal depreciation over time, but they then leverage that to hurt you more. The cost in man power to handle billing and billing disputes can be onerous. It is very easy for the man hours to bill a small client might be as much as one hour of admin time for every hour of working tech time!! That really makes you step back and look at the numbers. On scale, there is no way to be cheap because each tech requires an army of non-tech people behind them keeping the wheels turning, making sure that the money comes in..... eventually.
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And then there is the front loading of service costs. This is a big one that is hard to fix. Generally IT services are delivered before payment is received. Even great customers who pay on time generally pay in arrears. How does this affect you?
It means that you are stuck working for "free" for a month or two or you are stuck sending your techs out to work and then you have to pay them a month or two before you receive the money with which to pay them. That is hard.
This is one of the issues that gets you even when you are growing. Especially when you are growing - the more you grow the more that you need to onboard new customers, start new projects, setup new systems, get billing flowing, etc. IT work tends to be heavily front loaded so you tend to have a burst of tech time right up front and that is costly. You might find yourself in a position of needing new customers but being unable to afford to onboard new customers - a Catch22 scenario. You might need quite a bit of capital to be able to get new customers up and running.
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And that folks is a paraphrasing of my experiences as a small office home office business. Scott nails it perfectly. If it wasn't for the graphic/Web design side of things we might have closed up shop long ago, but instead we are in our 11th year.
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Sales killed me when I ran my own business. I couldn't sell my services at all. It's a skillset that I don't have. I should have waited longer before starting up so that I could have afforded to pay a salesperson.
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@alexntg said:
Sales killed me when I ran my own business. I couldn't sell my services at all. It's a skillset that I don't have. I should have waited longer before starting up so that I could have afforded to pay a salesperson.
Here here! I have the same issue.
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I know a lot of people who have hired salespeople and been burned by that approach too. IT services sales is extremely hard and to pay a salesperson on an ongoing basis would require a staff of several techs plus back office support just to make enough margin to cover the salespersons cost.
And you hope that they bring in the work. If they don't you are seriously screwed.
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Right now, I am freelancing. I know I am underselling myself but I am learning invaluable skills. Payment for my services is guaranteed, I get to work odd hours and maintain a full time job. I am fixing a host of different problems and gaining SMB experience fairly quickly.
I know Scott is going to say its difficult to sell yourself for more money after you freelance. The good thing about the site I am using is that most of my clients are outside the United States.
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@IRJ You are using one of those freelance service sites like Odesk or whatever?
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@scottalanmiller said:
@IRJ You are using one of those freelance service sites like Odesk or whatever?
yes.
