Most MSP businesses start out as one person deciding to do what they are currently employed to do under their own name, rather than continue to work for someone else. There are a lot of us who just don’t fit into the corporate culture and so we start our own business. As a one-person business though…are you really a business or are you just self-employed?
I don’t mean to imply that there’s anything wrong with being self-employed. I was for three years until I decided that if this is what I loved doing then I should make it into a business. Some people never make that decision, and that’s OK, too. But some people are stuck wanting to have a business but can’t figure out how to make that leap. This article is for you.
What is the definition of business anyway?
A business has certain characteristics that make it different from a job. (A sole-proprietorship is also a business and it often has employees, but that type of structure is not the focus of this article.)
- It is incorporated
- It employs people
- It can continue to exist beyond your lifetime
I started my MSP like a lot of people did. I started to gather up some side gigs supporting businesses after hours from my job supporting schools. Eventually, I decided to move the side gig work into being my main work. So I went to all of those businesses I was supporting and asked them to sign a contract so I could get enough stability to quit my job. And so they did, and I did. Now I owned my job.
I worked this job for about three years while I thought about what I was going to do. I was enjoying this job but it was, of course, a dead end. There was just me and nowhere to go except to keep doing what I was doing. I knew I wouldn’t be satisfied with this reality for much longer and so I decided to create a business from this job.
I’m ready to not be a tech anymore
Making the leap from tech job to tech business is largely a mental one. The point of the business is to give you someplace to grow in your career and to grow the business into something of value that you can later pass down or sell to fund your retirement.
The problem is that the first person hired is a 100 percent growth for your business. The second one is 50 percent. The third is 33 percent. The fourth is 25 percent. You probably got the point that it will get easier as you go but those first steps are really big ones. It’s like being at the gym and the coach has you starting on the three-foot box jump then work your way down! It’s backward from what would be ideal but that’s the way it is. Your business needs to be ready and your budget needs to be ready too.
As your business grows you will find yourself not being a tech anymore. Nor an engineer nor architect. You’ve chosen a career path that ends as a business owner and you need to embrace it.
Who should be your first hire?
There’s a lot of discussion on this topic. It’s reached the status of the “old quandary.” Your options are an admin person or a technical person. While there are good arguments on both sides I come down on the side of choosing a very good technical person as your first hire. Here’s why.
In starting your business you are playing all of the roles. Marketing, sales, technical, accounting, payroll, and more. The process of growing your business is all about giving away your job. Each person that you hire will take part of your job from you. Don’t worry about not having anything to do. Each of your other roles will naturally expand to fill the space. Been too busy to meet with your accountant monthly? Blog regularly? Engage in regular marketing activities? Now you’ll start to have time for those things. But only if there’s enough money coming in. You need the technical person generating additional income for the business.
My other reason for suggesting that you hire a technical person first is that you know how to do it. You know how to determine if a tech person is good. You know what their task list should be and you’re prepared to train that person. You can do all of these things because you are a tech. While it might be appealing to get rid of the admin work, you probably aren’t as prepared to interview and train that person because you don’t know the job well yourself yet.
Initially, both you and your new technical person will be doing the same work. You’ll be training this person to do the technical work just as you like it to be done. This person is going to be expensive because you need them to be capable of being you so you can bill clients for them in full confidence. Meanwhile, you are also working like crazy to bring in more clients so that both of you are busy billing full time.
Your second hire is probably another technical person for the exact same reasons. The company needs the money coming in. By this time you’re reaching exhaustion from being fully billable yourself while focusing on training this staff and bringing in new clients. Now your business should be able to afford to pay the three of you and start to off-load some of your workload. Hire a firm to help you with the bookkeeping and taxes and payroll. Offload some of your billable work to your new hires and keep the path toward giving away your job duties to others while bringing in the new business to support the expense.
It can be a roller coaster of paying others before paying yourself, but staying the course and compressing the timeframe to bring in that additional business is the key to success.
Owning a business: Avoid these pitfalls
I’ve seen MSPs struggle to get off the ground. The problems can seem like many but in my experience, these are the worst ones.
- Underqualified staff
- Debt
- High overhead
- Micromanagement
Hire people who can do the job, are going to stick around for a while, and who you can be proud of. Stay out of debt. Debt kills businesses! Remember that software will not set you free so don’t load up on “MSP solutions” until you really know what your business looks like when it has staff. Likewise, be frugal on your license purchases and keep your office costs as low as possible. No client is coming to see you so they really don’t care where you work from. You need as much of your income to go toward payroll as possible not over-head. Finally, avoid micromanaging your staff. Train them up to do it right then let them do the job. You’ve only got so many brain cycles and you need the ones you aren’t using doing technical work to focus on business growth. Because growth is ultimately what is going to get you past all of the initial hurdles so you can work your way down the growth ladder.
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