Read time: 9 mins

 

What are successful MSPs doing differently? See how we helped IT company ITSCO find out and stay competitive.

We talked to Mike Savino from ITSCO about his experience working with an MSP specialist accountant. These words are his and ours.

 

Read about:

• How we made ITSCO’s accounting as stress-free and organized as possible
• How automating processes helped CEO Mike get complete visibility on his performance
• Why it’s crucial to find people who already know and understand your tech stack
• Why other MSPs are using benchmarking to get ahead
• How you can get started with some basic benchmarking for free

 

“If you’re trying to scale your managed service company, very quickly you’re going to need better information. And you need a vendor that is going to look beyond just the accounting package and is really going to help you improve your accounting processes in total”

 

We met Mike Savino in a period of growth and change. His managed service business, ITSCO, had more than doubled in the space of 3 years, in both revenue and team. In his own words: “There was a lot of growth to digest and a lot of operations stuff to improve”.

Being a CPA with experience running several different businesses, Mike could see the business needed better processes to keep up the pace. ITSCO’s product catalog had exploded and, with an influx of new customers, invoices were becoming much more complicated. Up to this point, ITSCO’s internal controller had been managing all the transactions and had become burnt out with the speed of scale.

Mike knew:

• The industry was moving fast
• Other MSPs were using software they weren’t
• He was spending too much time in the financial administration
• He was lacking the financial information he needed to make decisions

Knowing ‘what got us here may not get us there’, Mike went Looking for a CPA who knew the industry and was referred to us by a friend.

 

“I found somebody that I felt was actually going to take ownership of understanding the business and the platforms we use to run our business”

 

Red Earth CPA is a cloud based accounting firm specializing in the back office of Managed Service Providers. Our tech stack is designed to give you a scalable back office so you can do what you do best: build your IT service business.

Our first priority with ITSCO was to get those back office systems up to speed. It’s hard to take advantage of growth opportunities in this industry if your financial data isn’t right or right in front of you. When it’s a dump of information and hard to decipher, it can be stressful and demotivating. The team at ITSCO were feeling it.

We needed to automate the processes that were slowing the team down and causing overwhelm.

We started by updating ITSCO from QuickBooks Desktop to QuickBooks Online, for greater cloud access to data. We introduced Mike to Bill.com, Dext, Wise-Sync and Wise-Pay to improve and automate ITSCO’s entire invoice lifecycle.

Before we started with ITSCO, they decided to implement the industry-leading PSA software, ConnectWise. Their controller had trouble adapting to it and couldn’t seem to sync the accounting file with the PSA.

Mike couldn’t get the reports he needed from ConnectWise. The profitability, invoicing, and customer statements were impossible because they weren’t properly utilizing each system.
It created an enormous amount of frustration with Mike, until he hired us to take over controllership.

“The automation tools they have as standard, and the fact he understood one of the automation tools that crosses over into our industry (ConnectWise) just connected a lot of dots for me.”

Finding finding people who already know and understand your tech stack and industry is key to getting ahead. It saves you time, money and a heck of a lot of stress.

 

“As you grow, bad decisions become more expensive. You really don’t want to be sitting on a bad decision for too long, and without the data it’s hard to know if you are.”

 

ITSCO had seen a boom in their products. But without quality data, Mike had questions about his profit margins.

“We were condensing it down: What do we do best? What are the best products to sell? How do we get better information out of our systems? I really needed an accountant that was going to help us organize that information and make it available to us in a timely manner so we could make decisions.”

Now, ITSCO had systems that all spoke to each other. The team had scalable processes that could adapt to the increasing volume and complexity of financial transactions without causing an unsustainable increase in workload.

Crucially, with daily bookkeeping and better automations Mike had complete visibility over the numbers and could take strategic action confidently (and quickly).

Growth isn’t just about the external factors – acquiring new clients and expanding products – but also internal factors related to the management and motivation of the team.

For a while, Mike had wanted to put an incentivized compensation plan in place for his team, but the gap in financial data had made it impossible.

Having performance data at his fingertips meant Mike could design his incentive program, setting internal KPIs tied to financial metrics.

“I feel confident to tell my employees that if they hit this gross margin in their pod of customers, they share in a certain amount of profit. But you can’t do that until you have the infrastructure, otherwise I’d be doing spreadsheets constantly all year and working out how to pay people their quarterly or half year bonus. Without good back end systems you can’t automate it. Plus you need to know you have a profit first!”

Now Mike could internally benchmark – comparing his business’ performance over time, tracking improvements and identifying areas that needed attention.

But how did ITSCO measure up against industry standards?

 

“Paul is helping us automate getting our financial accounts defined by the standards. We can put our data into the benchmarking platform, and all the information will flow easily into the system so we can benchmark against industry standards”

 

Understanding how top-performing MSPs achieve financial success can provide you with invaluable insights and help you adopt similar strategies for growth and efficiency. Knowing how you’re performing relative to your competitors is game-changing. You can spend less time guessing your strengths and weaknesses and set realistic goals for improvement.

We married up ITSCO’s QuickBooks accounts with the Service Leadership Index (SLI) so Mike could quickly and easily compare key performance data.

The Service Leadership Index (SLI) is the industry-leading data collection tool. With the right input of financial information, it’ll provide you with quantifiable data to understand your business better, see where everyone else in the industry is and how you relate. This understanding impacts every area of your business.

Having access to this level of information has already provided Mike with meaningful perspective on his profit margins and awareness of where the business is making and losing money. This is powerful for an owner in the MSP space. Profitability per service is difficult to understand in this industry. With so many moving parts, it’s a challenge to know where and if you’re making money. That’s one of the major issues our benchmarking service exists to solve.

But it requires a ton of data input.

The reason there’s such a disparity between those who aren’t benchmarking at all, and those who are regularly measuring their performance in this way is the effort it takes to compile and compare all the data.

To begin to get helpful benchmarking insights, we had to:

• Rearrange ITSCO’s accounts
• Make significant investments in their PSA (ConnectWise)
• Match and sync the accounting file with the PSA.

Only then could we input the information into the Service Leadership Index and get results.

It’s not an overnight success. It can take up to three quarters to provide the level of data input and get impactful data out. But if (like Mike) you want to take your business to the summit, the strategic value it provides is worth the time investment.

 

When we asked Mike Savino what advice he’d give a scaling MSP business, he said “don’t wait”.

 

Mike is a proactive and engaged business owner. He’s not the type to stick with the status quo and do things the way they’ve always been done. Even still, with hindsight, he’d have made the decision to improve his financial information sooner if he could.

“You can’t make up for bad data. If you don’t have good data, you’re really in a hole. When do you not want it to be in the way? As soon as possible. I should have made this decision earlier instead of running into roadblocks along the way. Red Earth are very down to earth. Paul’s definitely an accountant, he likes what he does. But he’s more of a holistic thinker, we seem to connect on the things that are most important. ”

If you see yourself in Mike’s story and slow processes are causing you to fall behind your competitors, this is your opportunity for change. We encourage all MSPs to take our Journey to Peak Financial Performance (JPFP) Scorecard to get an initial gauge of their position. Let’s get you to your peak.