Partnerships Unraveled
The weekly podcast where we unravel the mysteries of partnerships and channel to help you become more successful.
Partnerships Unraveled
Raymond Vrabel - Breaking Through the Growth Ceiling in MSPs
In this episode, together with Raymond Vrabel - Sr. Director Partner Programs, we explore the unique challenges and opportunities within the MSP space, a dynamic ecosystem where many businesses hit a growth plateau and struggle to scale. We unpack why MSPs often stall, diving into the common scenario where technically brilliant owners wear too many hats, but lack the commercial muscle to push through to the next level.
Our guest, with two decades of MSP experience, shares invaluable insights on how MSPs can break the growth ceiling by moving from owner-led sales, to building dedicated sales teams, embedding revenue acquisition into their company culture, and operationalizing scalable processes. We also discuss the vital importance of focusing on customer lifetime value (LTV) versus cost of acquisition (CAC) - a concept that powers the fastest-growing SaaS businesses and can revolutionize MSP success.
The episode further dives into:
- How AI is reshaping MSP operations by multiplying workforce efficiency and enhancing client service
- The cybersecurity challenges that come with AI adoption and how MSPs can stay ahead
- Why successful MSPs leverage AI not just to automate, but to elevate their business and client relationships
- What truly effective partner programs look like beyond just handing over tools and assets
- The power of white-glove enablement, strategic handholding, and tailored blueprints to help partners grow
If you want a clear roadmap for helping MSPs move from surviving to thriving, this conversation is packed with actionable wisdom and forward-looking perspectives.
Connect with Raymond: https://www.linkedin.com/in/rayvrabel/
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Welcome back to Partnerships Unraveled, the podcast where we unravel the mysteries about partnerships and channel on a weekly basis. My name is Alex Whitford, I'm the VP of Revenue here at Chanix and this week I'm very excited to welcome our special guest, raymond. How are you doing? I'm great Thanks for having me. Yeah, we're talking about one of my favorite topics today, um, which is the msp space, which I think is the interesting, most interesting space in the channel, because there are billions of dollars of revenue flowing through small businesses that maybe are doing this, maybe partly as a lifestyle business, partly as a fun business, partly as a way to make a shed load of money and everything in between, which I think is a fascinating area to sort of stake your post. Maybe for the uninitiated, you could give us a little bit of an introduction to who you are and what you do absolutely so.
Speaker 1:Uh, my name is raymond vrabel. I'm the senior director of partner programs here at connect wise, been in the channel now for just about 20 years. I came from a prior acquisition known as Continuum. Even before that a prior acquisition is Zenith. So I've been with the company the entire time in all sorts of roles, graduating and then on to helping with things like help desks and internal IT. It wasn't until about 2005 where I moved over into managed services and at that time it was just pulling a few tools together, right, av, maybe a remote control tool no one really knew what it was, but kind of starting on that, building out technical account management departments, figuring out what that meant, into customer success and some operations stuff. But then about seven, maybe closer to eight, nine years ago, I jumped over to the business side, running strategic account management, helping with business development. No-transcript, the only piece I think I haven't worked is engineering, so don't ask me how to code, but hey, I can help with that.
Speaker 2:You've worn almost all the hats when it comes to MSPs. I think the thing that I'm sort of and I sort of baselined in the introduction. It's sort of fascinating to me that in the MSP space there are like hundreds of thousands of jobs riding on businesses that maybe, if you looked at them, aren't the most optimally designed businesses. I think. When I look at a lot of MSP data, I see that very often they grow to a certain level, growth is very consistent. Then they sort of stagnate or plateau and I think your hypothesis, a lot of people's hypothesis, is hey, that's because they're engineering leaders, maybe they're lacking a bit of commercial muscle. What's the real issue that you see there that causes these MSPs to stagnate?
Speaker 1:Yeah, if you think of where MSPs started, just a little history there. Right, there was an internal IT person who said I could do this for multiple businesses, or maybe they were the resident IT person in their community or family or amongst friends. So they branch off and they're very intelligent people, tech heavy, geek out over the knobs and dials and ones and zeros, but haven't really been maybe as business savvy in some cases to run. They didn't maybe understand what it took to run a business on the marketing and sales and operations front and really stepping out of that role of playing inside the computer and more running a business which helps manage and monitor and maintain and prevent a maintenance on these computers. So that has evolved now to where people do have full-on marketing and sales teams.
Speaker 1:But the first things I look at when I consult with a business is is this owner-led sales where they're wearing all the hats, or do they have a dedicated sales team? Are they going after net new logos or are they just selling into their existing client or country club relationships they've had for the past eight years and they've kind of plateaued. What do their marketing efforts look like? Are they doing webinars and fun lunch and learns and wine about IT night and beers and engineers. Or are they just getting referrals? And then I'll start to dig into their operations a little bit and see what's taking up all their time.
Speaker 1:Why can't they get out of their own way? Why are they plateaued? What's their time sucks? And how do we automate that with agents, bots, ai, a third-party knock, sock, help desk? So how do I help them with that? And have they run into any attrition with employees and turnover? How do I make employee better work-life balance with these things? So I kind of look at those three pieces of the stool and say, look, if you're ready to build a business, let's find out what mode you're in. Are you happy, kind of just coasting along? Do you want to take it to the next level? Are you looking to acquire? And once I get a feel for it, I call it the get it factor. Once I pull that together, I can understand and help them shape where they might need to go next.
Speaker 2:Yeah, I think you know I come from this sass world and in the sass world we talk a lot about product market fit, startup scale up and I see a lot of the same lessons landing at the msp. It's like has this business worked out why it should exist? Okay, we're at startup mode. We understand, hey, we're able to get to a million uh reocring revenue. We're doing well. We understand how to do this. And then, fundamentally, what great CEOs and founders understand is you go perfect.
Speaker 2:Now we've got to draw a line under everything we used to do and work out how do we continue to scale this? And that means that the stuff that was unscalable before we now must make scalable. And it's a very different engine, it's a very different process and it's actually a lot of uh. It's a lot of the place where lots of startups die, which is they get to a certain level and then they don't know how to allocate the, the resources that they've gained effectively, and then they their engine sort of breaks down right. And so it's to me it's always been startup scale up and what I lovingly call mba, which is okay. Now that we're scaling, like now, we make sure the unit economics work really well, we're as profitable and operationalized as possible, and then that's this types of businesses that I see, whether it's in the msp world or in the sas world or any world. Those are the businesses that flourish absolutely right if they.
Speaker 1:Are they utilizing the resources to the best of their ability? Are they even six-figure techs, reset passwords, you know? Are they really trying to do? Is everyone trying to do everything? Are they trying to boil the ocean or do you have dedicated roles?
Speaker 1:And that's where I get into that owner-led sales. Who's trying to be the marketing person, trying to be the owner, and he's still touching projects? And how do you scale that? And so when you get to that MBA level you're talking about and maybe you get into a peer group, right, and you start to learn from what that looks like to get from $1 to $5 to $5 to $10, $10 to $20 million reoccurring.
Speaker 1:But when you start to get into those higher levels, you'll see people hand the baton to their operations livery manager. You'll see people start to hire a part-time or at least maybe outsource to a marketing firm or hire somebody internally to do marketing. They get really serious about this stuff. It's like they put a stake in the ground and we start to understand are you charging enough for your services? Or do you still have those ancient sweetheart deals with someone you signed up eight years ago and you're upside down on? So you know there's a term for that out there operational maturity. We start to look at the OML and find out where they're at in their journey and how we can help them. But you're absolutely right, in startup phase people get, they trip up on themselves.
Speaker 2:Yeah, 100. And when you're in startup phase, you have to do a lot of unscalable things to survive, which is great. That's the whole point of understanding how the business should operate. But my belief from when I sit down with CEOs, when I sit down with founders, my question is often how much are you working on the business or how much are you working in the business? And if the answer is the wrong way around, it's like now I can tell you why you're not scaling.
Speaker 1:I've been I love that term, I've been saying that for probably all 20 years is are you working in the business and in the weeds or do you want to take a step out? I think the challenge there and I've asked many business owners and I'm talking small business owners around the Pittsburgh community all over. You know what is the problem there. And a lot of times they'll pull me aside and say I can't find myself, I can't hire myself. It's either a trust thing. They feel like they can do it better and they have a hard time finding that next generation or next level of management so that they can go work on the business. And most of the times I've asked that question to these business owners, it's they can't get out of their own way, they're in it, they're in the mix and they don't have time. They're like where am I going to find time to do all this? Well, you have to make the time.
Speaker 2:I always take leaders through. I've got a framework that I use reactive, proactive and strategic. And reactive work is what most people find themselves doing almost all of every day, which is they open up their email. They let their email drive their agenda. The agenda then drives their outputs and then the outputs drive their impact and it's what, if you're not very conscious about it, is what you'll find yourself do almost your entire career.
Speaker 2:Proactive work minimizes the reactive work. So, hey, maybe I'm just going to create an FAQ sheet, because that way people will go there and I will get less questions. And it's a bit of a weird thing because you have to put extra time in which, for a period, is taxing because you still have the reactive work. Then the strategic work is the work that you do so well, you never have to do it again, which is the work that just does the proactive work. So this will be stuff like in today's moniker it's AI, it's hiring right, it's the work that is so high leverage that you suddenly find yourself and this will happen, it will freak a load of people out if you do it well, I don't know what to do today.
Speaker 2:I suddenly don't have something to do, and that's a great sign that you're suddenly working on the business rather than in the business, because you're suddenly starting to understand. Hang on a second. The engine moves without me and now I need to sit back, now that I have time to think and understand. How do we move forward? I'm sure that's the situation you find yourself driving leaders through to all the time.
Speaker 1:Yes, yeah, I tell them if they can't go to the beach. And they're answering their cell phone the entire time and they're answering those FAQ type questions. What are we doing here? You know what are we doing. You have to be able to focus on the business strategically. Who's my next hire? Are my employees happy? Are we in the right building? What's our next marketing event? You know what are we doing for pricing and packaging for 2026 and beyond. Do we have the right vendors aligned? So there's all these things that they just do not have time to work on because they're too busy doing the work themselves.
Speaker 2:Nice. Maybe we talked about where MSPs can stagnate, plateau. What do you think is the thing that really separates the MSPs that go from surviving to thriving?
Speaker 1:Yeah, the ones that thrive make that time, hire a dedicated sales team and then part of their company mission or mantra is it's part of every call. This isn't just a side business where we're going to run our business based on projects. We're looking for the next big project because it's a big number and it sounds cool and those are fun to do. That's not reoccurring revenue. Others where maybe they're in the printer telco and they go back to selling printers, toners, because that's what they're comfortable with. So the ones that I find are most successful have put that proverbial stake in the ground, have made that commitment, made it part of the mission, made it part of every call and got real serious about converting customers into fully managed IT customers from end to end, from cybersecurity to help desk, to manage services and remote monitoring and management, to backup and disaster recovery and data protection and cybersecurity. So you take all these pieces and they help convey the value to their client and they're not just showing up and saying you know what do you need, just like they wouldn't walk in and tell their doctor what medicine to take. They have to be very prescriptive and to do that you have to be confident, and to be confident. You have to understand what you're selling and what's in your tool belt.
Speaker 1:So the ones that are really crushing it out there do. They've taken the time to train their employees. They've taken the time to help convey the value, the why, to their end clients and they're double-digit growth, triple-digit growth in some cases, and their employees are happy. Their employees are making more money. They're making more money. Their clients are happy because they're more engaged. They didn't just sell them a SKU or a widget and walk off and hand them an FAQ and say good luck. There's others who just aren't mature enough. They just sell the product and they try to move on and look for the next big thing. But when you start to look at LTV and cost of acquisition, that costs a lot more to go out there and look for that net new logo. So yeah, those are the traits that I see in a mature MSP who's really crushing out there.
Speaker 2:Awesome. So now we've got an MSP who has broken through the plateau. They've made revenue acquisition a process and a culture. That sort of lives within everyone, and I often talk about this where really, to me, it must be a cultural motion. It's no good having one rep, all your engineers who speak to customers. It is their job to find out what the customer is trying to achieve and then we can work back in terms of how we build plans and drive value.
Speaker 2:You touched on LTV and CAC, which is the secret source of SaaS businesses. Why SaaS businesses are worth so much money and scale so quickly? Because they understand that we can over invest on what a customer is going to pay us in year one. So we can spend all of the year one revenue to acquire a customer because we know they're going to buy us for five years. And it means we can get wild customer acquisition because we can scale like crazy. We don't even need money in the bank for us to grow. We can go get outside funding. That's why the fastest growth companies in the world they operate this model. I think there's a lot to learn here for MSPs, because that LTV to CAC ratio works just as well for an MSP as it does for Netflix. Talk to me about how MSPs should be thinking about this concept.
Speaker 1:Yeah, when you talk about filling the bucket with net new logos. So we're filling the bucket, but what happens if there's a big hole in the bucket? So it's all for naught. If we're acquiring new clients and spending all this time and money and energy to go out and get net new logos, great, we're filling it, we're top filling it. But if I'm not paying attention to keeping my existing clients happy, which is many more times cost effective to cross sell into them, you already have them, you already own that client, you have a relationship. So you want to focus some part of your efforts on customer success, being the VCIO and having strategic conversations, not just looking to what's next.
Speaker 1:I think partners sometimes say well, my clients are in maintenance mode, I can go after them that new logos. Well, sometimes I'll challenge them and I'll say when's the last time you delivered a QBR? And I'm not talking about emailing them, I'm talking about sitting with them delivering a QBR. In some cases, make it fun, bring a food truck Friday for QBR and bring a food truck and deliver it and take surveys and get to know the employees, because you're just going to become a line item, you're going to become an afterthought, an expense that only Susan from accounting knows. It is whenever she calls because her printer's jammed or needs her password reset.
Speaker 1:And IT is becoming more and more remote. I mean, every single day we can do so many more things remotely, so with that it becomes easier to get away from that and not be engaged with our clients. So when you look at cost of acquisition and lifetime value and stuff, you have to say I already have this business, let me work on it. One keep them happy, keep a very good high NPS score, keep them happy with what we're doing, but also sit down strategically. Are they opening up a new office? Are they hiring new employees? Did they fire Bill from accounting 10 years ago and he still has access? There's a lot of strategic value things you can bring to these small to medium businesses that get thrown by the wayside because everybody's chasing the next new shiny object, and so I still think you have to reserve some portion of your business to that. And then, of course, let's go fill the bucket.
Speaker 2:But we know the bucket is solid, tight, sealed. Yeah, 100%. The real value of customer acquisition is how long they stay with you, right? That's why lifetime value is so important and the math is really simple If you can double your lifetime value, that's the best work you can do within the business, almost always, unless you have one customer, almost always right. And so the only time Netflix stock ever went down is the first year. They didn't retain users, right, and so suddenly their share price plummets because the stock market goes hang on a second. We've seen consistent quarter over quarter growth. Lifetime value is excellent. And then suddenly there was a drop in users. I think 20 percent rolled off their share price immediately Right, and lifetime value is critical to sort of long term success.
Speaker 2:Right, we have one superpower in LTV to CAC and another, because it's 2025 and I'm mandated to talk about it in AI, it in ai. I'm sort of fascinated um around how ai is going to affect msps, because a lot of the end game for a lot of msps is to sell their business to someone else. That's the, that's the exit dream for a lot of leaders and that's typically done based on the profitability of the company. Um and EBIT can wildly change if suddenly you can do 10 times more with 10 times less. Talk to me about how you see AI affecting the unit economics, but also the go-to market of MSPs.
Speaker 1:Yeah, we've seen it now in the evolution of AI and even managed services. To go back here at ConnectWise, we're kind of a do it with you, do it for you model, where you're trying to do more with less. Right, I want to keep the same 10 employees and double and triple my client base. I don't want to keep having to hire 10 more people to answer calls and then I'm growing very much like a stepladder where every time now I've hired somebody who isn't as profitable Now we have to wait until they're fully utilized. And oh, by the way, I just lost an employee because IT is very episodic or elastic, and you really wish you had 10 employees on Monday, but you only have five, and then, by the time Friday rolls around, you only need three, but you're still paying for five. And that's also seasonal too, with things like tax season and everything else, and so when you look at that, ai has allowed people to do more with less and be a workforce multiplier and start to create these bots and scripts and keep in touch with their clients, some warehousing and some other things. There's places where AI can absolutely probably do the same job 24-7, 365 without getting sick, I think, but in our world, we always will need a human element. However, the people that are leveraging AI will be much more successful than the people who might just use it for chat GPT and ask it a few Google questions, right, and so the people who might just use it for chat GPT and ask it a few Google questions. And so the people who are really leveraging it in marketing, sales and operations helping them take their existing staff become more efficient are going to be worth more, are going to have happier customers, are going to be doing more with the maintenance and preventative maintenance and stuff like that, and they're going to be able to take care of their clients and see a lot more green check marks on their dashboard. So AI is a very important piece.
Speaker 1:We also have to be careful on the AI side, because threat actors and bad guys and criminals and cyber attackers are using it as well to infiltrate our SMBs and our MSPs are using it as well to infiltrate our SMBs and our MSPs and stuff's looking a lot more real with things like deep fakes and these scripts and stuff that can be run by more of an amateur person, because AIs help them get there. So that has changed the game in a cybersecurity landscape. The data protection is now more important than ever. Cybersecurity posture is now more important than ever. Cybersecurity posture is now more important than ever. Security awareness, training, dns, all these things because there's no magic bullet to stay ahead of this and help our end clients understand how to protect their PI and IP, and everything internally as well, and how to use AI responsibly. So there's like this whole next wave of what AI has brought to the table, both in operationally efficient as well as our duty to help these clients understand how they're going to leverage it and how to leverage it responsibly.
Speaker 2:Yeah, just to double click on the operational efficiency element. I think the way a lot of people think about AI is they think how do I do a watered down version of what I do today, but faster or cheaper or automated, which is somewhat true, the thing that I would argue is nine times out of 10, also to a higher standard. And so you know. I have spoken to hundreds of marketing and salespeople over the last month who tell me Alex writes better emails than I do, builds better marketing plans than I do. It builds better marketing plans than I do. It does better scripting than I do, does better research than I do. And so you sit there and go.
Speaker 2:The people who will win understand how to be the puppet master the best, because it's not about like, oh, I'm going to create a chatbot who will do an okay job answering messages. It will. No, it'll do a better job because it will remember the guy's birthday and what his dog's name is and do everything in between, and then also wrap around to be a cyber security expert. So if people are thinking this is interesting, I'm gonna let it improve. Don't miss the wave, because it is coming yeah, that's a great point.
Speaker 1:I mean it. It can make us bigger, better, faster, stronger and take us to a whole new level. If you leverage, it's like unlocking your brain. If you unlock this neural network of what is AI and start to really dive down the rabbit hole of all the things it can do, it can really be mind-blowing. Whether it's your calendar, whether it's writing emails automatically for you, whether it's setting appointments or getting in contact with customers automagically. Rebranding your material is another piece we see, so I help with your.
Speaker 2:SEO. I literally have an AI agent who is my executive assistant, reminds me three times a day what my morning, my morning, lunchtime, afternoon priorities, plates it all together, chases me if it's not done and you go. Well, that's a 50,000 a year job. To go and hire a good ea that we built in four hours, right, and that's the sort of stuff we said. And go, hang on a second, this doesn't, this doesn't make sense and that's where the world is headed. And if suddenly I'm twice as productive which I think it's probably a little bit more than twice as productive then you know dave down the road's gonna have a hell of a time if he's competing against me and he's having to spend that extra 50K because I can spend it on marketing and you can't Absolutely Awesome. So one last one for you, because we're speaking about everything MSPs and you work in programs. In your experience, where do most partner programs go wrong and what does great actual enablement look like?
Speaker 1:Partner programs. Well, let me say partners go wrong. And what does great, actual enablement look like Partner programs? Well, let me say partners go wrong sometimes where they think they can do it all themselves. So you hand them a book on good, good behavior on here's what you need to do for marketing. This is good marketing etiquette and this is the right things you want to do. Or it's like handing them a wrench and saying go build that race car, right Software in our world. But you hand them a wrench. It takes massive time, skill, investment. You're going to smash your fingers a couple of times along the way building it.
Speaker 1:But a lot of partners think they can just do it themselves. And when they take a step back, they're selling the MSP model to SMBs. Right, it's like I can do it bigger, better, faster, stronger for you. I can do it bigger, better, faster, stronger for you. Mr and Mrs N client, that's what I bring as an MSP. Well, sometimes you should maybe take a step back and say does it end with me? Or what if I go with like a master MSP? Or what if I partner with someone like a ConnectWise with a help desk? Can I offload those mundane, commoditized tasks and get more strategic and give me some time back. And how do I do more with less?
Speaker 1:And so, when I think of the partner programs, where they fail sometimes is they just hand partners the software and maybe they'll hand them some assets rebranded or white labeled, maybe they'll hand them some training. But one thing is part of the partner program I hold near and dear to my heart is about a few years ago. We took a step back and said how do we help them with their blueprint to success? Look at all these things, beyond the dollar, beyond the cost of the software, how do we help them with a marketing concierge service to actually run campaigns, go to events with them, co-sell, teach them how to fish so they can fish on their own next time? How do we have these packaging and pricing conversations to find out? Are they charging enough? Do they have the right tools in their tool belt? When's the last time they reassessed all the stuff that they've had in their stack? And so you have business, sales, marketing, operations. You have all these pieces.
Speaker 1:The partner programs that fail, I think. Just give it to them. The partner programs, I think, that are taking off are the ones that are holding their hand and giving that white glove treatment as I look around the landscape. The ones that are killing it are the ones that are really walking or shepherding partners through that journey, because when they grow, we grow as partners and that's why we call them partners and not vendors and clients. We call them partners because the rest of my day will be filled with talking to clients about, well, how's that latest campaign working and what about that event? Do you have somebody, do you have it staffed, and what's the call to action? Just being their consultants and helping them go to the next level.
Speaker 2:Yeah, I couldn't agree more. We talk a lot on this podcast about meet the partner where they are, and I think people often meet the partner where they hope they're going to be, because sometimes it's maybe, I don't know. To pick an example that you just gave, I'm going to have this portal where there's marketing assets. Please go and download them and use them. Is that meeting the partner where they are? Is that meeting the partner where it's easy for me to meet them? Um, and in the same, you know the same message. I think having customer obsession, partner obsession, it's true humility in terms of, okay, what do they actually need? And for loads of partners it is a white glove service. Right, for a few partners it might hey, here's an asset library, have at it. You're really smart, you know what to do, but that's almost none of them.
Speaker 1:It might be very high value ones but it's almost none of them.
Speaker 1:It's a 10, 15, 20%. It's very high, high operation, mature partners. The rest of them come back to me and say your marketing team does an amazing job. They put out a thousand assets or I'm in this asset library I just paid for. What do I do with it? When do I send out the email? When do I send out the invite? How does all this work together?
Speaker 1:I'm not a marketing expert, so what is the right order that I use this? How do I not overdo it and send them 20 pieces of material? What's the right timing? What's this look like on a calendar? How do we drive towards a call to action? Do I have the right stuff on my page? So you're right, it's meeting the partner. We use a term sometimes we'll say helping the partner build their blueprint to the most ambitious vision of their success or version of their success. So where do they want to go? Where are they now and what chapters do they need to read along the way? How are we going to help them get from 500 to their first million, from 1 million to their first 5 million, and so forth and so on?
Speaker 2:Yeah, it's like handing a partner a dictionary and saying, if you put it in just the right order, you'll get Shakespeare. It's like no, no, we just give them the actual book, right. We don't need them to fill in the blank and guess and pull it together. This is a well-trodden path. I think that's why I'm sort of fascinated in terms of how mbas are going to start landing and I've started to see this in um in uh in the msp world, which is like very commercially, very business savvy people coming in and going this is we know how to do this. We've we've operationalized business like this in other industries and it's just this untapped resource here and we know how to put things in the right order. So, building programs to meet partners where they actually are, that's the fundamental. Yes, absolutely Awesome. Well, I like to meet my audience where they actually are, which is speaking to really interesting guests, which means I cheat by asking our current guest to recommend our next one. Raymond, who did you have in mind?
Speaker 1:So I would like to nominate someone who helped influence my career, who I actually worked for here at ConnectWise for quite some time, and even back in Continuum days, I think would be a really good guest. So I'm going to reach out and Jay Ryersey, who's now Sentinel One, to be the next guest.
Speaker 2:Excellent, jay, we're coming for you. Sentinel One's doing awesome stuff. We've had a few of their senior leadership on, so thanks for the recommendation. Raymond, thanks for sharing your wisdom. It's been awesome.
Speaker 1:Excellent thanks for having me.