Mack uses creative recruiting and marketing to stay relevant in today’s current climate of labor shortages and inflation
Note: This article is taken from a live interview and has been edited for clarity and length.
Travis Mack, chairman and CEO of Valeo Networks, has made sure his $25 million MSP stands out by offering the advanced security his customers need with his 100 employees in seven states. But growth isn’t just about providing the right services. MSPs are entering a new phase of evolution, and if smaller MSPs want to compete, Travis says, they also need to focus on consolidation and have a smart business mindset.
Big Red Media and MSP Success Magazine founder Robin Robins spoke with Travis about strategies to help MSPs get to the next level and how he’s addressing industry-wide challenges like labor shortages through creative recruiting and marketing strategies. There are many opportunities for smaller MSPs to grow, but the most critical piece, Travis tells us, is working on the business, not in it.
Robin Robins: Valeo Networks is experiencing phenomenal growth – 32% year-over-year. Tell me about your company and what you’re doing that’s working so well.
Travis Mack: We’re an MSP in seven states, with 100 employees nationwide, generating about $25 million in revenue. Like many MSPs, we focus on cyber security, network administration and managing the back office for small and medium-sized businesses. We focus on the technology so the business owners can focus on their business. That’s our bread and butter, and we’ve been very successful at that.
Robin: Like you, most people in this community are MSPs. But the lines are blurring because today you have to do security and compliance even if your client is a 10-person dental practice. So, are you selling to companies with IT departments, and you’re just doing the security piece? Who is your customer?
Travis: Our customer spans many business verticals or professional services areas. When clients bring us on board, we are a complete IT provider, including a basic help desk and all the A-to-Z support for small and midsize businesses. However, we distinguish ourselves from other MSPs because we provide an extra layer of security to our customer base. Security is changing every day, and the threats are changing every hour, literally. We’re not the standard MSP. We pay extra attention to security and ensure our customers understand that security is first and foremost in our minds.
We have internal tool sets we utilize to enhance security for our customers. Security is an ongoing evolution. We like to call it our belt-and-suspenders approach. To us, security is multiple layers of active things you do to secure an environment. It’s not one tool.
Robin: Where do you see the biggest challenges in the industry today, and what are you doing to overcome them?
Travis: Everyone is talking about the labor shortage, and honestly, it’s always been a challenge in the vertical as the world is changing and figuring out how to use technology more efficiently. Like every other company, labor has been a challenge for us, and we look at different ways to deal with that. There have been a lot of tech layoffs lately, so we’re finding talent that’s leaving the bigger organizations. We’re creative with resourcing, recruiting and utilizing different tools, like social media.
For example, we’ve gotten deep into ClickFunnels to identify talents across the web space. We have an aggressive social media outreach program and a website ClickFunnels campaign to look for talent. When we read a headline about a big layoff, we immediately adjust our recruiting strategy and focus on that area. We’ve been doing remote for years, way before Covid. That strategy benefits us because we don’t need our employees sitting in an office, but we need what’s between their ears to help us fulfill our goal and support our customers.
Robin: Many companies are starting to bring people back to the office, but you see it as a benefit to keep work remote. Why is that?
Travis: You have to meet people where they’re at. I do think people need to start coming back to the office in some shape or form because I think there’s more camaraderie there. But being in the office five days a week is a struggle right now. We’re listing remote as a benefit because you need to be flexible. If you’re not flexible in business today, you die. We make sure we’re meeting people where they’re at, not exactly where we want them to be.
Robin: Inflation and rising costs are a challenge most MSPs are dealing with, especially since the pandemic. Are you raising prices? How are you coping with inflation?
Travis: We raised prices because of our costs of labor and tool sets. They were raising prices, so we had to do it too. We had a campaign where we contacted our customers and told them what would happen. We gave them plenty of time, and I think most of our customers understood that everyone was experiencing it – not just in the technology industry. Bread, milk, gasoline – everything had gone up. We were reasonable about initiating price increases because we didn’t catch anyone off guard. But we were very transparent about what we were doing.
A lot of MSPS are scared of raising prices because of their size. If they’re concentrated on one, two or three customers, they are scared to death to raise prices. If their first-, second- or third-largest customer decided to leave because they raised prices, that’s 20% or 30% of their business, so there’s some risk to raising prices from the perspective of a smaller MSP. But if you don’t, you miss an opportunity, for one thing. Secondly, your margin will be squeezed, and you’ll pay a higher cost for infrastructure, labor and the whole nine yards. If you’re not passing that increase on to your customer, you’re in a difficult position overall.
Robin: Many MSPs are raising their prices to increase profitability, but there’s a limit to how much you can raise your prices because there’s competitive pressure. You can lower the costs of goods, but that’s hard to do. What are ways MSPs can increase profitability right now?
Travis: We’re always trying to figure out how to build the best tool that fits our environment. It’s out there, but you must invest in research and development to make something like that. That’s where I think smaller MSPs have challenges too. They don’t have the bandwidth or resources to go out and say, “Hey, engineer, figure out how we’re going to build AI into our help-desk support responses, and you have 90 days to do it.”
That’s where I go back to opportunities with consolidation and roll-up strategies – this is the next evolution of MSPs. That’s also where larger MSPs like us have a distinct advantage over other organizations. We’re backed by private equity funds, and they’re our partners. They believe in the strategy we’re executing. We’re trying to build a better mousetrap in the MSP vertical, and it’s very tough for small MSPs to compete.
Robin: What are other significant opportunities you’re seeing for MSPs right now?
Travis: Security is where it’s at right now, and I preach this every day to my executive team. Security is changing and migrating. You see new threats all the time. If you’re not building your infrastructure with a security focus, I would have some reservations about the strategy. That’s first and foremost in our minds.
At Valeo, we do a lot of mergers and acquisitions. I think there are a ton of opportunities with MSPs being consolidated; I think the game has changed. We went from break-fix to MSPs, and now we’re on a different tier. I believe we are exiting the standard MSP model. I don’t know what that engine looks like yet, but I think we’ve transitioned to the next evolution of MSPs.
Another opportunity we’re looking at is AI. We answer questions and provide solutions to our customer base, and we need to be efficient and effective in doing that very fast. Right now, we’re in the kitchen. We’re cooking, trying to figure out how to build on top of ChatGPT and other AI tools. We just had an hour-long conversation about all the possibilities that are out there with AI. We’re excited about where that could take us and how it can make us more efficient as an MSP.
Robin: Many of our member MSPs are still around $1 million in revenue. They’re still running a lot of the business themselves with no marketing team or sales department, which you can do well at $1 million. However, a lot of them want to get to $3 million or $5 million but aren’t sure how to build the resources or what the next step is to take. What’s your key to scaling up?
Travis: I call that a transition from a lifestyle to a commercially based business. How you ran your organization at $1 million is 180 degrees different than how you run it at $3.5 million. It may be $2 million of additional revenue, but your customer base has doubled, if not tripled, and you need to make those investments the whole time. If you don’t, you will start experiencing issues with customer support and everything that goes with running a multimillion-dollar business.
Many MSPs don’t get that because it was a lifestyle business. They took a technical skill set they had at IBM or GE and said, “You know what? I can go out and build a customer base,” but they don’t have the business acumen to run a business. They don’t like procurement, accounting or sales and marketing. But at the end of the day, to be a viable business, you must have that stuff. It comes with the territory. That’s one of the biggest struggles when you hit that particular point in your growth cycle.
Robin: I think a lot of smaller MSPs don’t want to give up the technical work for the things they hate, like sales and marketing. What do you say to those MSPs?
Travis: First, you need to make a decision. Are you going to be a lifestyle business or a commercially based business? If you want to stick at $1 million, I respect that. But it’s a business decision. If you want to scale, you need to innovate and change, or you’ll die. One or the other.
You don’t have to give up what you love, but you do need to figure out how to build and scale a business. No, that doesn’t mean you get to tinker around with the technical toys all the time. You do have to figure out how to automate systems and processes.
You also need to understand what your customer base will look like when you’re moving into a new model. We’ve reached a point where some customers don’t necessarily fit into the model we’re moving to or our support level, so we’ve helped them find other vendors. As an MSP, there is a certain point at which you don’t have the ability to scale anymore. You’re scared to spend a lot of money on business development sales folks, and you’re not quite sure what the return will be. You must be cautious about whether you want to scale to the next level, like moving from $3 million or $5 million to $8 million or $10 million. That requires investments, and it can become a challenge if you haven’t thought about it extensively.
Many MSPs tell me they’re plateaued around $3 million or $4 million. They’ve been there for two, three, four years and can’t figure out how to get beyond that without spending $1 million on infrastructure and new sales folks. So, I think it’s very challenging at that level.
Robin: What advice do you have for MSPs that are at $1 million in revenue but want to get to your level?
Travis: I would tell any MSP at $1 million that you can’t do everything yourself. First and foremost, you must focus on building a team. If you’re a type A business owner, you probably don’t do a good job letting go or letting others help you build the organization. You need to check yourself if you want to move to a different level. You need to figure out how to utilize technology to make you more efficient and your infrastructure as automated as you can possibly get it. I think that is the way MSPs need to be thinking about it.
And you need to focus on the business instead of focusing in the business. If you’re the technical guy and doing admin stuff, you’re not giving yourself enough time to build the infrastructure and automate it more, so you aren’t as dependent on labor. Having that mindset and vision is really important. I had to go through that, trying to get from $1 million to $2.5 million to $3 million. I like doing the work. It’s fun for me. But to build the business, you have to separate yourself and start to think about what your vision is going to be.
