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Data, not opinion, should drive MSP best practices

Dave Sobel breaks down why business leaders must use data instead of personal opinion to guide their business decisions and shares best practices for data-driven decision-making.

Dave Sobel is the host of the podcast “The Business of Tech” and co-host of the podcast “Killing IT.” In addition, he wrote Virtualization: Defined. Sobel is regarded as a leading expert in the delivery of technology services, with broad experience in both technology and business.

In this video from MSP Radio, Sobel explains why especially now it’s critical to focus on trusted, knowledgeable sources, and ensure you research those sources. He discusses how he determined that advice he received from a new source turned out to be poor advice because it was not based on data. Before our current pandemic crisis, bad advice might have just hurt. But now, bad advice can destroy your business.

Transcript follows below

If you haven't heard of it, there's a known, well-documented psychological pattern called "imposter syndrome." It's a persistent, internalized fear of being exposed as a fraud. It comes from where one doubts their own accomplishments, usually attributing their success to luck or they interpret it as the result of deceiving others into thinking they are more intelligent than they perceive themselves.

I totally suffer from this.

I work hard, I've built a successful business, I've built two channel programs I'm very proud of, one of which the CEO attributed tens of millions of dollars in economic value to. I built peer groups across Europe, successful teams in businesses both mine and those owned by others.

And I generally feel like just some guy figuring things out as I go. Everyone is going to figure me out, eventually. I'm sure of it. I was a pretty nerdy kid in high school -- and I'm pretty nerdy now, so it was way worse -- and I still hold onto that.

Now, I bring this up, because you might not know this about me based on being pretty confident and usually in a pretty good mood. I'm generally outwardly confident -- but inside, I do doubt myself. And, I check myself all the time.

I do know that my experience is pretty good, and that I have a lot of specific data to draw upon. It's also why I leverage a lot of data to make decisions -- I don't always believe that my own experience is enough to know where I'm going. The data I look for is a reinforcement of my own insecurities.

For me, this is why I didn't consult when I sold my MSP. What the hell did I know about running everyone else's business? So, I spent my eight years at vendors working with various providers and learning from them -- what worked, what didn't -- and then taking that information and the indirect results I could see of their performance via their purchase from the vendor, and then understood what worked. This gave me insights into thousands of more providers, and data drove our decisions. It was about building that larger set of analysis tools and the data insight to prove it at large scale, which is the skill set I both wanted -- and acquired.

I used to quip that I could tell you how much every beer I bought generated in revenue because the idea was that I knew the providers we were engaging with, we knew the programs we were running, and we knew what our desired outcomes were in terms of growth in revenue. Our success was tied to our customers' success because we knew that if they were consuming more software, it was because they had more customers.

That was how I built more data skills. Data matters.

Data is first and foremost when developing best practices

Let's take a moment and define "best practices." The idea is not "I did this one time and it worked for me." What it means is that you compared various practices, did an analysis of the results, and determined which worked most effectively.

It does not mean I built this one company and therefore I am qualified to consult with everyone about how to build every business. It's a skill to build a business -- learning sales, operations, finance, HR. But optimizing a business means you need multiple data points and multiple points of view.

Data matters.

Not all those who give advice are created equal.

In my last video, I slammed a vendor for recommending they provide a discount when they themselves wouldn't do it. Well, the following week, they had a consultant say the same thing. Same horrible advice.

In a follow up, I asked the consultant what data drove the recommendation.

The consultant thought it was an odd question, because there was quote, "No research data on this subject."

The consultant continued by saying it was drawn up on 30 years of business experience and discussions with other MSPs and other consultants.

This is my interpretation of that: An opinion, compared with another bunch of opinions.

Another "opinion" -- I listened to a podcast with a well-known channel trainer. Again, the trainer says, "Oh, I've been in tech for 30 years… 20 years owning my business."

And so, the quote you knew was coming: "That may mean compromising on when their customers pay them." To the trainer's credit, they indicated this was their business and what they were doing.

But again… thus, it's an opinion… there's no data there. This is a data point of one.

Back to that definition of best practices. A best practice is something that, through research, you have determined is a behavior exhibited by companies that have best-in-class performance.

Know how to leverage data

Let's observe there is data we can leverage. Calling on service leadership, that consulting organization that has a proven track record of data analysis and, to quote Paul Dippell, "The largest database of financial performance of solution providers on the planet."

I recommend checking out Service Leadership's Rapid Recovery Planning Guide. You should leverage this asset. It's a 57-page document and 20-minute video that walks you through it.

Spoiler alert -- cutting prices is not in the list of recommendations. Just so I got that out of the way. There are recommendations about offering lower cost alternatives, where you offer lower prices but hold or maintain gross margin.

THAT IS DIFFERENT FROM DISCOUNTS.

Using their past performance data, Service Leadership makes projections on revenue performance for managed services, project services, private cloud, and product-centric businesses. There are projections for the performance of these businesses and what they can expect from a revenue perspective.

In previous videos, I have also cited financial projections for the economy from Forrester, from Techaisle, from Bank of America.

Leveraging past performance through down economic cycles does allow for analysis to be done. Saying there isn't data is a cop out.

You know how angry you get at other IT people who just "do stuff" and call themselves experts? Well, consultants and advisors are much the same. Anyone can do it. There is no prerequisite. The difference between those whose advice you should listen to and those who are to be ignored is about methodology.

Why do I listen to investors for guidance? Because investors have tested their theories with money, and they measured it with the return on their investment.

Why do I listen to those who sell a methodology that has been implemented over time? Because these advisors have clients who have measured and reported back their success.

Why do I listen to someone who has managed the relationship with a collection of companies over an extended period of time? Because, if their compensation is tied to the performance of those companies, they have also leveraged data.

Why do I ignore someone who cites their "experience" as the reason to listen to them? Because there is no measurement to know if their opinion means anything. Owning a business, even two or three, is not enough to qualify you to optimize other people's businesses.

Data should drive business decisions, not opinion

Data matters. Those who have used any system, tested it, and implemented it with firm measurements at significant scale is in a stronger position to give guidance.

Right now, there are a lot of people giving advice. The old adage "Measure twice, cut once" is so critically important right now. Focus on trusted, knowledgeable sources, and ensure you are doing the research on who they are and where their opinions come from.

Before, bad advice might just hurt. Right now, bad advice can destroy your business. Be very critical of those giving you advice.

About the author
Dave Sobel is the host of the podcast "The Business of Tech," co-host of the podcast "Killing IT" and authored the book Virtualization: Defined. Sobel is regarded as a leading expert in the delivery of technology services, with broad experience in both technology and business. He owned and operated an IT solution provider and MSP for more than a decade, and has worked for vendors such as Level Platforms, GFI, LOGICnow and SolarWinds, leading community, event, marketing, and product strategies, as well as M&A activities. Sobel has received multiple industry recognitions, including CRN Channel Chief, CRN UK A-List, Channel Futures Circle of Excellence winner, Channel Pro's 20/20 Visionaries and MSPmentor 250.

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