From PC Builds to MSP Success (EP 805)

[Uncle Marv]
Hello friends, Uncle Marv here with another episode of the IT Business Podcast, the show for IT professionals and managed service providers, where we do what we can to help you run your business better, smarter and faster. I've got a little bit of a different episode today. It may go long.

It may be broken into two. We'll see how it goes. But I've got a conversation with another MSP that is in the house.

David Stinner was previously on the show way back in May of twenty twenty four. He joined us for an ASCII celebration on episode six thirty nine. And back then I asked him to come on the show again so we can talk about him and his business a little more.

So he agreed to do that. And here we are. So let me welcome David Stinner to the show.

David, how are you?

[David Stinner]
I'm doing great, Marv. Thanks for having me back. I like listening to your podcast.

I'm glad to be here today.

[Uncle Marv]
All right. Well, glad you like listening to it because I need to hear that every so often.

[David Stinner]
Yeah, it's great. It's really nice to, you know, when you are in the thick of running an MSP to hear some stories and hear things from other people in the industry.

[Uncle Marv]
Absolutely. So just to give people a little bit of a refresher on you, you are the founder and president of US ITEK and been doing it for over two decades now.

[David Stinner]
This is my official twenty sixth year under the name US iTek, Incorporated, but I actually. I think I actually have thirty one years because I opened a DBA when I was 16 years old in high school. Ah.

An official DBA, an official DBA, not a corporation, just a DBA, and I actually incorporated 26 years ago when I hired my first employee.

[Uncle Marv]
Gotcha. So in Florida, that's called a fictitious name. So you can register a fictitious name and operate, I think, up to five years before you have to make a decision.

And I did that for three.

[David Stinner]
Yeah, so I've been in the PC and IT industry for quite a while.

[Uncle Marv]
Yeah, yeah. You’re in my genre there. So you started that and started out as just PC repair.

[David Stinner]
So. Where it started was when I was in high school, back in the day, there was this wonderful thing called the Computer Shopper magazine before the Internet, of course. So it's probably like 1992.

And when you wanted to build a computer, you would look up motherboard from this company, hard drive from this company, whatever, and you put it together. So I was in high school and my father was. He was disabled for a while, was in a car accident, so he was kind of retired and he hung out with these retired ham radio operators, and a lot of them were like engineers and they were, you know, the geeky kind of people.

And they found out that I knew how to build computers, so they kept calling him and saying, will you have your son build me a computer? So, you know, I'm like 15, 16 years old and I'm like, well, let me see. OK, they can buy it from Gateway 2000.

For like three thousand bucks. And I can sell it for like two thousand bucks and make a lot of four or five hundred dollars, like this is amazing. So that's really where I started.

[Uncle Marv]
So I remember those days because before I started my business, I was working at a computer repair shop. And the way that I got that job is that I would get old computers at the time, wipe them, reload DOS back in the day and I could sell them to the shop between six hundred and a grand. He'd turn around and double my price and sell them out of his store.

And he finally was like, so you build good computers when he had to come work for me, I said, well, I'm doing pretty good. So you've got to match the salary where I'm at. And he did eventually.

But those were days when white box computers back in the day when they were all beige. Those were the good old days.

[David Stinner]
Yes. So when I was just about to go to college, I there was actually one of these companies that sold out of the computer shopper here in Buffalo. And I lived out in the rural area, so I had to drive like an hour, come into the city.

And I used to come into this place instead of, you know, like shipping and waiting for it. I came in and I would buy four or five motherboards, 10 hard drives, and a whole bunch of RAM. So the owner of this business, he was like, what are you doing with all this?

What are you doing? I'm like, I'm building computers. He's like.

You have a job, I hire you, I bring you in right now. He was like a foreigner. And he said, I hire you.

I'm like, OK, well, I'm like in high school. I can't really drive up this way all the time. But I was going to enter college and the university at Buffalo was just like two miles from his shop.

So when I entered August of ninety four, I started working for him full time. So I worked my way. For about four or five years through that company, starting with like.

I think one of the first jobs I had was CPU installer. So they would get all these orders every single day. With the motherboards, processors and cooling fans, I'd come in after class from college and they'd have like a stack of 40 or 50 motherboards, and those were the days when you had to look at the manual and move the jumper pins.

Yeah.

[Uncle Marv]
Yeah.

[David Stinner]
You put in your 46 SX, 25 or 30. You set the megahertz, right?

[Uncle Marv]
DSRXX. Yes.

[David Stinner]
So I guess I was really good at that because I used to finish all of that in time before shipping deadline, which was, I think, seven o'clock when FedEx or UPS showed up. So I had to get them all configured, you know, glue on the heatsink fan. Test to plug in the video card and all that.

Remember when you had to plug in all the cards? Everything, everything was plugged in. Everything was plugged in.

And then we shipped that out. So then I moved into quality control because, you know, I was always very particular and have a little OCD. I like things perfect.

So I did quality control when they assembled computers. So when I had that job after class, I would come in and they'd have, oh, we got 50 computers today. You got to stay till it's done.

I'm like, OK. So I'd go through and you'd have to pop the audio disc in the CD drive and make sure that it would play music because, you know, sometimes the builders wouldn't put in that audio cable that went from back of the drive to the sound card. You know, and we have to check all different kind of things on there, make sure that the drives were configured right and whatnot.

And then I moved into tech support. And again, this was still the mid-90s before the Internet. So we would have phone calls all day.

So after class, I'd come in and do that until the evening shift and come in on Saturday and handle tech support. And, you know, it was tough. I mean, that's where I learned really how to diagnose issues because I had no visibility.

There were no remote tools and we had people who were do-it-yourselfers trying to buy multiple parts from multiple different shops, build their own computer and then call and say, it doesn't work. And I have to lead them through, OK, read the part number on your board so that I could go find the manual. And back then, finding a manual was literally we had a bookshelf of all the different motherboard manufacturer manuals.

And the revisions used to change so much. Remember having like this all organized. So they have to go find that and say, OK, tell me how you flip the jumpers.

Oh, it was just or how did you put the CPU in before the ZIF socket? You could put the CPU in 90 degrees off. And you'd blow it up.

Yep.

[Uncle Marv]
So and you had to have the right plastic clip to pull it out.

[David Stinner]
Yes, yes, for sure. So those are the fun days. I moved in at that company into.

Being their first webmaster and built their first website for them. And then finally, like the last year and a half, I was there, moved into purchasing, and that was probably the most fun since I had known all the parts and the tech support and the inventory and the manufacturing. I was very particular and I'm a very value based guy, so I love just the art of the deal and kind of figuring out what's the best deal.

Right. So the purchasing methodology I had back then was a yellow legal notepad. And a whole bunch of faxes, if you can imagine this.

The importers in city of industry, California and in New Jersey, Edison, New Jersey, used to send daily faxes of their memory prices, their CPU prices and their hard drive prices. You know, we had these companies that I don't know if you ever dealt with them, but like MaLabs and WinTech and PC Magnetron, like these are things I haven't thought about in 20 years. But I used to go through to the manufacturing manager and he would give me like a list every night.

We're short for just-in-time inventory. We're short this many CPUs, memory modules, hard drive modules and software. Like you got this here tomorrow morning.

So I'd have to scramble and like do all this purchasing. And then I had two phones on my desk. Because you'd always go, you'd call one distributor or importer and you'd be put on hold.

So I called the other one and I just like leave it there on hold while I'm talking to the other one. And I'm writing down, OK, I need 150 of these one meg memory modules and they're 4250. And the next guy, he's 3950.

He must have just got a new shipment from Asia. So then I have to like figure out, OK, what's going to be the best fit of these parts and those parts and those parts, put it all together with an overnight shipping to kind of come up with the best landed cost. It was it was it was a wonderful time.

Very crazy busy. Lots of math. I'd come in the next morning and I had to receive all the product.

So in a typical morning. The FedEx truck would show up with the overnight delivery from California, the UPS truck would show up with the red UPS overnight deliveries, then you'd have the first truck coming with pallets, the second truck with pallets, the third truck with pallets. And I had to like go and receive everything because I didn't trust anyone else to know what came in because this was high value stuff.

A hundred thousand dollars a day, I remember, was the value in the mid 90s. Of the incoming inventory, so I'd have to receive it all and then pass it off to the warehouse staff who would put it all away in whatever places it went.

[Uncle Marv]
Yeah, I remember those days and at the shop I worked at, my owner at the time was big into. Buying, you know. Closeouts or companies that went out of business and he would buy a truck full of stuff at a time and, you know, for him, because our store was new and used computers, so he'd buy a truck for twenty, thirty grand, you know, but the value was really probably closer to that hundred grand you were talking about and we would have to go on to that truck, pull everything off, go through the computers because, you know, there'd be, you know, two, three hundred computers in there and we'd have to, you know, plug them in, see what they were, servers, modems, you know, the U.S. robotic, you know, the big boy, hard U.S. robotic modems.

[David Stinner]
I remember those, the ones that plug in with the serial ports. Yes. Yes.

You'd have to get the right cable, the DB9, the DB25 cable.

[Uncle Marv]
Yeah. So I remember those days and I remember going behind my boss's back to order stuff off the Internet when it first came out. And my first shop was Evertek.

I don't know if you ever heard of that name, but they were.

[David Stinner]
I heard of Evertek. You know, they lasted a long, long time. I think they opened the doors like two or three years ago.

[Uncle Marv]
And I recently had seen their website where they thought they were coming back, but they haven't yet.

[David Stinner]
Yeah, they were they were something my boss wouldn't let me buy from them because he didn't want anything like used or secondhand or whatnot.

[Uncle Marv]
Yeah. So, Dave, it sounds like you enjoyed the good old days as much as I did. I guess we can't call them glory days.

But you started to make the transition into managed services. So what was that like?

[David Stinner]
Yeah, so, well, just to fill in the gap between that job I talked about and managed services, I worked that job until I graduated college and it was it was pretty stressful and I worked a lot of hours and I didn't get paid overtime. So I basically told the boss that I'm leaving and starting my own practice. Since I had learned all the ropes, I started a business and competed with him then.

So that was quite interesting. But, you know, in those first few years, I probably I calculated up, I probably did about 15 million dollars’ worth of hardware sales in the five years after I left. So fast forward, that's from 99 until 2004.

I made my first acquisition in 2004 and it was a small break fix company. The proprietor of that company still works with me today is my CTO. He merged his company into mine and he came with a few staffers and we did break fix.

So that was the first time I did professional services. And a couple of years into that, I was really, really tired of discounting hours. So there was this constant battle of.

The customer saying, well, you sent this tech instead of that tech, and I think he took too long, so instead of three hours, only going to pay you two. Or you didn't get here quick enough and it was an emergency and now it's not, so I'm not paying you the after five o'clock rate or whatever, whatever it was, just I remember it being really stressful and looking down at my P&L one day and saying, boy, it looks like half of our professional service hours we're having to discount. So I can't remember exactly how it probably was an email blast.

Got this email blast from this guy named Eric Simpson, who's still on the channel today. He ran a little company at the time. It was called Intelligent Enterprise.

And he was hosting a little two day workshop in Los Angeles. And I was like, boy, can I get out to Los Angeles? You know, that wasn't a big thing for me to travel back then, but margins were low.

So I did a ton of hardware, but there wasn't very much money to be made back then in those days because it was really, you know, you were competing against everybody on the ice. So I scrounged up enough to get out to Los Angeles for this little workshop. And I learned I learned this concept of managed services.

I think that was 2006. So it was an intriguing thing. There was Eric and his partner talking about how they sold services and got paid every single month by their customers.

And they did proactive work. And they made their customer systems better. And I was always about that, like continuous improvement like that rang well in my ears.

So I came back and I got the staff. I had still sales guys selling hardware. And that was just a disaster to try to think that I could convert those guys into selling professional services.

Yeah, that was that was a total disaster.

[Uncle Marv]
Now, one question, when you were selling your professional services, were you selling at a single price rate or did you have different levels?

[David Stinner]
I think we were just selling for a single price per hour or a block of time. OK. Yeah.

And customers really have anything that I can remember that was recurring. Maybe antivirus, like annual renewal of antivirus, and that was the only recurring thing that we sold back then. Yeah.

So. So it was interesting, so I came back and it was it was a tough. Internal discussion to try to get everybody to switch to this new model, and at this time, you know, our PC manufacturing and hardware business was still, boy, I want to say 80, 85 percent of the revenue.

So, you know, that was the big the big revenue generator and, you know. Selling the professional services was kind of small piece of the business, but I knew that that was the future and I knew that the hardware, you know, its days were numbered because, you know, from the golden era of the 90s of thousands of people making computers to where we are today with just a handful of manufacturers, it kind of was apparent to me at that time in the in the early 2000s. So I can't remember exactly when it was, but at some point we did make the decision to flip everyone and call everyone and say, this is the new way we're doing it.

And that was a big, scary time. But I think we did it because we lost a couple of customers. But most of them converted to some form of managed services, so that was around.

Maybe 2007 or 2008 when we got people to switch and, you know, funny story. Last summer, we got this customer back who I think was one of the break fix customers who didn't switch to managed services. He switched to someone else, another little MSP in town, and they.

I think the guy retired and sold the practice and he didn't like the new ownership, so he called us back after 15 years. 16 years, we got him back. Nice.

[Uncle Marv]
Now, I mean, that sounds super simplified, so let me dig a little deeper and ask you about that transition, because when I remember making a couple of tweaks in my system, it was easy in the sense that most of my clients were lawyers. They understood the term retainer and that was my form of managed services, so they were paying me monthly for my block of availability hours. There were no rollovers.

They didn't get to get back any unused time, but they were paying for availability. And that's kind of how I started it. In your case, you were having to flip customers.

So what were some of the unique challenges that you remember, you know, simply besides, you know, paying on demand to pay in monthly? What are some other things that you ran into?

[David Stinner]
Well, it was it was tough internally to get my staff to kind of go along with it, particularly the sales staff, who, of course, are all long gone because the hardware business is gone. We kind of followed the guidelines that we learned in that seminar, and they kind of, you know, laid out a plan like this is what you should deliver, you know, check your software, your patches and all this stuff. And by the way, we did this before that we had an RMM tool and before we had a ticketing tool, as I said, before remotes.

Yes, we were we were going on site limited, but I think the biggest struggle at that time was actually delivering everything that was in our agreement, because there were a lot of proactive things in our agreement that were tough to deliver. I mean, like we still had customers on tape that we had to go rotate tapes for backups in the in the late 2000s, you know, 2008, 9, 10. So I think that was probably the biggest struggle.

[Uncle Marv]
So you were actually going on site, rotating tapes, because I had my customers do that. I didn't do that. Were you doing that every day?

[David Stinner]
They know we weren't we weren't going on site every day. The customers would flip it every day, but we still had to regularly, maybe once or twice a month, make sure that they were doing right. So, you know, like the test restores, those are the kind of things that we had promised in their contract.

And I don't know how great we were with delivering those kind of things.

[Uncle Marv]
I mean, there wasn't much to promise back then, except to, you know, do your patching, do your defragging, right?

[David Stinner]
Yes, that's right. Defragging, that was one of the things that we had to do. Wow.

Your syscheck and defragging. And one of the things that we had to do was clean out computers. We had that in our agreement.

OK. Oh, that was something every tech hated doing, because you in some in some shops that weren't offices like factories and whatnot, they'd get really dirty. So they have to like unplug the computers, go outside with a can of air or something and blow all the dirt out of the computer and then go put it back.

Funny to think what we used to do with computers compared to where we are today. Absolutely. My goodness, gracious.

[Uncle Marv]
All right.

[David Stinner]
And then we found, we were at, I think it was called Microsoft Channel Partner Summit. It's a conference that doesn't exist anymore. And we found Peter, Peter was his name, Sandiford, who was the founder of Level Platforms.

It was that long ago that he was there at the little booth, him and one of the guys selling Level Platforms as an RMM tool. That was the first RMM tool we'd ever been exposed to. We bought it.

That might have been 2008 or 2009. And implementing that was tough, too. I remember.

It wasn't so easy as it is today. Right. Probably around 2010, we bought ConnectWise to do ticketing.

So before that, I remember handling all the tickets by email. Oh, that was a disaster, too. That would that would that would count as a struggle.

But yeah, those are the good old days of the early times of managed services. Right.

[Uncle Marv]
Now, back then, you did the investment because it wasn't cheap to, you know, go into those platforms. So how was your business, I guess, health wise in terms of, you know, number of staff, number of clients. Annual revenue in that sense, how are things looking for you to make that switch?

[David Stinner]
So. We had some good years early on in the beginning when we sold hardware and then it was a struggle again when we started doing professional services, it was a struggle getting customers on managed services. I remember a few good years, probably.

Twenty eleven, twelve at that at that time, after like the Great Recession was kind of we're coming out of that period and then it was a struggle again for a long time when we were doing too much. And we just weren't focused until we, you know, like the current iteration where we are, where we're very, very much focused on doing managed services. So in that time, I opened a data center, a new building.

I had a retail showroom. I was still building computers, trying to do managed services, trying to do web development, all this kind of crazy stuff. Oh, yeah.

And then in there we had electronic medical records sales. I had like five sales reps trying to sell electronic medical records. That was a bust, but it's fun to think about that now.

Yeah, I mean, you know, I always was very nimble and had some difficult times, but. You know, most recently we finally figured out it took me a long time to learn and figure out how to get to the place where we're managing the costs and the staff really well to be a very profitable MSP. And what's the nicest thing about that isn't really, you know, it isn't really about the money that I take out of the business, but it's about paying my staff well, which keeps my staff around.

I don't have churn like I used to. And it allows us to invest in the right kind of tools and deliver all the. Proactive stuff that, you know, in the beginning times we struggled with, you know, how many people struggle with doing their quarterly business reviews with their customer?

You got to really have like a dedicated person to do that. That's what I've found out ultimately. Right.

[Uncle Marv]
So all of this is happening up in New York, which. I can imagine there's got to be a little bit of competition to drive your what's the best word I'm looking for to drive your passion, I guess, to, you know, to increase revenue, to scale, to keep up and all of that stuff. So what's it like working in the New York area?

Well, I'm in Buffalo.

[David Stinner]
OK, I'm a whole flight or a six and a half, seven hour drive to the city. So I'm completely on the other side of the state. So I don't really have any customers or interaction there.

[Uncle Marv]
All right. So you're part of what is it? The Bill's Mafia, is that what they call it?

[David Stinner]
Bill's Mafia, yes. Western New York, Buffalo, Niagara, Bill's Mafia. That's for sure.

And we have customers all the way down the thruway. So that's the Buffalo, Rochester, Syracuse, Albany market. That's kind of down the thruway.

That's where we have customers.

[Uncle Marv]
All right, so that's not too bad. So what's your median size of a customer? Are you dealing with, you know, five to 50, 50 to 100?

Do you have some enterprise clients?

[David Stinner]
So I like to say SMB and SME, which is small, medium enterprise. So we've been able to move up the food chain into that small enterprise space. Those are the people in my region and then cities down the thruway, which are above 100 users.

So we have a couple of different, probably about four different clients we work with now that are in that size above 100 seats. And it's nice to live in that space where. Customers are bigger, they take your advice, they have budget, take your recommendations.

So I think the last time I checked. Our average seat count was north of 50. OK.

And. An interesting thing that's happening. That I've talked to other MSPs in the channel, like in my peer group and at some ASCII events.

I'm seeing this and I ask and other people are also seeing this, that the micro businesses, which I call like less than 10 or less than five. They're kind of. There's less and less of them around there, they're kind of closing up shop, retiring, going out of business.

I think maybe the new the new business startups that are kind of born in the cloud. We don't really get the opportunity to service them because they don't have servers and don't need managed services. So but that's fine by me because I prefer any time to deal with a 25, 45, 75 user network over those micro businesses.

So like last year alone, you would think it's kind of bad news that I think we lost seven net customers, but we ended up. With more seats and more MRR than when we started. So we had like 26 percent growth last year, even with losing seven customers.

And really, it's because. I think all but one were micro customers.

[Uncle Marv]
So your other customers are growing and compensating for that loss.

[David Stinner]
Yes, they're growing. And at the higher end in that enterprise space, we're doing co-managed I.T. support where we don't always get all of the work. But it's nice to be able to get.

The work that we get, and it's pretty fun. My engineers love working on it.

[Uncle Marv]
All right. So this sounds like a good spot for a break because I want to kind of get into the managed services space, the services you offer. But I have a feeling that I don't want this to be a two hour episode.

So let's take a quick break and we'll do a part two for our listeners so they can listen in charts there. Is that OK? Sounds good.

See you on the other side. All right. We'll see you on the other side.