MSP Experts Interview With Karl Palachuk

Karl owned an IT business for 16 years. Once he sold it off, he started working as a business coach and is involved in programs with HP, Intel and Microsoft. He stays involved in the MSP space by writing on his blog at Small Biz Thoughts and is the author of, “Managed Services in a Month”.

Listen to the full interview:

Key takeaways:

  • Karl sees the MSP industry as an interesting place. Karl says, “There’s a lot of business owners in their 50’s and 60’s, looking at retirement and getting out of the business, yet there are not a huge number of young people getting into the business”.
  • In three years’ time, everything we are doing is going to be different – things are changing so rapidly!
  • Things are getting consolidated, there are good-0zed organizations going around and gobbling up the little guys.
  • Opportunity lies in putting together your own little packages that include some storage, hosted anti-virus, hosted spam filtering, hosted exchange, and backup. Karl calls this his ‘five pack’ and says that it should be cheap enough that nobody even bats an eye. But, it’s important to do this to get people through the door. These services are automated so they should take too many man hours. Now, when your client does need some extra help, you’re their first call.
  • A problem that’s going to be faces MSP’s moving forward is in the form of ‘bring your own device’. Four years ago, we would not have imagined the extent at how big this issue has become. Company’s need to have policies, you need to talk with clients and come up with a process to deal with it.


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Full Interview Transcript:

Please excuse the odd grammar error, this is only a transcript.

Ross: Start with telling me a bit about yourself. I’ve done a bit of a lookup about what you’re up to but for say, others that aren’t familiar with what you’re doing, just give everybody a bit of a rundown of what you do, your experience in the industry and where people can find you.

Karl: I owned an I-T business which eventually we began to call a managed service company for 16 years. I sold that off, I now work for the guy who used to be my service manager. He hires me kind of as a coach. I help him with sales, with the client roadmap meetings. I’m managing some of the bigger projects, I get to play with the toys. I get to be involved in some stuff because of my writing.

I’m involved with programs with HP, Intel and Microsoft that allow him to have access to toys that he might not get access to. Sometimes we get equipment out of that which he gets to keep. We have a really nice relationship and he does most of the work so that’s good. I keep myself involved in it day to day because as a writer in the S-M-B space, I want to know on an ongoing basis what the problems are and what the questions are and what the challenges are and what the solutions are.

We do run a very successful business. I help build that as a model for giving advice to people in how to run their businesses. I’ve written 10 books including my most recent which is “Managed Services in a Month,” which is available in paperback, audio and ebook and now it’s available in Spanish.

Like I say, I do some coaching. I’m developing a new product for people to be able to do some self-coaching and that will be released the second half of this year. It’s in beta now, I have about 60 beta testers.

Ross: Is that like an online platform to help people?

Karl: Yes, it’s built completely on the Microsoft Azure fabric, so it’s completely cloud based and that way, it can be multi-user. It’s actually got some really cool features that will allow people to resell it in some cases and make a little money as well.

Ross: A lot of the stuff that you do with your books people can find you on small biz thoughts dot com, right?

Karl: Yes, small biz thoughts great little book dot com is the site basically for my books, but small biz thoughts is for a broader collection of products and services by myself and others. I use the brand small biz thoughts for my blog as well.

Ross: A lot of people that I talk to, they’re always interested in knowing where’s the industry going, what’s the trends, where do you see things going in the next one to three years. I was wondering if you could shed a bit of light to your thoughts on what are the trends with seeing, obviously there’s a cloud having a reasonable impact on everything, but what’s your thoughts on the trends?

Karl: It’s interesting. I think we’re at a very interesting place in the history of this business. On one hand, there’s a lot of people who are in their 50s and 60s who are looking at retirement, looking to get out of the business. Yet, I haven’t seen a really huge number of really young people getting into the business.

I’m out looking for the younger folks who are getting into the business who are going to be doing things differently. They’re never going to start with the solution of, “Hey, let’s put in a server.” The server will be like the last thing they’re going to think about pretty much. They just have a different view of the world. It’s interesting because in technology we always think of ourselves as having such fast turnover.

I always tell people anybody can get into this business now because in three years everything we do is going to be different. There’s such a fast turnover but at the same time, there are people who are today emailing me and begging, “Where can I find a small business server 2003 license because I want to sell one to a client?” I’m like, oh my god, A, it’s 10 years old, but B, it’s generations behind the technology, but it’s what they know.

There’s more conservatism in technology than we like to believe sometimes. I think some of that’s going to shake loose. I think the economy and the recession still hasn’t hit every place in the world, it’s just really going to shake out this industry a bit. That plus a little bit of retirement here and there, I think we’re going to have a different industry in three or four years than we do today.

Ross: Do you think it’s still going to be as big? I think it’s going to start to be consolidated now that things are going to be moving more to a …

Karl: Things are getting consolidated. Normally, I coach five clients at a time. Just recently, I looked up and I realized three of the clients I was coaching were either buying a company or positioning themselves to sell the company. There are pretty good sized organizations going around and I wouldn’t say they’re gobbling up the little guys, but they are making it known if you’ve got a successful business and you meet a certain revenue level that they are acquiring businesses.

I think there’s some of that is going on. There’s always going to be people coming in the business starting out with one or two employees. There’s always lots of opportunity, that’s the good news is that it’s an expanding universe. We still, as odd as it sounds, there’s not complete penetration of business networks into small businesses.

There are millions and millions of small businesses all over the world that have no network. They only have unconnected computers. Even if they can use things like Google apps or SkyDrive or Microsoft products, whatever, they still need some coordination. They need to have a backup, they need to make sure their stuff is safe. Whether they know it or not, business owners just absolutely don’t know how to do that the right way. A good technician will always have a job if they’re willing to put out the effort to be professional.

Ross: No, it’s interesting. I want to just touch on what you mentioned before with trying to get some younger guys, trying to touch base with younger guys that’s in transition between maybe aging owners in the S-M-B space. Are you looking to try and get some younger guys involved, to get their thoughts on things? Is that what you’re trying to do?

Karl: Yes, I think it’s a bit of a two-way street. On one hand, I want to help them avoid some mistakes. One of the reasons I price managed services at twenty four ninety-five U.S. is that anybody can afford that. I don’t care what you’re doing. You can afford 25 bucks to figure out what you should and shouldn’t be doing in your business. We provide some resources to help people skip over some of the mistakes that other people have made.

At the same time, I need those younger people. I need to talk to them. I need to find out how do they approach problems that’s different from the older generation? What kind of services are they offering? I’m always looking to figure out what’s the cutting edge, not necessarily in the technology, but in the way that the technology is delivered and serviced.

Eventually, we’re all going to catch up to those people, but at the same time, they need to catch up to us. It goes both ways.

Ross: That’s very interesting. I didn’t realize that there’s going to be that weird transition that is I suppose is going to happen and … yes, very interesting.

I’m over down here in Australia. I always feel like we’re a bit behind the eight ball when it comes to a lot of these things. We may be 12 months behind some of the trends and stuff for the businesses that we do work with over here, it’s interesting and such.

I suppose going on from there, we’ve touched on it a bit. What one big opportunity you think, if the S-M-B business owner here is listening to this little podcast is wondering, “How can I grow my business?” What’s an opportunity that you’ve been really recognizing the last 12 months or moving forward that people can really take advantage of?

Ross: For a long time, I pushed something that I call the cloud five-pack, which is basically the concept of putting together your own little package that includes some storage, hosted anti-virus, hosted spam filtering, hosted exchange, products that you know and love and you’re comfortable with, a backup product and put it into a little bundle that’s at a reasonable price. The reason I say sold as a five pack is that it should be cheap enough that nobody even bats an eye at paying for it, so for us, it’s like two hundred fifty bucks.

It’s services that can basically be delivered automatically. Once hosted exchange is set up, I essentially never do anything with it. Maybe add a user, take off a user, same with spam filtering and anti-virus and so forth. We do remote monitoring.

Basically what happens is we sell the client a package of services that allows them to run their business. We get recurring revenue and there’s almost zero maintenance. At the same time, because we’re monitoring your system, if they need some help, we’re there. We literally are, we can remote in and we’re hands on and we can fix the problem. Then, we can either sell managed services on top of that or just have it as an hourly model or a block of time model.

In any case, you can serve an incredibly large number of clients that way with almost no cost to yourself. It’s literally almost all profit. I think that’s a huge opportunity. I hear people say, “My client can go to Rackspace and go click, click, click, go to Microsoft and go click, click, click.” Yes, they can but they don’t. They’ve always had the opportunity to go buy a small business server and install it and those that do just mess it all up so we get more money by going in and fixing it up.

Business owners want to do what they do. They want to run a restaurant. They want to be attorneys and doctors and whatever. They don’t want to be in the I-T business.

Ross: I think that’s a great opportunity. Again, I like to think of it as building trust when you’re trying to build a client base and stuff and by offering a reasonably cost effective package to at least just get a foot in the door. I’ve heard this maybe when I was down at the ConnectWise Melbourne User Group, when [inaudible 00:11:57] was speaking or something. It’s about getting your foot in the door so that when they do need those additional services, you’re the first cab off the rank, so to speak.

Karl: Exactly. Again, if you’re the one who’s doing the monitoring, they’re already your client. You are the one to call, it’s not even like there’s a choice.

Ross: Yes, exactly, interesting. I suppose follow on from that, I was down at ConnectWise User Group, I was down at Melbourne a few weeks ago and they were talking about managed I-T providers being your one, maybe not your one stop I-T shop, but really sort of now changing from just managing some of the I-Ts, also looking after manage the print, the telecoms and basically all the vendors. That seems to be the way things are moving. Is that what you’re seeing in terms of trying to be in control of all a company’s I-T, print, telecom, VOIP, everything?

Karl: We like to manage all the vendors. We’ve been doing that forever because any of them touches that network, we want to make the decisions, we want to be involved. We have a lot of vendor logins, for example for a line of business apps where we set up the login, set up permissions and then disable it. When the vendor needs to get in, they contact us, we schedule a time. We shadow them and that way, they just don’t go click, click, click and mess up something. We’ve had that happen where people have just uninstalled some critical component because they don’t know what they’re doing, so we’ve always done that piece.

In terms of owning the stack, I think you should own as much of the stack as you can comfortably make money at. If you don’t know phones, either learn phones or don’t get into managing VOIP. We resell a hosted phone system. I looked at Asterisk and built a system [inaudible 00:14:00] and configure it all and then realize, “You know what? I don’t want to have an Asterisk guy on staff for the rest of my life.” I uninstalled it and re-used the computer for something else. I had to go through that process to decide that for me, it wasn’t going to be the right choice.

Other things, the hosted VOIP, we can do that all day and all night because again, we set it up. We get an agency fee and we get a check every month.

Ross: How about the problems an S-M-B is facing moving forward? What do you think would be something that people need to be looking out for in the coming months or years?

Karl: It’s funny because if you think about when you have kids. When my daughter was little, I could not have foreseen that when she was a teenager, everyone in the universe would have a cell phone. I just didn’t see that far ahead.

In the same way, just three or four years ago, we would not have imagined that the extent to which bring your own device has become an issue. It was the case three or four or even maybe ten years ago at the longest. At least, five or six years ago that people were showing up with these huge hard drives which used to be 200 megs, but now they’re two terabytes. They just plug them into the network and now you’re responsible for figuring out whether somebody’s moving stuff offsite that shouldn’t be and whether it’s secure and whether it’s backed up and how much crap have they got on there. That was the beginning of bring your own device.

Now, we have people who show up with, “I want a tablet. I want a laptop and I want a cell phone and I want all of these things tied into the network.” I think the big danger looking ahead is that we will let that get out of hand. We will not control that and even if we can’t control it, I think we least have to be aware that it’s there.

We have to have policies, we have to talk to our clients and have some process in place to deal with that, because the last thing we want is for somebody to bring in something, cause a problem, cost the client lots and lots of money and have us stand there like, “I didn’t know that was going to happen.” Like anything else in our business, we are responsible for so much stuff that we take on a certain level of liability, whether we like to or not.

Ross: That’s a great point. Particularly the younger generation coming through, they’ve been brought up with playing with tablets and no real sense of any security risk. They may wander into the work force and just plug their tablet in and connect to the wifi and who knows what else is going on there.

Karl: Right, and not know whether they’re bringing a virus. The viruses of the future are going to be where something is plugged into a network and sucks down data quietly in the background. Then, when it’s plugged in into a different network, it sends it to the mother ship for selling credit card data or whatever. Once that’s something that you can do more or less automatically on a cell phone and on these little handheld devices and so forth, we have lots of trouble ahead and we just have to have our eyes open because it is going to happen.

Ross: That’s a few of the bigger questions I wanted to get out and see what your thoughts were on. I definitely appreciate sitting down with me today, Karl. I suppose in wrapping things up, can you just everybody another idea of where people can find you on the Web, Twitter and all those sort of things?

Karl: If you can figure out how to spell Karl Palachuk, it’s Karl Palachuk all one word on Twitter, Facebook, LinkedIn, Pinterest …

Ross: Let’s have somebody [inaudible 00:18:11] under the video here so people can find it.

Karl: Yes. I’m on Pinterest, I’m loving Pinterest, actually surprised at how much traffic I’m getting from Pinterest. It’s so visual and you see these … it’s almost like YouTube. You start playing around and you go click, click, click. Then, of course small biz thoughts at my blog, that’s small biz thoughts dot com. We get about 40,000 visitors a month. I would love people to check that out, check out our store, buy one of everything, that would be great.

Ross: You’ve also got a, is it S-M-B online conference coming up?

Karl: Yes, end of June, the S-M-B online conference. We got about 12 speakers. It’s three days of online content and it’s really I think, better content than many of the conferences that you can go to and of course, you can consume it at your own time because you can download the recordings any time. If you listen live, there’s a live question and answer periods for each of the speakers. We’re going to do some Google Hangouts between sessions.

It’s a fun event. Again, three days at the end of June and if people use the code “secret one hundred” s-e-c-r-e-t one zero zero, they get a hundred dollars off the registration and you can download those recordings for a year afterwards. It was a huge hit last year and we’re really expecting a great show this year.

Ross:  They can go to, is that where it is?

NOTE: The live event was hosted in June, but you can still download the recording. Head to the website for more info.

Karl:  Yes sir.

Ross: Karl, thanks for your time today. It’s been a pleasure and I think we’ve got some really good insights into where things are moving in the space and some opportunities and problems that S-M-B business owners can be keeping an eye on.

Gordon Tan

Gordon Tan is an entrepreneur based in Australia who has started and sold multiple technology companies with a combined value of $150m. This included a client satisfaction benchmarking platform which gave him first hand insight into the best practices of over 6,000 businesses. After retiring at 35 he is now a recognised thought leader on winning and retaining clients - His two passions: making clients the heartbeat of a business no matter what the product or service and this blog.

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