Sourdough, dog-walking, and listening to podcasts: meet Larry Cobrin, everyone! Well, there’s a lot more to him than that and we’ll get into it here. Larry joined us on a recent episode of the Stride to Freedom podcast to talk about how he helps Managed Service Providers (MSP’s) turn data into a secret weapon for growth and profitability!
Larry is the founder and CEO of MSPCFO, a data analysis software company that provides actionable insights for MSPs. He’s been leading the company for the last 10 years and shared his insights with us about the power of data, leading a company, and why it’s important to communicate in plain English.
Data-Driven Results for MSPs
Larry helps MSPs become more profitable. He compares it to a retail operations manager’s role: if a company has a number of stores, it’s up to the operations manager to figure out which ones make money and which ones don’t. In a professional services environment, determining those “unit economics” is a bit more challenging.
For MSPs, swap out stores for clients. Which clients, along with their projects, agreements, and engineers, are not making you money? You may aim to bill at $150.00 an hour, but time-consuming, high maintenance customers may eat up your time and bring that down to just $50.00. Did you know that?
Most MSPs simply don’t know their data. They know that there is a customer that’s frustrating to deal with, but they might not get the full view of how it’s impacting the bottom line.
That’s where MSPCFO comes in. Their cloud based software pulls and analyzes data from PSA (Professional Services Automation) software like ConnectWise Manage and Autotask so that MSPs know exactly what’s draining the business and what’s keeping it afloat. The business can then act and adjust through client management, operations, or other strategies.
Focus: Building a Business
Larry works exclusively with MSPs despite their software conceivably having applications in other industries. Why? Focus! Here is what focus gets you in the MSP segment:
- Ability to build for the unique problems of a segment. When you can “talk the talk” of an industry segment, you aren’t just selling software. You’re an industry partner that adds strategic value.
- A rich and connected community. Maybe more than other industries, MSP’s are very collaborative. That makes it a lot easier to learn and iterate on product to serve the segment. It also helps drive more referral activity.
MSPCFO received counsel from a trusted source to “stay in their lane,” and that’s been working for them. Focus affords companies the ability to drive a very clear value proposition and MSPCFO is nailing it.
How to Connect with Customers
When describing his zone of genius, Larry said he likes to answer problems in English. What he meant is that while data is behind every decision he makes or solution he gives to a client, it needs to be delivered in a way they understand!
This means no industry jargon or numbers to make their eyes glaze over. Use the data, get the solutions, deliver them to the client. You win client’s trust and business when you explain things in a way they understand—it signals empathy and understanding.
Larry Cobrin had so much more wisdom and insight to share with us. Make sure to check out his full interview on the Stride to Freedom podcast. You can also connect with Larry on LinkedIn and check out MSPCFO.
And while you’re poking around the internet, check out the other episodes and resources on the Stride to Freedom podcast! We’re hosted by Stride Services, a provider of back-office accounting and CFO services for the MSP market.
If you want to know more about us at Stride Services, contact us today.
The Stride for Freedom podcast is hosted by Stride Services. Contact us today to learn more about our back-office accounting and CFO services, including stable and efficient bookkeeping, cash flow management, and actionable analytics for growth.
You’ll enjoy this Podcast episode with Larry
We are fortunate to have Larry available to spend time with us on this edition of Stride 2 Freedom. If there is a speaker you’d like us to interview, click here and let us know. Stay well. Stay safe. Stay healthy.
Show Notes and Links From Episode:
Larry Cobrin: LinkedIn
Larry Cobrin: Top 10 Takeaways
Larry Cobrin: firstname.lastname@example.org
And if you want to know more about us at Stride Services, contact us today. We offer back-office accounting and CFO services, including stable and efficient bookkeeping, cash flow management, and actionable analytics for growth
Russell Benaroya: Hello, everybody. Welcome back to another episode of the Stride 2 Freedom podcast. I am your host, Russell Benaroya.
What is the Stride 2 Freedom podcast? The Stride 2 Freedom podcast is designed for business leaders that are motivated to achieve their highest and best use. We help business owners get and stay in their zone of genius.
What is your zone of genius? Your zone of genius is that thing that you do that is uniquely yours to own; where you lose track of time, where maybe you do it if you didn’t get paid, but more importantly, you get acknowledged and recognized for this work. And you say to yourself, “Oh, I didn’t really know that was a thing, but people are so impressed.”
The truth is that many business leaders don’t spend enough time in their genius zone. So we created the podcast to bring guests that are in the business of helping business leaders get in their genius zone and achieve their highest and best use. We’re fortunate today to have Larry Cobrin on and we’re going to talk about doing just that.
Are you in, Larry?
Larry Cobrin: I’m here.
Russell Benaroya: My name is Russell Benaroya and I am your host of the podcast. The podcast is sponsored by Stride Services, an outsourced bookkeeping, accounting, and fractional CFO services firm serving professional service companies like MSPs. What is our genius zone? Our genius zone is helping business leaders use data to make better business decisions.
It’s so apropos that we have Larry as our guest today because he’s like in the Uber business of helping MSP owners use data to make better business decisions. Larry is the founder and CEO of MSPCFO. For the last 10 years, Larry has built a technology that empowers MSP owners to achieve greater profitability and transparency with their data. I’ve enjoyed speaking with managed service providers that have lauded Larry, an MSPCFO, for the impact that he and his technology have had on their organization. So, it’s a pleasure to see you, Larry, and to acknowledge your impact.
Larry Cobrin: It’s a pleasure to be here. Thank you so much for having me on.
Russell Benaroya: Such a pleasure. I want to penetrate what I perceive to be a slightly stoic exterior. I want to get to know a little bit more about you before we dive into what you do. I hear that you like waiting for fresh bread to rise and hiking with your dog. What’s the deal there?
Larry Cobrin: The fresh bread is obviously just sort of cliche. During COVID, I got into sourdough bread making and it was quite a treat. When COVID struck and you couldn’t get flour in the store, I found a restaurant supply place that would drop off 50-pound bags of flour, and we started going through those about once a month. I don’t know if you’re responsible for shopping, but that is an awful lot of baking that we did. It kind of tapered off as many COVID activities did.
Then walk with the dog; that’s how I start my day every morning. Before anybody else is up in the house, between 5:00 and 5:30, there’s a trail about a mile point seven, not far from the house. The dog and I go for a hike. I listen to a podcast and it’s my peaceful time. That’s how I get my day started. I come home and then I see the kids off to school.
Russell Benaroya: What is a podcast that you’re listening to that’s capturing or captivating you right now?
Larry Cobrin: I do the serial ones that come out. There aren’t that many right now that are getting me but one of the ones I listen to twice a week is Pivot with Kara Swisher. She was a writer for the Journal and a marketing professor at NYU. I listen to the New York Times Daily. And in my world, we are a bootstrap startup so there are several bootstrapped podcasts that come out every week that I try to listen to.
Russell Benaroya: What is one adventure that you’re planning this summer that you are either really excited about and/or might break you out of your comfort zone a little bit?
Larry Cobrin: At my age, I don’t get out of my comfort zone anymore. One of the trips that my wife and I do every year as we go up to Stowe, Vermont. We stayed at a nice little hotel. There’s a five-mile bike path. I don’t know if I’d call it an adventure. It’s just something I really look forward to. On the ride back on that five-mile path about halfway, there is this fantastic restaurant with an outdoor bar. I get a soft pretzel flight of beer, and I’m in my happy place.
Russell Benaroya: Sounds so nice. Let’s jump in and talk about MSPCFO. I’ll give you the floor to give us some background on the business. I’m also equally interested in your decision to start it and the method that you’ve used to capitalize it, which as you just shared is a bootstrap business.
Larry Cobrin: To really see how I got here is to see where I was before. I was at that division of CitiGroup that got bought by Morgan Stanley. I was there from 2006 to 2010, which covered the period of 2008 when financial markets almost stopped spinning on their axes. At the end of my tenure, I was given the opportunity to spend more time with my family.
It really is one of these situations where somebody says to you when one door closes, another one opens, and you find that to be so trite when they say it to you. But with a little perspective, it’s true. I wasn’t happy there. I had met a former friend at Morgan Stanley who was at a startup. She looked happier than anybody I saw at Morgan Stanley. So I started looking in the startup space.
I ran into a friend of my wife who had an MSP and he said, “Listen, we have a real problem with analytics. I think this is something we can do.” He had first thought we’d be outsourced in a similar way to what you do outsourced accounting and bookkeeping services. And I said, “I don’t have the expertise for that, but what I have done in my career is I have done analytics.”
So we started breaking down how to look at MSPs. We started pulling data out of ConnectWise and realizing how much data truly is in there. The perspective that we always have taken is that if you look at a managed service provider, there are ways to look at it that are similar to a multi-store retailer. By that, I mean if you’re multi-store retail, you have 10, 20, or 30 stores, and each one of those stores has to make money in accounting parlance. That’s the four wall contribution of a store.
Well, some stores make money, some stores don’t. Your job as an operations manager is to figure out which ones make money and to better those and fix the ones that don’t. Well, MSPs are similar, but they don’t have stores. They have clients. They have agreements, they will do projects, and they have engineers. So, they should be able to break down which ones are doing well versus poorly.
We started to do the analysis on that to break down which clients are better or worse. And again, to stick with this whole retail metaphor, in retail, the way they look at it is sales per square foot because a bigger store is going to do better than a smaller store. For MSPs, we look at it as how much gross profit are you earning per hour you spend servicing that client?
We were able to show that maybe you have a big client that makes money but two smaller clients are better than one big one, and maybe you should reevaluate your portfolio. When we started the business, we started doing analysis in Excel, sharing files via Dropbox, and pulling data out with ODBC connections.
We realized that what people were asking was starting to have similarities. We were answering the same question. We were preparing the same worksheets so we moved it over to an application. We built the application from scratch. We outsourced development and we’ve actually brought it in-house. We’ve been doing this now selling software for about seven years.
Russell Benaroya: Congratulations. I think when one door closes the other door opens and resonates with me. I wrote a book on a similar topic and the topic is really about the privilege of architecting your life, of being a creator, and you did. You created something and built something that mapped to the way that you wanted to build your life. I appreciate that.
What complicates solving this problem for MSPs? What complicates getting that information through a source other than what MSPCFO could help them do?
Larry Cobrin: I can tell you doing this for as long as I have, some of the stuff is complicated. From the simplest perspective, if you look at working on an agreement, and you want to say how productive your engineers are, well, you can’t look at the gross value of the agreement. You should look at how much labor there is.
If you sell a large BDR device, like a $1,000 BDR device on a $3,000 agreement, and you want to calculate the effective hourly rate, how much you’re earning per hour of labor, you didn’t sell them $3,000 of labor, you sold them $2,000 of labor and $1,000 of product. That is a very simple way of doing it. A lot of our partners make it much more complicated. Like if you sell $75 a seat, but you throw in $15 of tools, it’s all in one line item.
The disentanglement of product and labor is a real complication. And a lot of people don’t fully make that effort. What you can do is you can make good clients look bad and bad clients look good. The whole goal is to make improvements to your business and you want to do it in the right place.
Other complications people have for doing this are average camouflage problems. We always look at a client and we say, “Well, what’s your effective hourly rate?” Let’s say they’re targeting 150 and then they calculate their fixed fee labor, they calculate the fixed fee hours they put in, and it works out to 150. They may say, “Well, we’re good. Let’s move on. Let’s focus on other parts of the business.”
And we say, “Well, before you move on, let’s look at your whole portfolio of clients. It averages 150, but you have some clients that are just awful, that’s 70, 60, 50, and you have some clients that are wonderful worth $500 because they never call you. If you say you’re done, what you’re missing is the fact that on one side you potentially have clients that you can improve. They’re already doing business with you, and you can focus on how to improve them. And there’s upside potential for existing clients you’re not selling or maybe you’re upselling a little bit when you’re just fixing operations. But on the other side, these clients that are paying you $500 an hour, it’s not going to be too long before they scratch their head and say, “Well, maybe we should put this out the bed. I never see these guys.”
A lot of the complications people have is not going deep enough and not being careful enough with the numbers. And then obviously, the foundational issue is using the PSA correctly. They think the data in the PSA is fine, I get my invoices done. Well, getting your invoices out and having the quality of data to do analytics are really two different levels.
Russell Benaroya: Which is what impresses me so much about what you’ve built. I have a story, which you’ll clarify in a second, that you don’t provide as part of the service, a disproportionate amount of consulting. You’ll clarify this for me, but I have the sense that we don’t have to provide a ton of control because the software is pretty intelligent.
But then I got thinking, boy, how people set up their ConnectWise manage instance, and how they’re mapping to certain cost items has a big impact on what populates into your software. So I’m curious, how do you manage that? There’s so much variation, I imagine.
Larry Cobrin: Well, as I just said, I came to this business from working at a large bank. Before that, I had worked at a consulting firm. I’d worked at a hedge fund, I’d worked in private equity. I’ve done a whole bunch of different things but not an MSP.
I’ve been doing this long enough that I can consider myself part of the community, but people will say to us, “How do I set this up to my PSA?” And I say, “Well, I know how it should look when it comes out of the database, but we’re not front-end consultants.” We’re really fortunate that in our industry, there is such a depth of coaching, consulting, and advisors that are available to people.
We do try to draw a line and say listen, “We will provide the software. This is what the software will tell you. We’ll tell you when the software says the data is bad, but you are better served by talking to an implementation specialist or talking to a PSA provider. However you do it, get somebody who is a front-end person who understands this.” We will work with them. We’ll tell you if the data is better but we really rely on the community to help our clients.
And you know what, we’re not the only reporting platform out there. But I’d like to think whatever we recommend to go up to cleaning up the data, it wouldn’t be applicable if they left us and went to somebody else. If you have bad data, no reporting platform has as much value as it should.
Russell Benaroya: Have you always had this philosophy of the rails or the swim lane with which you will fly? Or have you felt the urge to expand and then for whatever reason, ran that experiment, decided it was not for us, and came back into your lane?
Larry Cobrin: In my heart of hearts, I’ve always said that I wanted to work for a software company. Software companies versus consulting companies are much more scalable. Consulting companies, you sell 40 hours a week, you have to hire a new person. And hiring really frightens me because then you’re always very careful about what we’ve done and you have to have quality control to make sure that you have the right people promoting your brand with the product that they deliver. I was never comfortable with that.
That being said, I live in the product. If I have a client that comes to me and says, “Well, what should I do?” I can start popping around an application, and within five minutes, I’ll give them four recommendations on what to do to fix their business or to fix their data.
It may take them two hours to do what I can do in five minutes. There are many things I do much slower than other people, but this is my product. I know how things work. We’re always trying to make it easier for people. It’s a struggle, but we always work towards it. So we had contemplated selling almost managed services hours around MSPCFO. We have a user group that we convene every once in a while. I think we’re due to meet again and I mentioned to them; that maybe we could sell some hours. And to a person, they told me no. They told me all the challenges that I would have in providing a managed service around the product and that I shouldn’t. So we started leading towards it and then we were pushed back pretty hard by people we trust.
Russell Benaroya: Good to have good, good people around you that will give you honest feedback. When your clients are successful with MSPCFO, what are some of the decisions that they’re making from analyzing or getting insights from the data?
Larry Cobrin: To the point I was making before, people have a portfolio of clients. What we try for is the highest return on effort. By that, we mean how small can we make the problem? Like if you look at your P & L, I think 21% is what they say is best-in-class EBITDA margins, if you’re at 15%, you want to add six points. The question is, how do you get there? Maybe I’ll raise prices, maybe I’ll change the tool. Those are big, complicated issues.
What we like to do is look smaller. We can look at an individual client. Here’s one that we always use as an example. This was somebody that had a large accounting firm as a client. And as tax rules change every year, accounting software is updated and has such crashes because it’s constantly being dynamically updated. They were doing a heck of a lot of work supporting this line of business software. We identified that client as having an outlier in its operations.
The amount of money they were getting paid for what they were covering was about average compared to their clients. But the amount of work that we’re doing compared to what they were recovering was disproportionately high.
So we found that this was an operations issue. From that operations issue, we took it down to its line of business. We had a conversation with them and their takeaway was that they went back to the client and they said, “Listen, we’re not going to handle your software issues anymore. We are an infrastructure company. We will support what we sell, but this is outside of our game plan.” And that dramatically changed their profitability. It added a couple of points.
One relationship added a point or two to their bottom line. That’s what we try to do. We try to find small, discrete opportunities where somebody can add a point or two to their bottom line. Some people have a lot of turnover so they’re dealing with a lot of installs. Well, what they’ve decided is it’s above and beyond what they should be providing and they cap it. They say, “Well, you’ll get a certain number per quarter. If you go above that, you pay.” Now they’re getting paid for the work that they’ve been doing for these clients that have very high turnover.
It’s being able to narrow the issue and know that if you can fix that narrow issue, you’ll get a small or mid-sized bump to your bottom line. That’s what we’re trying to sell.
Russell Benaroya: I really like the effect of grounding stories with facts. We tend to live in a world of stories and they’re not always grounded in facts. But look at the data, look at that individual customer and what it’s doing to you and whether or not you have a lever there to influence it.
Do you allow clients to turn reporting out of MSPCFO externally to their clients so that they can use data as a basis for conversation around getting into better alignment or a better-shared agreement with that client?
Larry Cobrin: It’s not designed for that. But that being said, one of the things that we do is we’ve been a sponsor of Evolve for most of the time we’ve been in business. One of our earlier clients showed that we have a chart that shows how many hours you’re delivering, versus what you expect to be delivering for what they’re paying. If you’re shooting for a $150 effective hourly rate and it’s a $3,000 agreement, you want to deliver 20 hours. If you deliver 30, then it would show 10 hours below the line. If you deliver five, it would show 15 hours above.
So what he did is to use that chart as a bar chart. He showed that chart to a client and said, “Listen, this is sub-economic for us.” I think good business people don’t want their vendors to do them a favor. They want good business relationships. And they said, “Listen, we’re going to have to raise your prices.” They said that the chart was very effective in helping them have an open and honest discussion with their clients, and allow them to raise prices.
Here’s the interesting thing. When they were below the line, if it said 100 cents on the dollar to get it back up to where they wanted it, they would ask for 100 cents. And then they would find clients that were consistently above the line. And they would say to those clients, “Listen, I know we’re charging the right amount for the machines or people that we’re covering, but you guys are not using enough time. We want to give you guys a rebate.” And they’d give them a discount of 25 cents on the dollar.
If you’re paying a vendor, and they’re getting their job done and machines aren’t breaking, it’s always nice to pay less rather than to pay what you were paying. So they had their great clients who now we’re paying less and are much more stable and now in love with them. And they had their bad clients on the road to more profitability.
So there are certain points that people used to make a client facing and that was completely unanticipated. I sat in the meeting and I was shocked that he shared it because it’s not designed for that. Our system times out after half an hour. It’s not meant to be left on the plasma. This is very much for the C suite or the operations manager to focus on and find opportunities to improve their business. So yes, there are times that it happens, but we don’t create outward-facing stuff. People find uses for it.
Russell Benaroya: For everybody that is listening to this, even if you are not an MSP, but you are a professional services business owner that’s trying to run a business on a subscription basis or some kind of monthly recurring fixed revenue, what Larry is articulating may be the most important analysis that you can do in your pursuit of maintaining profitability in a subscription-based environment.
What, Larry, you’re really referencing, was this concept of the shadow bill rate. There is some number of hours times some amount of hourly rate that you are implicitly charging and may be losing money on that client because you are fixing the amount of revenue that you’re generating. But if you don’t know that, that’s redzone.
Larry Cobrin: We actually have a number. Effective hourly rate is something that’s much more common. We also have this number we call pricing efficiency, where we literally do exactly what you discussed. In the PSA, there is a billable rate for every time metric. If you have a call center person that bills out at $125, and you have a level three project engineer that builds out at $250, for every time bench, we build a fake invoice. We say, “You deliver $2750 of value. Let’s compare that to what you actually did.” Then that gives you your efficiency.
There are people that are smarter than us that would say your efficiency should be about 1.3 because you have tools, you have automation, and you have all these benefits. You have a standardized stack with these clients. That’s what your sort of narrow target is, but the nature of our clients business is they are insurance policies. They are there when bad things happen and things will go up and down. So they recommend that you should get active if the client goes out of the 1.8 to 1.5 range. Below 1.8 means that you’re doing too much work for what you’re getting paid. Above 1.5, they’ve become a flight risk, and you have to reassert your value. But yes, we use the term shadow billable.
Russell Benaroya: I love it. Let’s go back to the way back machine here. I’m not a huge fan of looking back and going should’ve, could’ve, would’ve. But I’m curious, 10 years ago when you started the business, or thereabouts, what did you anticipate at the time? What were you thinking this could be?
And when you reflect a little bit on where you are, are you exactly where you want to be? And I’m not saying where you want to be relative to where you thought you were going to be. But the environment changes, you adapt, you change, it’s been 10 years. Take me back to what you thought.
Larry Cobrin: I would say that the product is largely doing what we had thought it would do; being able to help people quickly find problems in a business. We had anticipated this when we were doing work on spreadsheets. We’re doing it better than we had been doing it before. We’re constantly iterating on a product or we want to make it better. It’s better than it was a year ago, but it’s not as good as it’s going to be a year from now.
If I’m being honest with myself, I would say that I thought people would embrace it more and quicker. I love the product, I think it’s great. I think it’s super useful. I get people on the phone all the time, and I do a demo call with their data. I would have thought there’d been a better embrace but we’re doing very well and we’re very happy.
Things are way slower than they ended up being, but that’s fine. The challenge that we have is that when we sell our service, people who actively use it get a multiple of the value easily. For people that don’t use it, every penny they spent on us is wasted. So they should also look at what the investment of time is. If they’re not going to use it if they have other issues they are working through… that was something I should have understood better that this isn’t the only thing like if they’re dealing with employee issues.
I remember when I was sitting in an Evolve meeting, we sat in on clients and talked about their issues. I’m sitting there saying, “This is how you squeeze an extra point out of your EBITDA.” And we have partners who are saying, “Well, this is how I dealt with the cocaine problem in my office.” People have other issues that sometimes trump my 5 points of margin. And that’s not something I really considered. I thought we were giving them more money. Well, there are other things that people need to focus on.
Russell Benaroya: Tell me a little bit about your pricing journey experimentation that you’ve undertaken on pricing MSPCFO. Because to your point, those that do use it get a multiple of value.
Larry Cobrin: If they can fix agreements, then they get multiples every month.
Russell Benaroya: Exactly. I’m curious how you wrapped your head around the pricing for your service, and what kind of experimentation you’ve done. What’s your pricing philosophy?
Larry Cobrin: Originally, the price was $3 a month for the standard service. We didn’t give it a ton of thought, to be honest. It was a standard price for tools so we thought we’d fit in there. About two years ago, we raised the prices by about 15%, the only time we’ve ever really meaningfully raised our prices. We’re still trying to evaluate how we do things. We charge a little extra if you have different logins.
And we’re considering that given that we are a database-based service, and larger databases take up more space, and we pay more to Amazon to analyze and we want to actually make things bigger so that these larger companies can be analyzed, we are thinking about a surcharge. We have to decide where this line will be, but for very large companies, for new clients.
Two years ago, we raised prices. I lost sleep over this for a long time. We put it through; we just said this seems reasonable. I thought about so many different scientific ways to get there and I thought, let’s just make it a round number. We went from $300 to $350 a month. We lost 3% of our clients but these are mostly our zombie clients who kind of woke up and said, “We’re not really getting value, so it’s not worth paying more.”
I wish there was more science to it; we just went with what we felt. We don’t monetize the data. Our goal has always been we’re going to build a great product and we’re going to try and scale and make money that way.
Russell Benaroya: If you were to dangle out in front of us questions that you are trying to help your clients solve that are still pretty hard to solve, what else would MSPCFO like to be able to help their clients answer?
Larry Cobrin: There was some stuff we’re working on right now, which is really just connecting the dots, telling a full story in one question. Whereas a bad client is, what’s the source of the unprofitability? Is it because of the project or the engineer or the agreement? Usually, it’s the agreement, but not always. If it’s the agreement, it’s because it’s mispriced. If it’s the operations, where’s that coming up?
In our system right now, you go through four pages. We want to string that all together so we can say, “Hey, you have a client that’s killing you on VPNs and you have an opportunity to make a 5% margin if you fix it.” That’s something we’re doing, tearing the logic. Another thing we like to do is benchmarking. The challenge that we have with this is it requires standardization, that when you call a new machine setup, somebody doesn’t call a three-step process with three tickets and you call it one ticket because then you can’t really make a comparison. We’ve really fought against benchmarking. I have a gut feeling about what’s good and bad. But that’s something I like to be able to do with confidence and I haven’t been able to get there yet.
Russell Benaroya: Are there companies in other verticals that offer a similar value proposition to MSPCFO but for another industry like digital marketing or something? Maybe it’s Google analytics.
Larry Cobrin: When I started this business 10 years ago, we thought we’d do this for a while and then go into another business. I think hospitality is a lot like this. There are some really great tools there. I think medicine sometimes tries, although I don’t think they try hard enough. There are various industries that have it. We just really haven’t had the time or ability to go into other industries.
Russell Benaroya: What is it about the managed service provider industry that you have just taken to and appreciated?
Larry Cobrin: There are a couple of ways to answer that. From a personality perspective, I kind of like the people. I go to these conferences a couple of times a year. I really enjoy seeing a lot of people. It’s really enjoyable to me. The percentage of people I like is far in excess of what I would have expected to go into a business conference. Really nice people, really interested, really motivated. I actually catch them at a time when they’re trying to make an improvement in their business so it’s really been great.
I think there’s a mutual value. I think they value what we provide and we value their feedback and what we find from them. I’ve said to our clients many times that I’m kind of smart, but our client base is collectively genius. We are always learning from them. That’s been really wonderful. The fact that they’re always trying to improve their business; I will pick up tidbits all the time that we could try to build into our system or build into our way of thinking.
That’s from a more personal side of it. From a professional side of it, what I love about this space is sort of the standardization. There are peer groups where these people all share ideas. There are conferences where 2, 000 people will be in the same hotel, listening to the same speech. There are PSAs, of which there are three, four, or maybe five major players. I briefly worked for a healthcare startup and there were 700 EMRs, 15 years ago. So this is a much more standardized space from a business perspective and that allows you to sort of live and scale within it without getting too broad.
Russell Benaroya: That’s why I love it too. We’ve been focused on the MSP segment for less time than you have. But for the last year and a half or so, that standardization has been so awesome and the community’s terrific.
What is something people might find surprising about what it takes to operate a business like MSPCFO in the way that you’ve chosen to structure it?
Larry Cobrin: I don’t want to say anything bad about our clients, but people are like, “How many clients do you have?” And we give them a loose number. We don’t tell them exactly what we have, but we’re honest about it. We have around 300 plus clients. They do the math and go, “Oh, you must be killing it.” I’m like, “Well, we have a lot of expenses.” It costs a lot to build the product. It costs a lot to maintain it. We have people that support the product.
That’s something that people ask. I don’t really get into it. I just say, “Yes, we’re doing great, thank you.” But yeah, sometimes people don’t have a full appreciation for all the expenses and keeping your business up and running. That’s one of the big ones.
The other thing is we have clients all over the world. We get tickets coming in constantly. I get people that want to chat on our website and it’s always on my phone. And it’s sort of never-ending. There is no workday because if something happens, I have to jump on it right away. The reputation of the company is completely something that I want to protect. And if something happens, I want to get on it immediately.
I’m not perfect at it, but we try. So I have the flexibility that I can go on the back porch and do work. I have the flexibility that I can enjoy my kids and go to a game. But if something happens on my phone, I will step away from the game and deal with it, constantly being on call. Those are the big ones.
Russell Benaroya: What is the next most important hire for your business? When you think about the function that you would want to solve with a hire, what role would you fill?
Larry Cobrin: That’s a good question. We actually just hired somebody. She started last week. She started to manage our customer success.
Now, we have two people that do it right now, but we wanted to be able to scale it up better. We hired somebody to, again, apply systems and be able to scale that up. I think we’re done for a while.
As a founder in the first couple of years, aside from writing code, which we had a developer for, I was doing almost everything. I did a talk at my daughter’s eighth graders’ Career Day a couple of weeks ago. And I said one of the great things about doing this is when you start out, you have to do everything from recruiting to customer support and marketing and sales. I am a product person. I provide everything to the developer to build. And then as we grew, I was able to hire.
One of the first hires we had was sales. We have other people that do customer success. I dip my toe in now and again, but most of our clients are supported by other people. This year, we outsourced recruiting. We have an outsourced marketer.
One of the nice things about being a founder is you get to fire yourself from the jobs that you’re not good at. When you start a company, you have to muscle your way through everything and now I get to go closer to where I think my natural abilities are. A long-winded answer to your question: the next person we hire I’m not certain. We have customer success handled, marketing and development we’ve added to those. Strategically, we would add underneath that. As I said, I think we’ve hired the right number of sergeants for now; the next thing we hire are privates.
Russell Benaroya: Last question, Larry, what is your zone of genius?
Larry Cobrin: I don’t want to sound falsely humble, but I’m not super comfortable with calling myself a genius.
Russell Benaroya: Don’t take it literally. How about where do you get the most energy?
Larry Cobrin: I get the most energy in solving problems. I find it fun. Everybody likes puzzles. I like analytic quantitative puzzles. I was a physics major in college and I just made my problems a lot more interesting.
My zone of genius is taking a real-world English question, finding the data that goes along with that question, doing analysis, and coming back with an English answer. I don’t want to sit there and say, “Your R squared is this and your slope and you should worry about…” I don’t want to do that. I want somebody to say, “How do I make more money?” And I want to come back and say, “You should carve out your line of business software from your managed service agreement.”
I will have a lot of data between the question and the answer and that’s where I like being. But being able to go from English to English is what I enjoy most.
Russell Benaroya: It’s so powerful that that really demonstrates some empathy that you have for the customer that does not know all that sits in the middle. They want to have an English conversation. Acknowledging that and building for that is so hard to make it look so simple.
Larry Cobrin: The thing I think about is, remember the fishing moving with Paul Newman and Rob Wright and the two brothers were talking about fishing, and one of them was a prodigy. And he’s like, “You’re sitting there and you’re casting really well.” He was like, “Well, I don’t think as a caster, I think as a fish.”
As a product person, as a vendor, I try to think about what my clients want to know. They don’t want jargon. Some of our clients are great at jargon. That’s fine, but that’s not really where we need to do our best. We need to do our best to make them better in plain English.
Russell Benaroya: Larry, thank you so much for spending some time with us today on the podcast. I just wanted to get to know you for a long time so I figured, well, why not get to know you and have you on the podcast simultaneously?
I learned a ton. I appreciate the wisdom. I appreciate what you’re doing for the industry. I am highly confident we should have more conversations because I’d love nothing more than to find ways to engage together. But most importantly, I want folks on the show to appreciate what you’re helping build to help a very large segment of business owners make better business decisions and break it down into a small enough unit that they can take action on. Thank you.
Larry Cobrin Thank you so much for having me on. This was really fun.
Russell Benaroya: Larry, it’s such a pleasure. Have a great day everybody. We will talk to you on the next episode of the Stride 2 Freedom podcast. Take care. Bye