Key Considerations for Tech Startups
Unknown: Hey everybody, welcome to the latest edition of volley. I'm Carolyn April, and as always looking for my good friend Seth Robinson said, Hey, how are you doing? I'm doing well. How are you doing? You're looking like you're in an undisclosed location today.
I know my they're working on the internet around my house, I guess. So. I just jumped over to the library. And not a lot of visual appeal in the study room here at the library. It's, it's it's minimalist, let's put it that that's a good that's a thing. That's, I mean, it's a nice enough room. There's like, There's windows in here. But I can't really grab any of them in the in the screen
or wash me all out. I guess for our podcast listeners who aren't on YouTube, they can't even see this background anyway. So it's kind of a non non thing. But, but I'm looking at it. But how are you doing? I'm good. I'm good. Yeah, I mean, this is the latest in a
series of misadventures trying to record this episode. So it's good to finally be doing this one. This is true. We've been like on vacation me not on vacation,
because I messed up my vacations, then we've had scheduling snack foods and rescheduling. So here we are. So thank you, thank you for being flexible. I know you're, you're trying to kind of enjoy a little bit of that rescheduled vacation this week. So yeah, good to see you, too. It's been Yeah, it's been Yeah, we've made the best of it. Um, but uh, yeah, it's been weird. But
luckily, it's going into going into a long weekend. So. Yeah, yeah, that's gonna be good. And we got a good topic today. I think this would be fun. We do. Yeah. So if you were at Telecom, earlier this month, and of course, we had all of our members there, a lot of people that have been doing channel business for a long time doing technology, business, probably some people that are new into technology, business and trying to start up their own managed services. And we've always had a lot of talk about the evolution of service providers, and some of the things they need to do as they're maturing. And I know
that our MSP community just put out this MSP playbook, or they're going to put out this MSP playbook, and that kind of talked about a channel time. And that's for kind of MSPs that have been around for a while, you know, people that are trying to grow their business, maybe or define their operations. And that just got me thinking about, well, what about the beginning of the process? What about those, those people that might be start trying to start a tech firm these days? Because I think that looks very different than a lot of our members, or a lot of people that have maybe been doing technology for a while when they started off, I think it's very, very different from the way that company would start today. Yeah, I would agree. I mean, a lot of the, you know, existing current MSPs and other channel companies came from a place a lot of them were they were entered the market as resellers, you know, and going back, you know, into sort of the traditional var, if you will, who was reselling, in most cases hardware and, and doing so, you know, very, very in a very traditional way, you know, the the vendor through a distributor, the hardware would, they would buy some sort of discount, and then resell that to customers and make a little bit of margin on that, and then add some value around it with with respect to other services. And then a lot of those
companies have evolved over the years into managed services. So they actually wouldn't ever company starting from scratch, most of them as MSPs. But were companies that were evolving from a reseller into a managed services company. And so that was a very different journey than somebody that was just starting from a blank slate to become an MSP. And in the
meantime, we've had all kinds of changes in the industry. It's a much bigger ecosystem, the the number of services and technologies that are offered is just mushrooms. We have the cloud, obviously, and you can't go without talking about how much of an impact that's had on how we do everything. From the respect, you know, from the perspective of a technology business, whether that's what we sell, how we sell it, where it resides, how customers buy things, all those things have changed. So you have to start a business today in the channel services area was very different than it would have been 1020 years ago. Very different.
Yeah. So I think there are a few things that we want to talk about some key considerations that anyone should be keeping top of mind if they're trying to start up a tech firm and I a couple of caveats here. Before we get started. We're talking about a tech services firm, not so much a tech product firm. So
if you were going to build out a new widget or you had an idea for some kind of software or app that you wanted to build then you were going to be selling that thing. That's a very different thing that I think trying to get into enablement or services, whether that's, you know, kind of a traditional MSP type model, or some kind of new services around data analytics or something like that. So we're talking about services here, one way or another. And then the second caveat is, we're not specifically talking about the technology that you might wrap the services around. So we're not going to talk about you should get into AI, or you should get into data science or whatever it might be. We will have, I think, one little twist
at the end on that caveat, but for the most part, we're not talking about the technology. So I think with those two ground rules set, we can jump right in, we've got four different keys here that I think we're going to talk about. And the first one is the business functions that you would have to help you run a business. And I don't think that these things are ever completely
ignored. As someone's starting up, maybe some of them would be a lot of them wouldn't be, but we're talking about things like finance, and legal and HR. And I think that the point of this is that you don't want to just do any of those things by the seat of your pants, you don't want to do the bare minimum on them, they are critically important to future success, even if they're not maybe critically important to figuring out the market fit or to getting your services off the ground or to building out your portfolio. They're so important down the road, I think
that that's what we see in a lot of firms that are a little bit more established, and maybe trying to grow that if they haven't built that solid foundation in some of these business areas, then they really start to struggle. They do. That's that's where we see it most right now as in existing companies that were small to begin with, started with, you know, technical acumen and sort of all those business functions that you just described. Were not well thought
out. And and and given the same priority as whatever it is the service the technology that they were trying to sell. And then when they reach a point where they want to grow to that next level, by adding staff, which you know what that can do to a company, by getting into a new market and really trying to expand revenue, they find out that those those pills, those legs of the stool, the the basic business functions, if they weren't on solid ground to begin with, it's very difficult to move forward. And so a lot of these companies ended up going back and trying to get their house in order before they can actually move to the next step. And so what we're recommending here is get those things settled from the get go, you might you will have to make, you know, alterations as you grow and move. But if you have good fundamentals in the beginning, around those very basic business functions of finance, HR, legal operations, I would throw into there as well. You're going to
be in much better position to thrive and earlier and then move more quickly through a growth path without a lot of hurdles along the way. Go ahead and also be thinking deeply about the questions in each of those areas. Don't just be doing okay, what do I what do I need to do for finance to just get started here? You had, I think, a lot of good examples around finance that were good questions to be thinking about, rather than just what are the basics right. Do
you want to dig into those a little bit? Yeah, I mean, it's really one of the things that I've noticed and my time, you know, covering the channel, and also we've seen in research is that companies don't think through, they do think through sort of the, you know, get me through to tomorrow type of financing, but they don't think through a few things. I think COVID really has opened a lot of people's eyes about you know, things that can go wrong. And if you're not prepared, but channel firms in general, what I found are very risk averse. And
part of that translates in on in the financial realm to unwilling to borrow money. And they don't look at what sort of credit availability they may have with their bank or another lender might be, they don't consider those things, because to them, that's sort of anathema. And they're, they don't want to borrow money, but is most people and entrepreneurs do figure out along the way, at some point, financing becomes important. And you may never take advantage of it, perhaps you're one of those lucky companies. It doesn't have to and you've got adequate cash flow at all times. But that's not usually the case. And so one of the fundamentals that I would recommend very early on is even if you're not going to use it, if you value never going to make sure you understand where those lines of credit may exist for you establish them, make sure that you've got you know, a good credit rating and so that when you may find yourself in a position, whether it is a negative situation where you really need to borrow money to make ends meet or a positive one you want to grow and the only way to expand into something would be to put your neck out there and borrow some money you need to be fundamentally ready to do that. The other thing I
would say, I would say that a lot of new companies in this area don't Think about, as you mentioned, HR, most small companies don't hire an HR department, they may not even have an HR individual. But in the very beginning, you don't think about how you're going to manage your people and your workforce and potentially grow it and create a culture, even if that's something that's not done with an actual full time headcount person at the moment, you need to think about some policies and procedures right out of the gate, and someone who's going to handle those things, whether they even if it isn't somebody who is designated and hired to do so. Because down the road, as you grow, you are going to need that functionality formalized. And you're better off having some sort of foundation that you've already established for it. And so there's just a just a couple of examples. That may seem pretty obvious. But a lot of companies don't do that upfront. And then
they find themselves really drowning when they get to a point where they have to do it tomorrow, or immediately, and they're not in a good position to do so. Yeah, I'm glad you mentioned HR, because I think of all these that we're talking about, that, to me seems like the one that's most likely to be completely ignored, right? You know, someone that they're starting up, they're just going to grab the people that they need, and they're going to get started up. And they're probably not going to be thinking about like, how do I continue to build my staff? How do I continue? You know, how do I focus on retention? How do I think about these things. And I would imagine that not a lot of startups are in a place where they want to bring on a full time HR person, but I think to do a little bit of HR consulting would probably go a long way. And then legal is maybe the last one to mention here where I think like finance, there's no way to kind of get started without having some kind of legal thought. But I think it's really important to go deeper, especially in technology services to kind of understand things like liability, things like regulations, these things that have become a lot more important today than they were several years ago. So I think
all of those business functions are really important to think through upfront and not just treat, like, I'm going to do the bare minimum, and then I'll build it up as I go. I think that that really puts you behind the eight ball. The second key that I think we want to highlight is another business function, but one that we thought was worth highlighting on its own. And that's marketing. You have done a lot of discussions around the need for marketing, in today's service industry, that so many of them were just tied to a vendor beforehand, and they didn't really build their own identity. And now that's becoming more and more important is kind of building and creating your own identity, and then finding a way to message that out to your own clients, existing clients, potential clients, whatever it might be.
So I think that marketing arm is another business function. But I think it's one worth kind of pulling out and talking about separately. Yeah, it's super important. And marketing has not been strong suit for a lot of traditional tech services firms. Again, you mentioned that they often tied their branding to the vendors whom they worked with, you know, the the products they were selling, and those vendors who made those products, that was their entry card into visiting potential customers. That's changed dramatically in the world that we live in. Now,
honestly, sales is almost secondary to the sales skills in your organization are almost secondary to what should be your marketing skills. And in the end, I'll explain it in this way, is that customers today are really the hunters, they figure out in many wit cases that they are in need of something, they don't always know what they need, especially in the technology area. But they have grown accustomed as consumers in their regular life to going out and vetting products, services, doing a lot of research ahead of time. And they're looking, they're often looking, and they're looking online, you as a company that selling something, need to have a very strong marketing presence and branding presidents for those customers to find you. And a lot of things used to be that it was all about sales, cold calling, knocking on doors, you're going out and trying to push yourself. Now you need to be there when customers come to you and and that requires a really good digital marketing content marketing type of strategy for your organization, a really good website, one that takes advantage of all the technologies that are out there today. Using SEO as much as you said that you and I work in the
content world, you know, can groan and moan about SEO, but for a lot of companies trying to get themselves seen by the customers, these things are very important to get to the top of search lists and all of that. And that takes some skill and expertise. And a lot of smaller companies in the in the tech services area don't necessarily necessarily have that. And I
would strongly suggest allocating more of your budget than you would expect to to the marketing area and whether that's smart people training, whether that's certain types of tools and software tools that you may use, but making sure that is not kind of a secondary priority, but make it one of the top priorities. Because the more that you can create your own identity in the marketplace, especially as a services farm, the more likely you are to be competitive, at least and more successful against others who don't create that kind of identity that sticks up. Yeah, yeah. And the last thing that maybe add on to that is, I feel like I don't hear quite as much these days about like, multichannel or omnichannel marketing. But I feel like it's just as important as it ever was, like when you mentioned that having a really strong website, which I think is critical, I think, very closely tied with that as having a very strong mobile presence, whether your website is mobile optimized, or whether you're building out an app, we talked on the last episode about social and how that's really become the domain of marketing. And just this knowledge of how
individuals are moving through digital experiences, whatever that might be. I think that that is kind of where the whole discussion on Metaverse has has regressed back to is this idea of multi channel or on my channel, or just the customer being in a lot of digital experiences. And you need to be there in some way yourself to be present. And to be identifying yourself and your brand with consistency.
Yeah, in order in order to be successful at that you and this goes back to one of our business fundamentals, we probably should have put right at the beginning was identifying your customer target. So really knowing who your customer is, who your ideal customer is, will help you then fine tune and hone all of these marketing omni channel, you know, means of communication and other ways to promote yourself and to reach those customers. So rather than just throwing a lot of spaghetti at the wall, really understanding like the geography of your customer, the size of customer, you're after the type of services that they may be looking for that you have. And then the persona thing, I guess, is what it is. And then you can really, I think have an easier
time trying to identify what the best channels are for you to reach those people. Yeah, definitely. So So we mentioned how this need to focus on marketing and build your identity comes from the change in the environment where services firms aren't as tied to the vendors that they might be working with anymore. But that still doesn't remove the need to think about the other people in the technology ecosystem that you might be working with, whether that's vendors or distributors, or other MSPs, or services firms in your area that might have different specializations than you, I think we put all of that under the umbrella of alliances, where it's definitely of thinking, I guess, again, it's thinking about the entire ecosystem, rather than thinking of yourself at kind of the end of a product chain, and just doing being the last mile of that product out to customers. But it's still, I think, really important to recognize who all the players are and which types of players there might be. And it even extends beyond pure technology firms into firms that might be doing business consulting. But
there, there might be technology kind of woven through the business consulting that they could do, and there could be a good partnership there. So I think there's just a lot to consider when it comes to alliances. And so that's the third thing that we wanted to really highlight for anyone thinking about doing a service startup.
Yeah, alliances are critical. Again, we, you know, we mentioned that we've moved a little bit away, or a lot away from the kind of the traditional linear line of the manufacturer to the distributor to the channel company out to the customer. But and now we've got this, this ecosystem of all kinds of types of partners in the channel, some who don't even identify as being in the channel, but they happen to be tangential and they're doing something like a consultant that may relate to your business. But being wise about who you decide to work with. And understanding that there are lots of different types of alliances that you could form out there is going to be critical to your success as well, you still need to pick the right vendors, you want to make sure you're selling the right products and services as part of your portfolio. You also want to
be using the right services if you're an MSP, you know the decision on what type of internal software for you to use your PSA software, your RMM software, which will intersect with your customers as well. Those are critical decisions to make and you want to make sure that you're working with the right vendors in that regard because it will make your your company run better. And therefore your brand will be on tarnished, if it's running well and your customers will see that part of you. So that's important. Distributors this these days have really gotten well beyond being fulfillment type of wholesalers in the middle of this whole equation that we call the channel or the go to market. And distributors are offering all kinds of services. They're becoming platforms for a lot of the vendors out there so they're online markets. Lisa's in a sense, and that's a place for
channel partners to be able to go and source a lot of their materials, but bundled in certain ways and available via the cloud. So picking the right distributors to work with is going to be important too. And I think the one thing we talk about a lot, that often doesn't get taken advantage of his how much you can align yourself with other partners, and fill skills gaps, that's that way we talk about, you know, the skills gap issue, it's very difficult as a channel company to be a jack of all trades these days, I mean, a lot of companies are starting to get away from being fully horizontal generalists, because there's so many different technologies that you would need to be adept at that it's almost impossible. So you know, it can
really help you to find a few partners out there that do things better than you do in certain areas, and you have some sort of skill that you bring to the table that you can marry, marry with what they don't have, and, and build some sort of a little mini ecosystem, if you will, that helps you there as well. And this is really just kind of, you know, networking, joining peer groups, understanding what's out there and doing your homework in order to do that, and take advantage of fully, fully aligning yourself with a lot of other companies that are in the in the same space as you are. Yeah, yeah. And you mentioned that the linear model has kind
of faded a little bit. And I think that's true. But we've talked on here quite a bit. And you've talked in your research quite a bit that it's it hasn't gone away, it's not going away, I think there is are still a lot of firms whose kind of center of gravity or their business model looks still pretty similar to a linear model. And I think that's fine. I think that could
continue. I think even if you're starting up a firm today, maybe you would align more to that linear model. I think the point is, that's not the only option. And it's possibly not the best option for growth, if you're starting a firm today, it might not be the most robust or dynamic way that you would choose to serve customers. So I think there's a wide spectrum of
business models that you can have that were the Alliance's would look one way or another. And something that looks kind of that like that linear models still might be applicable. But it's not the only thing out there by any means. Well, that's the exciting thing about the channel, I like to say, you know, you've got a lot of options in terms of the the business model you want to pursue and it's changeable over time, you can lock into a hybrid type of model where your primary business may may look like a linear model, it may operate that way. But you may have some alliances and partnerships and
referral partners, you know, in and around your business that help round it out or have it be, you know, make it a little bit more sophisticated in certain ways. And yet, you're still moving in on that linear chain. So there's no one size fits all, I think was your point. And I think that's very good. A very good one. Yeah, so I think that brings us to the last key that we want to mention. And like I said at the beginning, we're going to mostly keep this technology free. But we did want to mention
cybersecurity as the last key here. And I think that this is critical dimension, whether you are featuring cybersecurity as a service that you're offering or not, I think whatever you're doing, you have to be fluent in cybersecurity. And maybe you could make the argument that you still have to be kind of fluent in architecture or system design or data or whatever it might be, you've got to have some fluency there. But I think that cybersecurity rises above all of those pretty clearly as as the one that you have to have pretty good breadth and depth in even if you're not featuring cybersecurity, you have to have good cybersecurity in your own practices and your own business. And then you have to be able to talk about it even if you're not offering it and be able to guide your clients and customers into the right decisions around the services that you might be offering. So as much as cybersecurity still is kind of a technology topic, we always talk about it, you know, on the research team as a business imperative now, and it's really taking a different shape. For an end user or an individual firm
as they're thinking about how they're running their business. I think that we see that they're thinking less and less about cybersecurity as part of their IT architecture and their technology footprint, and more about cybersecurity as almost a business function kind of like back at the beginning. We're talking about finance, legal cybersecurity, it's almost a business function these days. So it's so important. It's not going to stop anytime soon. You know, it's always going to be this constant balancing act. We're definitely going to be
talking about cybersecurity quite a bit over the next month. But it's the last thing that we think that people need to think about if they're starting a technology To surfaces from, well, it's critical, it goes back to identity too. So you want to have a brand and an identity. And part of that is trust. You want customers to trust you, if you're an MSP,
you're essentially asking customers to entrust you with their assets, their customer data, their their technology assets, all of the information that resides within their technology environment, they need to trust you just like putting your money in a bank, you need to trust that that bank has backup insurance. If something happens and has cybersecurity and privacy policies in place, the bank doesn't sell cybersecurity solutions necessarily, but they need to know what they're doing with regard to it. And likewise, the same thing, if you are an MSP, who is taking over the you know, the control and the accountability for your customers environment, they need to believe and know that you have some cybersecurity expertise there, you may parlay that into part of your portfolio and your business as well. But
you don't necessarily have to do that you don't have to be a seller of cybersecurity services, but you need to understand cybersecurity and you need to be good at it. Or you're you know, you're going to find yourself in trouble or you're just not going to be competitive in terms of gaining customers. So definitely, it's one of those conversations that you have to have. And you will always continue to have with customers
with the you know, the partners and alliances that you form. I think it's kind of permeates everything that we do. Yeah, and I, I think that the way that cybersecurity has evolved, and when we talk about modern cybersecurity compared to the old days of a secure perimeter, I think there are still a lot of companies out there that haven't really wrap their head around what that means. What it means to try to
be following a zero trust framework. And what it means to be thinking about cybersecurity in terms of not just technology, but also process. Not just protecting things, but also being proactive. I think we still see some room for improvement in all of that. And so having that fluency and really understanding what modern cybersecurity looks like, is critical. And like I said, we're going to have a new
cybersecurity report coming out very soon. And that's going to be the focus of a couple episodes for us. So everyone can stay tuned for that. Yeah, more to discuss there for sure. Well, I think that was a good primer. Yeah, I hope so. Yeah, I know,
just again, from kind of looking at what's come out of tanto con, you know, attending that event for several years and talking to you over the years about your research. It was good to kind of talk about this and kind of say, Okay, if you were starting something today, how does that look a little different than you were if you would have started something? Tanner definitely 20 years ago. Yeah. Agreed. So hopefully a lot of people out there starting their new businesses, because we like to see the pipeline get filled in the channel too.
Yeah, yeah. This is going to be the seed that. Yeah. All kinds of startups, of course. All right. Well, thanks again for your flexibility and thanks as always to our producer Andrew McMillan and Carolyn. I'll see you next time. Sounds good. Bye bye.