Joe Rojas: Hello there and welcome to the Start Grow Manage Podcast. I’m Joe.
Jeff Loehr: And I’m Jeff.
Joe Rojas: It’s been a good start to the year! It feels like it’s already flying by though.
Jeff Loehr: We’re already in the second week of January and it feels like the first week just flew by. That’s why it’s so important to have a plan and know what you’re working on – if you don’t set those stakes, it’s easy to lose track of time and before you know it, a day, week, month, or even a year can pass by without getting anything done.
Joe Rojas: I’m really happy with our new planning process – it’s helped me get really focused and all of our clients I’ve talked to have said they love it too. It’s great because it lets them see what’s happening over the next six weeks, all on one sheet.
Jeff Loehr: I’m hearing that too. Having a well-structured plan is really helpful to get a handle on the process.
Joe Rojas: I’m feeling really good about what needs to be done and I’m confident that we’ll get it all done. It’s a necessary change, and I know exactly what needs to be done, which is great. I recently had an epiphany while talking about the Hats Chart. It made me realize how important it is to take a step back and look at the big picture.
Jeff Loehr: Right, so that everybody know – the Hats Chart – it’s our way of thinking about the organization. Basically, it means that one person can wear multiple hats, like a CEO hat, a marketing hat, and a delivery hat. This means that the CEO might be taking on roles in the company that aren’t necessarily their own. The Hats Chart is a way we’ve used to think about the organization chart.
Joe Rojas: I’ve been noticing that we’ve been looking at our organizational chart like it’s a list of 35 positions that need to be filled. That’s a problem, and it’s been confusing for us and for MSPs. But that’s not what it is – it’s actually 35 hats that one person can wear. So instead of feeling overwhelmed and thinking that we need to hire 35 people, we just need to find the right person to wear all those hats.
Jeff Loehr: Working with a client, we went through a Hat Chart as an organization and they didn’t understand it. They thought they had to hire 35 people. We explained it was a map of all the functions in the business and it started to make a difference. We used the example of McDonald’s to explain that it doesn’t matter how many people you have, all the functions have to be there. This applies to MSPs too, they have to have a help desk, level two and level three support, etc.
Joe Rojas: Right, like you have to send invoices.
Jeff Loehr: Joe, how many businesses have we worked with that don’t send invoices? We have one client who was complaining that her vendor wasn’t sending invoices, which created a lot of problems for her. She would get big, lumpy bills of like $100,000 for the last eight months, and this created issues for the vendor too because they didn’t have the cash to run their business.
Joe Rojas: receivables, I’m not doing my job right. I remember when I started working with MSPs back in 2015. I went to work with a half a million dollar company and the first thing I wanted to look at was their books. I found out they had a quarter million dollar receivable and 50% of their money was out on the street. I knew they were in trouble. So I worked on their accounts receivable and accounts payable function and brought in over $70,000 in the first two or three months. This gave them relief, but for an MSP to be successful, every function on the chart needs to happen and be measured. If there was $250,000 in outstanding receivables, something wasn’t working.
Jeff Loehr: It might not take a full-time job to manage accounts receivable. All it takes is somebody who knows the functions that need to be taken care of. This is especially true for small businesses with only two or three people. Knowing the functions is key, otherwise they can easily fall through the cracks. That’s the value of knowing all of the functions – it may only take half an hour to make three calls and get everything done.
Joe Rojas: We often work with clients who feel stuck. They can’t seem to move forward or make more money, and it’s usually because their roles – their hats – haven’t been clearly defined. Without knowing what to do with their people, how to measure success, or what work to assign, they’re stuck.
Jeff Loehr: Pausing on this thought because one problem we see as well is people building the organization around the people. When building an organization, it’s important to define the functions first and then hire the right person for the role. Don’t just hire someone because you like them if they’re not the right fit for the job. You don’t want to hire someone to do work that you don’t need. It’s better to build the organization first and then fill it with the right people.
Joe Rojas: Taking care of that is magical, because it becomes a process dependent business instead of a people dependent business. People dependent businesses are 100% owner dependent, so if the owner isn’t there, nothing works. This can be a problem for MSPs who are in their late 50s or early 60s and have no out to retire or sell the business. A process dependent business, however, can run without the owner for months at a time. Having a properly defined Hats Chart is key and critical to this, as it outlines all the functions and allows you to build processes around them.
Jeff Loehr: Wow, yes. And we realized that we have to change our language around how we think of an organization. At first, it’s really only about the functions and what work needs to be done. Once that’s defined, then you can start planning how the work gets done and who does it. It’s important to understand the functions first and then bring other people in to fill those functions. A process-dependent company is better than a person-dependent company, because if it’s not built around the owners, they can leave with all the business.
Joe Rojas: I’ve seen that happen: you bring in a brilliant person and build the business around them, but then they realize they can do it better on their own.
Jeff Loehr: Knowing all of the pieces and delivering on them, so that anyone who comes into the organization has confidence that everything else is being taken care of, is key. We’ll add more about our Hats Chart to the Learn More page that was recently updated for MSPs. Soon, Joe, we’re having a conversation about cybersecurity and the planning process. Expect those episodes soon.
Joe Rojas: And I wanted to let you know that we’ve created the perfect Hats Chart for MSPs, so if you’re an MSP, go check it out! And remember, you are loved!