Hello friends, Uncle Mark here with another episode of the IT Business Podcast, the show for IT professionals, where we try to do our best to help you run your business better, smarter and faster. Welcome back. I am here with another great episode. This may or may not be the last of what I had been calling the MSP money series, where we were talking to other people in the industry. money experts about all the things we need to know to try to make some money and be profitable. So today, I'm going to be joined by Lori Harky from ByteWize and she has a very great story you're going to want to hear. I should mention that this is an audio show presented by our good friends at Super Ops. They are the all-in-one RMPSA future-ready tool. to help you organize your business and help you supercharge your operations and help you make money like we're going to talk about today. So let's get right to it and Lori, welcome to the show. Well, thanks for having me. All right. So I heard your story and I said, you know what? This is exactly the type of person I want to talk to. You like me for all practical purposes. Solo tech in the industry, correct? Yes. And been at it for a while, doing a very good job of, how should I say this, honing in on your niche, right? Well, yeah, I did all this by design, quite honestly. I was an IT manager, I worked in some big... companies, Mayo Clinic, and then I was an IT manager for a software company. And over the years I figured out what I didn't want. I didn't want to have employees. I, I just didn't want to be a glorified babysitter. Not that that's everybody's story, but, um, I don't get me wrong. I still have a part-time tech. Um, and I have no problem getting additional help when I need it. So, um, I just didn't want any W to, you know, have that responsibility of making sure. we had to have enough business to pay everybody. Right. Yep, I got that. I had a couple of texts back in the day and when I learned that I could do just as much remote and didn't need them in the office full time, sitting around doing nothing, because back then we weren't doing the remote support like the MSPs are today with our remote management tool and all of that stuff. I was still sending them out, hoping to have people call in need of our assistance and when I started doing the remote stuff, I'm like, you know what, I can just subcontract when I need to. So that's what I do. Yeah. All right, so Lori, you were also, now let me get this straight, I probably should have asked you this before we started recording, but are you a certified Profit First professional? Yes, I am. Okay. Yeah. And there's a little story behind that, but. We'll get to that. Okay, well I wanted to let the listeners know we're going to be talking about this Profit First system. Michael Michalowicz, a gentleman that we all know well with his other books, Fix This Next and The Pumpkin Plan. And then of course, Profit First helping us to, and it wasn't really designed for managed services specifically, although Mike was a IT professional. So a lot of what he. you know, puts in his books are from that mindset. So it does help us out a lot, but I wanted to, you know, talk about the fact that you actually adopted this for your MSP, made it work, but I guess go ahead and tell us the story. How did all that come about? It was one of those things where, you know, I read the book, this was in 2018. I listened to the book, read the book, and I was like, ah, not right now. Then in 2019, I'm like, you know, I'm going to just give it a try and see where it goes. And like within four months, I was at that time doing that 0% credit card game, you know, like, oh, and then I'm like, I'm sure I'll have more money, you know, in 12 or 18 months when that comes due. And so then I. was able to pay off a $19,000, 0% credit card in full after four months of implementing Profit First. So that was my first. Okay, well, that's pretty cool. Let me see. And it really made such a huge difference in my profitability. And you know, it takes a little bit for your profit account to grow. But within 12 to 18 months, I was sold. It really made a huge difference. I was finally starting to pay myself more. And I decided that. And I've been accountability captain with other IT, you know, like Robin Robbins and stuff. And I would always ask, you know, if people are looking at their books, oh, not as much as I should, but. And then I worked with other MSPs who they wait until year end to take, uh, to figure out what, you know, if they've had a profit or not. And then that would dictate how much they would get paid. So I, I've always had an interest in finance and I decided that, um, wow, the two finally came together. I, this is what I need to do. I need to help other MSPs be profitable. and get paid what they're worth and make it, get into a rhythm of doing, taking your profits first. And so that's kind of how it all came about. All right, well, I certainly understand that. I've talked to several MSPs over the years, and we've all talked about those early years of struggling, I myself had a. had a stretch where I didn't do things right and ended up owing the IRS and said, okay, I've got to fix this. So luckily I did kind of right the ship and made sure that I paid myself, made sure the money was available for the business and knock on wood, haven't had any issues since and have had some very good profitable years the last two or three. So let me ask you this. and we're going to kind of go a little backwards with our questions here, but you mentioned that this is something you want to do now is to help other MSPs right the ship. Is it because you see a lot of MSPs struggling today or is it because you have found such a light at the end of the tunnel that you want to share it? Well, it's both. Okay. So one of the things we need to all do is, and I know everybody hears this too, but it's like, where are you going to take your business? What are you going to do when the time comes? Are you going to just sell it? Are you going to merge? Are you passing on? And you can't wait. You have to be taking a regular salary. It needs to be consistent with what, if you're going to... sell your company and they now need to replace you, you have to be taking that amount of money. Otherwise they're going to look at your numbers and go, this isn't worth much at all. So in order to get any value out of your business, you need to be taking a regular salary, W2, and then it's so, it's. Definitely something that I see that a lot of MSPs don't do. Or, and even for me, I would, I was taking, I would take my personal money and put it into the business, and then I'd take it back. And I would think, okay, now I'm really going to, everything's going to be okay. And then, you know, six months later, I'd have to like, ah, I got to, I'm falling short again. I just need, just. for two months, I just need this money, then I would pay myself back. And I actually have a chart that shows I'm all over the place. This was before Profit First. Then after Profit First, it's very consistent. It works so well that I can't imagine my life without it. Very nice. So I want to go ahead and take the opportunity to say now. instead of waiting to the end to let listeners know that you're actually, you know, now that you're a certified profit first professional, you're actually going to be doing, is it called Profit First Academy? So yeah, I was able to, along with the certification, I asked, can I use, you know, Profit First for MSPs? And they said, absolutely. So I'm building out an academy so that it unfortunately, you know, there's things that you could do just to get started. But if you really want to implement it and get the full benefits of profit first, it takes a little bit of we have to set up multiple bank accounts. And where do you do that? And what, you know, just it takes like two to three months to start changing where you're pulling that money from. And, and then we do an assessment and look at what your percentages should be. And then we develop a rollout plan. And then we, so there's like all these things that we get you into a rhythm. So like the 10th and 25th is usually what we recommend. And then we, once you start doing that, then we have quarterly, I call them bonuses. So we get a quarterly bonus. When you first start out, it might only be 10 or 30 or 50 bucks, but it's, it's something that it's, it's your reward, you know? And then, um, and then also we, um, we make sure you're putting money away for taxes. So you mentioned that. And that's a biggie. And, um, a lot of us struggle with that concept, like, you know, but I don't, I don't need that much. And like, no, trust me, just put it all away. And then we can set up other things like maybe a marketing account. So if you want to dedicate some of your money towards marketing account. And the ultimate goal is to look at, bring up your app, say on your phone with your bank accounts, and you can actually make pretty good business decisions by looking at how much money is in your bank accounts. But that takes a bit for you to feel really comfortable with your numbers and trust the system. That's another biggie is you got to trust the percentages. You can't just jump from, you know, once we, there's target allocation numbers, they call them taps. But when you start out, you're starting out really low. and it's just to get you into this rhythm and then eventually you'll have this financial clarity at the end when you have it fully implemented. Of course, that's the goal to have that clarity at the end. But in the beginning, like you had done, you read the book, listened to the book and then said, no, not now. And I think a lot of people have a hard time starting because looking at the end, it's kind of daunting to think I'm going to do all of these accounts and all of that stuff. So as you're building the academy and as you're talking to other MSPs, what are kind of, I guess, the basics of Profit First or the core principles or something that you start with, just to explain, this is what Profit First is going to do? Basically, it's that mentality of having smaller plates and it's... really are spending habits, it's a behavioral. So when you have all of your money in one account, so that's typically what we do, we may have a checking account and a savings account as a business owner. And then you, you're like, maybe you just got paid extra money because you sold some hardware. But when you look at your account, you're like, oh, I have some extra money in there. kind of forgetting that you have maybe potentially sales tax that you need to pay, like all those things. So it helps you divvy up that money into smaller plates and you're structuring your money twice a month typically, so that you know exactly where that money is going. So that's like one of the biggies. So I know that taxes is one of those things that a lot of us struggle with in the beginning, depending on how you structured your business, making sure to set that money aside or anything like that. But are there specific challenges or advantages, I guess, if you want to flip both sides of the coin, for MSPs versus other businesses and how Profit First is run? Really, Profit First can work for any business of any size in any industry. It's really good if you are in the startup mode, because now you're going to instill pretty good habits from the get-go. So I, I just like to me, everybody, every business should be. So there's actually a stat. There's like 33.3 million small businesses in the US. that's 500 employees or less. And 27 million of those businesses are break even. So it's pretty alarming. So that means a lot of us are doing a lot of work. A lot of us are lying about our profits is what that sounds like. You know, that's another good point is, in our industry, we always talk about revenue. It's always that. top number. And that always bothers me because I, you know, if you have $2 million in revenue and you have 1.8 in expenses, that's a lot of shuffling of, and it's a lot of work for $200,000 a year. So, you know, and even if we were to talk about net income, that's even, we can't compare. You know, it's really hard because depends on what are you take, what are you, what personal things are you running through the business? How much are you paying yourself? All those things come into kind of the bottom line as well. So that's where, I wish it was just a kind of a cook here, follow these instructions and, I had to hire a professional, profit first professional when I just tried to implement it. because there's, you know, the way the book has cost of goods sold, you do this if you have labor and materials and I was so confused. So I try to make it very simple. Okay, so it sounds like one of the biggest things would be just simply that mindset shift in changing the way we look at our numbers. I know that I've been trying to develop this process of helping people understand and know the numbers. in the business and I take that from my experience where, like I said, early in the year, I think it was year three, I owed four grand in taxes. After being in business too, I think I'm doing good. And year three, oops, got to pay that money back, which made me shift my business and I spent the years trying to understand cashflow and stuff. But in terms of, you mentioned that it's great to get started early. But I imagine you've run into some people that have been in business 10 years, 15 years. Now they've got to make that shift. How hard is that and what types of things do they need to change in their thinking? Yeah, I've had to spend some extra time with a couple of them to, you know, because you're taking your profits first and... And so you end up focusing more on that than the revenue. And that's what I did. I decided, you know, I really want to focus on. My margin over millions, I, I want to just because then I think if you have that in place, that sets you up to grow because now you're comfortable with your numbers, you can you know, you're profitable and you can even, you know. set aside some additional money, we call it a vault. You can create different, we always say, when in doubt, create an account. And you can just put money aside into these various accounts. So it really helps you kind of get into this system. And you might even be motivated to like raise your rates because you're like, you know what? I need to be profitable. Might even also negotiate better deals with vendors. That's something I do all the time. And it's amazing what I can negotiate. Um, so all those little things, just finding ways to reduce expenses. That was, that's another big, big thing, especially in our industry. We love our gadgets and tools. I mean, and I'm, I say this because this is me. This is, I, I love all this stuff. I love being a tech. And so I had to go through and figure out, I don't need this tool. It's not helping me with my sales or it's not bringing in money. And we have, and it wasn't anything against the vendor. It was, you know, so. It was what's right for your business versus a vendor. What was the, if you had to name one thing, what was the biggest impact? change that you made after starting Profit First? That's the biggest. I know I didn't prep you for that. Yeah, no, that's, well, I guess I, I mean, it was going through the, we call it the monthly nut exercise, and you really literally go through all of your expenses, and it's like, oh, I forgot about that, do I really need that? In fact, even things like, I had an answering service, and it was. They were great, nothing, but I was paying about $125 a month. And then through, you know, the community that I, I was talking with somebody and they're like, well, have you thought about this company? So I was like, let me look into it. Well here, that saved me a hundred dollars. So all of this, it takes time. You know, that's you, you just want to jump into, I can't wait to be profitable, but then it just, it takes some time to go through all of that. Um, but And that's, I think, the hardest part with Profit First is that it peels away some of these layers little by little. And then all of a sudden you're like, oh, this is really getting, this is fun. Now this is fun, you know, running a business. And it really, I guess the biggest thing would be it gave me confidence in I'm a real business. I am. This isn't. Even though I, you know, solo MSP and I'm not in growth mode, I don't want a ton of clients. That's not what I want. So I, I've had my business serves me instead of I'm serving my business. I imagine, like you said, that a hundred bucks probably doesn't sound like a lot to some people, but if you find enough of those and add them up, you know, uh, the service here, the tool here. the subscriptions there that you're running through the business, the personal things, you know, if you're putting, you know, all of your gas and meals for your personal life in the business, that can, that can add up real quick. Well, and the, um, oh, forgot what I was, I had a good one there too. I ended, yeah. Um, it'll come back. Yeah, it will. Cause it was a good one. Well, let me ask another question here in terms of what would be a misconception that we have as MSPs in terms of utilizing something like a profit first? Because you mentioned, the big shift I see in profit first is to, as you mentioned earlier, take your profit first rather than waiting until. all the bills are made and then taking the profits. So people think that that's a misconception. Well, how can I take profit first when I don't know if I have profit? And that's exactly what it'll make you realize that you're spending too much money. So when you flip that formula that we've been taught for all these years, sales minus expenses equals profits. And then we're basically flipping that with profit first. So it's sales minus profits equal expenses. And when you do that, you'll realize I don't have enough money. So that's why I mean it makes you realize like, I need to raise my rates. I need to, another big thing is just being efficient in everything you do. And like for me, I've never had debt, but. One of the things I really am a stickler on and that is I'm getting paid on the first of the month with I'm and I'm. I'm a pretty much 100, no, I am 100% managed. I don't have any break fix clients. So I get paid on the first. Of the month every month and I have zero AR. I don’t think everything is all automated. It just works like clockwork. So that helps me, I spend more time working on my business than side stuff than I do, you know, working in my business. And that's just because, after all these years, I stopped doing virtual desktops. And you know, because I deal with really small clients. And it was it just got rid of a lot of the headaches and So streamlining is really important. Very nice. So you went ahead and mentioned your business model. So I want to go ahead and ask a couple of questions to give listeners an idea of your business. I mentioned, you know, ByteWize. But what I did not mention is that you technically are running your business 100% remote. And most people would consider remote one thing. but you've got an added concept where you're not even living here in the continental US where most of your clients are. Where are you? Yeah, I live on Maui. I have for like 11 years. And I have kind of a unique story there where my wife got a job offer to move to Maui. And I was like, now is not a really good time. I'm like, gosh, what an opportunity. How can I not? You know, we need to make this work. So it was really hard the first couple of years, but then I kind of figured it all out. So I was selling remote before even COVID was a thing. And I was able to secure one of my largest clients. And it's how you present yourself. they were concerned it was just me. And I have a little statement that I'll say is, it's not really just me. I'm a member of several elite peer groups. I have access to more raw talent than I could ever hire on my own. And that is a key statement that I think a lot of MSPs could use, because that's the truth. If you're involved in a lot of the various awesome tech groups that we have available. you do have access to a lot of great talent. So everybody is kind of a phone call away or a Slack chat away or, and I actually work with two other MSPs that are in the East coast and we kind of mirror our businesses. We try to use the same tools and if somebody needs some time off, we can help each other out. So. Very nice, very nice. And. What year is this for your business now? As an MSP for 16 years. 16, okay. But I've been in the IT industry for about 35. I didn't want to say that out loud. Yeah, I've been around for a while. Man, so I do want to, again, let everybody know we are going to have links for Lori in the show notes. She's going to have a guest page there and you'll be able to. check in with her, Profit First for MSPs. I should ask now, you've been doing webinars and classrooms and stuff, but is the Profit First for MSPs actually up and running now? The website is, you can get on the wait list and I'm really hoping that I'll be able to just, if anything, get some small groups going. And I'm trying to get people who are in the similar revenue range. I'm kind of part of a little group and then I'll walk everybody through getting, you know, those steps and like I said, I've had a lot of great questions from the people that I've been helping so far. So that's really helping me as well. All right, and then I guess you made a comment earlier that would tie in with this question. You said that the earlier you start with Profit First, the better. But now that you've been in the business for a while, you're doing the Profit First, what would be some advice that you would give to say a solo tech that wants to transition to an MSP or a new MSP that's starting? What advice would you give to them? Actually, I kind of have as part of my, my one class that I do teach. So there's, um, there's things like, if you're just starting, it's kind of like, Oh, here are all the things that I wish I would have done. Right. Um, like I would have had a done for you website done, um, created. And I went through a friend of a friend and it was, I ended up with a $3,000 Getty image, um, Cease and desist. Yeah. So I've had all kinds of things happen. So I was like, no, I would have done that. I would have just really kind of hone in on your sales process and make sure you understand all of the steps, try to make it simple, but yet so that it can flow from, um, it, you know, from your initial conversation with a prospect all the way to, um, creating the, the quote to the invoice and then, you know, in the in your ticketing area, your contract system or PSA. And then, you know, obviously join one or more of the peer groups, understand what your, I call it perfect client avatar is. So like for me, it's, I only now will work with businesses that are open eight to five Monday through Friday. No retail, I really avoid medical because of the HIPAA. So I... I try to just stay very focused and, you know, maybe also work with try to find another like-minded MSP, like I have with these other two. And that's really just the we meet every week and, you know, just talk about anything in our business that we're struggling with, or we, we kind of divide and conquer on vetting new vendors. And then also, yeah, get your you know, work with a CPA that maybe knows our industry so that they, um, your books are set up right from the get-go. Cause trying to go back and redo that can get a little messy. Okay. Wow. That was a big list. So one thing stuck out to me in particular, even though this is a show about money and profit first, one thing caught my eye. You said you are only working with other companies. that are open from eight to five. One that's very specific. So I was going to ask, how did you come up with that and why? Because I had been dealing with retail and they're open seven days a week and after hours. And that was not, I was working a lot. And I'm like, this is, this is, they got, sorry, they got to go. So, cause I really. Rarely do I work weekends or after hours. And that was, again, now, eventually, I came up with my criteria so that helps me live the life I want. Not, I'm not, the business is serving me instead of the other way around. So that's kind of the big key. All right, well, glad you found that. In a sense, you're happy. place, your spot where I guess the work-life balance is what you want it to be. Very nice. Very nice. Yeah. Well, I'm kind of big on health and I have this health, wealth and happiness kind of motto. And everybody's different. So you have to figure out what it is you want. But I enjoy being outdoors and walking and I love to cook and... you know, eat really well and so that gives me a lot of energy to do all of the fun stuff that I'm working on. Well, funny you should say that. So in my other life, I have this concept that I'm building to live healthy and be happy. And it's going to be in that order, you know. Take care of the health first and then the happiness will follow. Yeah, we all. Yep. So there we go folks, Lori Hardtke, ByteWize, and going to be starting soon, profit first for MSPs. So check out the link in the show notes and get on the waiting list and benefit from the wisdom that she's going to share. And it's not just book knowledge, this is something that she lived just like us as an MSP and profitable and living life and being happy. Lori, thank you for coming on the show. Thanks for having me. It was awesome. All right. That's going to do it, folks. We'll be back with other episodes soon. Check out previous episodes at itbusinesspodcast.com Check us out on the weekly live show, Wednesdays at 8 p.m. Regardless, find a pod catcher, hit subscribe, and we'll see you soon. Until next time, Holla.