Dave Cava grew his MSP to an impressive 10MM in annual revenue prior to his exit in 2017.
Post-exit, he joined Shawn Walsh as a partner in Encore Strategic, a consulting and strategic planning group.
When he first joined Encore, Dave was primarily responsible for recruiting talent for their growing MSP clients.
Shawn and Dave have co-authored a book inspired by (and licensed by) Mike Michalowicz's Pumpkin Plan. The book is a "love letter to technology service providers who feel like they're never going to get off of the hamster wheel".
Dave and Shawn both realized they had been following the principles of "The Pumpkin Plan" long before they read the book, and both entrepreneurs benefitted from having healthy businesses that led to the exit multiples that MSP business owners dream of.
Learn about the challenges associated with writing a book with a co-author, the benefits of the Pumpkin Plan process, and the free workshop that Shawn and Dave are hosting at Comptia Channel Con.
Your host for this episode of WIN - What's Important Now is Carrie Richardson, partner at Richardson & Richardson Consulting. Let's get in to it!
Carrie Richardson and Ian Richardson host the WIN Podcast - What's Important Now?
Carrie helps businesses improve their sales and marketing teams.
Ian is certified in Eagle Center For Leadership Making A Difference, Paterson StratOp, and LifePlan.
Learn more at www.foxcrowgroup.com
Book time with them here: https://randr.consulting/connect
Be a guest on WIN! We host successful entrepreneurs who share advice with other entrepreneurs on how to build, grow or sell a business using examples from their own experience.
Dave Cava grew his MSP to an impressive 10MM in annual revenue prior to his exit in 2017.
Post-exit, he joined Shawn Walsh as a partner in Encore Strategic, a consulting and strategic planning group.
When he first joined Encore, Dave was primarily responsible for recruiting talent for their growing MSP clients.
Shawn and Dave have co-authored a book inspired by (and licensed by) Mike Michalowicz's Pumpkin Plan. The book is a "love letter to technology service providers who feel like they're never going to get off of the hamster wheel".
Dave and Shawn both realized they had been following the principles of "The Pumpkin Plan" long before they read the book, and both entrepreneurs benefitted from having healthy businesses that led to the exit multiples that MSP business owners dream of.
Learn about the challenges associated with writing a book with a co-author, the benefits of the Pumpkin Plan process, and the free workshop that Shawn and Dave are hosting at Comptia Channel Con.
Your host for this episode of WIN - What's Important Now is Carrie Richardson, partner at Richardson & Richardson Consulting. Let's get in to it!
Carrie Richardson and Ian Richardson host the WIN Podcast - What's Important Now?
Carrie helps businesses improve their sales and marketing teams.
Ian is certified in Eagle Center For Leadership Making A Difference, Paterson StratOp, and LifePlan.
Learn more at www.foxcrowgroup.com
Book time with them here: https://randr.consulting/connect
Be a guest on WIN! We host successful entrepreneurs who share advice with other entrepreneurs on how to build, grow or sell a business using examples from their own experience.
Dave Cava Encore
[00:00:00] Carrie Richardson: Good afternoon, everybody. Thank you for joining me today. My name is Carrie Richardson, and I am the host of WIN and one half of the consulting group Richardson and Richardson. With me today is Dave Cava, who is a partner in Encore Strategic.
[00:00:13] Carrie Richardson: Dave is primarily responsible for recruiting for technology service providers at Encore, and in partnership with some other people, he is a strategic facilitator that is now specializing on bringing Michael Michalowicz's Pumpkin plan to the TSP market. Dave, thanks for joining us today.
[00:00:33] Dave Cava: Very excited to be here.
[00:00:35] Carrie Richardson: So tell me a little bit about how you joined Encore strategic.
[00:00:40] Dave Cava: I've known Sean Walsh, my partner for 15 years. He was actually an early mentor to me when I was starting my MSP. He had been in his for a long time and we were in peer groups together over the years and he sold his business a couple of years before I sold mine.
[00:00:57] Dave Cava: And he was [00:01:00] Doing coaching and peer groups for TSP's and I said, I have this idea to do recruiting for mSPs and he said what would you think about trying to put it all together?
[00:01:14] Dave Cava: So it took us a year or so to figure out what that offering looks like because you really are trying to combine a couple of things there.
[00:01:23] Dave Cava: And he said, we're really about helping MSPs scale and get their team, and that's the common denominator. And it's really working well. Now it took us a little bit to figure out how to earn it, but we've done it.
[00:01:35] Carrie Richardson: You owned an MSP from 2007 to 2019.
[00:01:40] Carrie Richardson: I did.
[00:01:41] Carrie Richardson: And you were a niche specific firm.
[00:01:43] Carrie Richardson: Tell me a little bit about how you decided to pursue the financial services market.
[00:01:50] Dave Cava: When we started our MSP, we already had a decent foothold there, and we looked around at the MSPs around us in New York City, and they were all trying to crack into [00:02:00] that vertical, and most of them were failing. And we said, we're already in this vertical, why are they trying so hard?
[00:02:06] Dave Cava: Maybe we really have something here. We were scared of being pigeonholed in the beginning, but after a while, we figured. Maybe we should just go with this and we actually did a lot of what's in the pumpkin plan before we realized the book existed, we said, these are our best clients.
[00:02:24] Dave Cava: They're our most revenue. They're most in line with the way we want to do things. Why don't we just build our business around that? And if we pick up other clients along the way, that's fine. But we're going to do things the way we do them, and that's going to be who we exist to serve. And from there, things really took off.
[00:02:42] Dave Cava: It, worked out terrific.
[00:02:44] Carrie Richardson: As somebody who chose a particular niche for my own business , it eliminated a ton of challenges.
[00:02:50] Carrie Richardson: Recruiting got easier, training got significantly easier, HR got easier, and marketing got much easier. So [00:03:00] congratulations on that successful exit.
[00:03:02] Dave Cava: It was one of the best days of my life and one of the worst days of my life.
[00:03:07] Carrie Richardson: Jamison West wrote a book about the emotional toll that entrepreneurship takes on people and the emotional toll that selling your business takes on people.
[00:03:16] Carrie Richardson: And you got a whole lot of that all at once.
[00:03:19] Dave Cava: The case study of me selling my business and what was going on is actually in that book.
[00:03:25] Carrie Richardson: We wanted to talk today about one of the challenges that you're experiencing at Encore. And I understand that you're writing a book , tell us how that's going.
[00:03:36] Dave Cava: It's going well, but it's been harder than we thought it was going to be. So we licensed the pumpkin plan for Mike Macalowicz and we're writing a version specifically for MSPs called the pumpkin plan for technology service providers.
[00:03:48] Dave Cava: It's the first time either Shawn or I is writing a book. We both like to write and, combining our two voices has been more work than we realized it was [00:04:00] going to be
[00:04:00] Dave Cava: When you're writing a book it's, a piece of art.
[00:04:03] Dave Cava: And if you can imagine it was a painting, and you're trying to paint a painting with somebody else, and you're trying to fix, the things that you see wrong with the part they painted, I mean it, it's it's amazing.
[00:04:19] Carrie Richardson: The reference makes sense. You got to the same point, but you took different paths to get there. So I imagine the story that you want to tell is a little bit different as well.
[00:04:30] Dave Cava: We've really embraced the challenge because if you think about it. If we can fight through things, it's almost like a marriage, right? Where it's really hard. It doesn't work out for everybody, but if you can fight through the hard stuff, you can wind up with something really beautiful. And so you fight through the combining of the voices and are you okay with me changes here?
[00:04:54] Dave Cava: Are you okay with me changing that there? And with the belief that the end [00:05:00] product is going to be that much more powerful than you can produce by yourself, because there's a reason we came together in the first place. And we're getting there.
[00:05:06] Carrie Richardson: And do you have a third party who's essentially like a referee ?
[00:05:10] Dave Cava: We do. We're so excited because we found somebody with 15 years of journalism experience who actually worked at an MSP for another 15 years. So he really understands the industry and we're excited to have somebody that understands. Writing and putting a book together and how to structure it and correct all our little amateur mistakes Who really understands what we're writing about and understands who we're writing to which might be the most important thing
[00:05:41] Carrie Richardson: Now we talked a little bit about the term msp and the term tsp and why you opted to choose pumpkin plan for tsp's Tell me a little bit about the difference .
[00:05:53] Dave Cava: Yeah, great question. We all know our companies as MSPs, right? The term's [00:06:00] been in use for close to 20 years. We really felt as the industry has changed, so much of what MSPs are providing goes beyond services these days. Every MSP that's worth its salt is starting to provide a significant amount of their client's technology platform.
[00:06:20] Dave Cava: You're not just selling. Oh, you buy whatever you want, and we'll make sure it works. We're selling so much more than that so we really felt like it was an all more all encompassing word because it includes the platform. Everyone's selling platform these days or should be, and we really felt like managed service provider is very generic because you can have that with your doctor.
[00:06:43] Dave Cava: You can have that with an accountant or a lawyer, and so TSP or IT. SP seems to be the term that's coming into bloom now. And we really believe it's going to be here to stay. So if we had to be a step behind or a [00:07:00] step ahead, we chose a step ahead.
[00:07:01] Carrie Richardson: So thinking about pumpkin plan, great book, is there a difference between companies who are focused on growing a monthly recurring revenue stream versus say an ITSP that does more project work?
[00:07:14] Dave Cava: We push really hard for recurring revenue we would say that project based companies, unless they're doing projects in order to create M R R are probably going down the wrong track. MRR and EBITDA net profit is what determines the value of your company and everything you do in your company should be around building value.
[00:07:38] Dave Cava: It's not just about the money you stick in your pocket today. It's about for every dollar you stick in your pocket, you should be sticking a dollar in a piggy bank you get to break one day. And adding platform to services really increases that MRR significantly. So whether it's your client account management or the projects [00:08:00] you sell, your whole organization should be motivated around adding that MRR, putting that money in the piggy bank. When you look at the M& A market for TSPs, everybody thought there was going to be a window that would close that this whole five to six times X EBITDA eventually would die. The private equity involvement would die. They'd figure out, Oh, there isn't much money in this.
[00:08:28] Dave Cava: And the opposite has happened. If you look at what the average deal size was 10 years ago. It's increased significantly since multiple used to be an average of 5. 5. As of last year, it's 8. 2. And that's happened because MSPs have matured. They focus more on recurring revenue.
[00:08:50] Dave Cava: They've they're far more operationally mature on average, and the private equity involvement has actually shot through the roof. [00:09:00] Last I knew there were 80 something major roll ups driven by private equity going on, and the reason for that, and I think you're going to see more, not less, because as the interest rates have gone up and the markets have gotten a little crazy, all the money has stopped going into software because companies don't want to invest money and think it's a lottery ticket.
[00:09:23] Dave Cava: And I've got a one in 10 shot of this company exploding and me getting my money back exponentially. Instead they'll look at something and go, I can put my money in. Multiply it by three or four and it's almost definitely going to happen. And that's why all these private equity firms in a crazy market are going, okay, this is a pretty safe bet.
[00:09:42] Dave Cava: MSP market always pays. So you've seen that while the money is stopped flowing in other places in the economy, it's kept going into the MSP market and focusing on your MRR. Makes total sense. So when we use that phrase TSP we're really looking at it in terms [00:10:00] of what you sell and we, really believe that should be MRR.
[00:10:06] Carrie Richardson: So is helping a company transition from that project based or break fix model to a monthly recurring revenue model something that Encore could help with?
[00:10:16] Dave Cava: Absolutely, and it's a significant theme of the book.
[00:10:20] Dave Cava: We talk about the hamster wheel MSP versus the pumpkin plan MSP the hamster wheel MSP is more inclined to sell whatever they can anything for a buck. There's still very much a trading time for money component dollars for hours, and the owner is enmeshed in all aspects of the business. So really, the book is about how do you get away from that and break through to something else and Really have entrepreneurial success, which we define as gaining control over your time and, having enough money to get back to the world.
[00:10:57] Carrie Richardson: One of the things that we always talk about is you have [00:11:00] to build your business like you might die tomorrow. I know a lot of entrepreneurs who, if they pass tomorrow, their businesses would be in total chaos. Their spouses aren't involved in the business. They don't understand the business.
[00:11:12] Carrie Richardson: They don't have a business partner. They haven't trained up leadership teams. There's no succession plan in place. Now, if something happened tomorrow, even though their business is fairly profitable today, they would not get the value of that business if they had to sell it or if their partner, God forbid, had to sell it tomorrow.
[00:11:29] Carrie Richardson: So creating a plan for your business and your life. Essential the success and if I were going to start a business today, which I might be doing, I would plan it from day one as if I was going to sell it on day two, right? I don't want to go to exit this time and have the buyer look at my ad backs and say, no.
[00:11:50] Dave Cava: Yeah. Yeah.
[00:11:51] Carrie Richardson: Your business is going to be worth what someone's going to pay for it. And if you can show them process and clean books, it's going to go a lot way to taking [00:12:00] that four times multiple up to that six and a half.
[00:12:04] Dave Cava: Yeah. One of the things we talked about in the book is the concept of self employment versus really building a business.
[00:12:10] Dave Cava: I've seen a lot of one person MSPs that when they talk about their business say we and I'm like, he could say we all he wants, but I just see that guy and you can have plenty of employers and still be self employed.
[00:12:25] Dave Cava: A business is something that can run without you and that's a high bar. And, in some, In a lot of cases, it's a place where the owner just can't see over the horizon. They can't see getting there. And a lot of the book is about how you get there. It's about putting a plan forward that's achievable step by step so that you can get to the point where you really are running a business and it's not running you.
[00:12:52] Dave Cava: And you're not just the plumber that hangs out a shingle and says, I have a plumbing company. What do you do? I do plumbing. I am a plumber. That for a lot [00:13:00] of MSPs, that's what it is. I'm an MSP. What do you do? Oh, I think I fixed the computers. I set up the networks and, because most of the people that start these businesses are technical, right?
[00:13:12] Dave Cava: And they're not, they don't have MBAs. They're not experts in building businesses, they're expert in technical things.
[00:13:20] Carrie Richardson: But one thing I always like to point out is people are coming up with these kind of aggressive Numbers and as a facilitator, I'm sure that you come across it all the time, somebody will say to me Hey, I want to build a 10 million dollar business.
[00:13:35] Carrie Richardson: And my first question to them is going to be why, do you want to build a 10 million dollar business? Let's do some math. Like you're a 2 million dollar business now paying yourself a quarter million dollars a year. Have you talked to a financial planner?
[00:13:49] Carrie Richardson: Have you talked to your Tax guy? Are you already making the amount of money that you would need to put enough in the market every year so that you could hit your number without even selling your [00:14:00] business? I could have stayed like over one, but under two at the margins that we had. And stopped putting money back into my business. Stopped spending so much on marketing. I could have retired in five years easy, but I didn't talk to anybody about it. I was building this business and it was going to be big and it was going to be amazing.
[00:14:18] Carrie Richardson: And we were going to be on the ink list and I would have done just fine putting money in the bank and just closing the door and throwing away the key when I left.
[00:14:28] Dave Cava: It's so interesting to hear you say that because for me it's illustrative of the fact that You can look at other people's businesses now and parse those things and, see the picture perfectly clearly.
[00:14:44] Dave Cava: But it's really hard for us to do that with ourselves. It's much, it's really shows the value of having a third party whether it be a financial planner or a business coach or whatever, to be able to say, Hey, what are you really trying to do here? And how do you consider it? X, Y, Z, [00:15:00] because here's what I'm seeing.
[00:15:02] Dave Cava: It's really hard for us to get perspective on our own businesses and our own lives in a sense having somebody go whoa, Let's just look at this from an outside angle. There's so much value to that. What you just said, there's so much wisdom in what you just said, but it's much easier to see someone else's problems and someone else's opportunities and someone else's.
[00:15:27] Dave Cava: Speed bumps that are are coming that they don't know are coming.
[00:15:32] Carrie Richardson: You can get to two through sheer grit and muscle and force. But you got two things that will happen at that point, at least in the MSP space. My experience is you go back to one or up to five and nothing in between.
[00:15:47] Dave Cava: I like to talk about, MSP plateaus. And the most famous one is what I call 10 guys and an owner, where the owner is still very involved in all [00:16:00] aspects of the business.
[00:16:00] Dave Cava: The owner's the de facto service manager, even if someone else has the title the owner is still involved in all the recruiting and hiring. And that company just can't go any further without things structurally changing. And usually there's a big problem there in that. Now everything flows to the owner.
[00:16:20] Dave Cava: The owner hasn't established other leadership that really has any kind of power or authority. And now they're going to try and make an organ transplant. Put other people into those roles and you know what happens with organ transplants. Sometimes they work, sometimes they don't. You make a wrong hire at a high level and boy is it going to make your life hell for a couple of years.
[00:16:41] Carrie Richardson: Dave, we'll just give them equity. Don't worry about it.
[00:16:44] Dave Cava: Yeah, that's a great idea. Terrific idea. If you look at the Michael Gerber e myth plan there, he talks about having a fantasy org chart, imagining your organization being 50 or a hundred people trade all the boxes on the org [00:17:00] chart.
[00:17:00] Dave Cava: But the names of the people that are actually doing those things now into those boxes, so the owner's name is going to be in 30 boxes, right? We talk about getting the owner's names out of those boxes as early as you possibly can, because at the 10 guys in an owner stage, if your name is still in all 30 boxes, you've already got a problem. I'm a big believer in the, two pizza rule. Your, team should never be bigger than who you could feed with two pizzas.
[00:17:30] Carrie Richardson: That sounds like heaven.
[00:17:33] Dave Cava: Laughter
[00:17:35] Carrie Richardson: No, that's not true. I spent two years with no employees, and it's been glorious. But it's also given me time to reflect on the things that I failed at as a leader, and it also gave me time to consider whether or not I was prepared to do the work, to acquire the skills that I was lacking, in order to do it again .
[00:17:52] Carrie Richardson: I don't want to build another two million dollar shit show. That's not interesting to me. My, my consulting practice does fine, [00:18:00] but I would like to start another business.
[00:18:02] Carrie Richardson: I was inspired by the chief people officer at PAX eight beyond. And I don't think he knows that he inspired me, but I met him in the elevator and I had no idea who he was.
[00:18:13] Carrie Richardson: He was just like a very tall man with a suitcase. And I was like, Oh, are you like. How was your conference? Ours is just starting today. And he's Oh no, my conference is starting today, but I had to go to a meeting and now I'm back now. Oh, you're here for PAX 8 BEYOND. Have a good time. Blah, blah, blah.
[00:18:28] Carrie Richardson: And then I saw him at the bar later. I was like, Hey, elevator guy. No idea that he was like PAX 8 royalty. And I'm just talking to him. Like he is just some random guy. And I was like, ah, I'm thinking about starting this new business. And I don't know. So managing people was so hard last time, not sure what I want to do.
[00:18:46] Carrie Richardson: And now he listened to me for a little while. And then he was like it was very nice talking to you and I have to go. And he stands up and he puts his hand on my shoulder and he said "Carrie, I think you should try to scale a business at least once in your life. I think you would [00:19:00] find it very rewarding".
[00:19:02] Carrie Richardson: And so I started thinking about it. I was like, yeah, PAX eight guy. All right then. Yeah, it gave me a little bit of a like. All right, why not? Let's try this again.
[00:19:13] Dave Cava: Sounds like he had some gravitas to him. Just the way you said that it was just like, I don't know why I should listen to you, but I know that I should.
[00:19:22] Carrie Richardson: It was the British accent. He had a British accent. He sounded very, intelligent and very refined.
[00:19:28] Dave Cava: Oh man, I've got a good story about that. I got a I know a guy, he's an outsourced closer for MSPs. So you give him your hot leads. And, he'll learn your organization and your offering and basically go, close them..
[00:19:45] Dave Cava: And he's British. He lives in my town. And one night we went out. And we're just having drinks. And he says, Oh, who's playing over at the Paramount scene? And I listed off a couple of bands and one of them was Blondie. I said, Oh, Blondie is actually [00:20:00] over there tonight. And he said Blondie, is a bucket list show for me.
[00:20:03] Dave Cava: We're going. And I just said, it's probably already underway, but if you want to go over there. You walk over there and he goes to the security guard and says might I gain admittance to the performance? And, this it's a 17 year old kid or whatever. He looks all confused. And he says, do you need to talk to the people in VIP?
[00:20:25] Dave Cava: And he's that would be lovely. And all of a sudden we're. We're through the metal detectors, we're into the venue, we're sitting at the VIP desk, and he says, might I gain admittance to the performance? And they look at each other, they hand us two bracelets, and we walk in. The tickets were like 140.
[00:20:43] Dave Cava: And I'm walking up the stairs, and I'm going, I don't know what the hell just happened, but I know if I ever need an outsourced closer, I'm calling that guy. The something about that British accent gets it done.
[00:20:56] Dave Cava: Especially if you got a nice shirt on.
[00:20:58] Dave Cava: I'm just like... I [00:21:00] don't know what just happened.
[00:21:03] Carrie Richardson: You're doing a pre day at CompTIA and I saw this on LinkedIn and I asked you to come talk about it today because I think if you're going to be at the CompTIA channel con event in August in Las Vegas, you should absolutely come in a day early and attend this event. So Dave, tell us about the event that you're hosting.
[00:21:24] Dave Cava: The thing I want to emphasize is it is going to be meaty. We don't anticipate a giant crowd, so it can be very interactive we're going to take some of the material we've been working on for this book and really dive into it.
[00:21:37] Dave Cava: We're going to talk about how to get off this hamster wheel, the difference between self employment and business ownership. We're going to talk about how to build your team and staff, your company, and we're going to, dive into all the things that we've been working on for a couple of years now.
[00:21:51] Dave Cava: We're very excited about it.
[00:21:53] Dave Cava: The book really is a love letter to struggling MSP owners, and some are struggling more than others. Some have [00:22:00] got a decent quality of life, but just haven't figured out how to scale it.
[00:22:03] Dave Cava: There's others that can never go on vacation. They're losing their families, and this book is for all those people. It's really about how to get to the point. Where your business can run itself. You're making good money and you're in a position to give back and you have control of your time.
[00:22:19] Dave Cava: And step by step we go through how to get there. We can't go through everything in the book in four hours, but we're going to dig into some key chunks.
[00:22:26] Dave Cava: The cost is free,
[00:22:28] Carrie Richardson: free,
[00:22:29] Carrie Richardson: What is your daily consulting rate out of curiosity?
[00:22:33] Dave Cava: Oh gosh we're at 360 an hour, 5, 000 a day.
[00:22:38] Carrie Richardson: And you're going to get four hours of multiple people's time, all of them who normally bill at 400 an hour, and they're giving you your time for free. 100% you should be checking this out if you're going to be in Las Vegas anyway.
[00:22:53] Carrie Richardson: Skip the afternoon at the pool, skip the afternoon at the blackjack table, you don't need to be there. Head on over to [00:23:00] see Dave and Sean from Encore at their pre day event for CompTIA ChannelCon. That'll be July 31st.
[00:23:07] Dave Cava: Thank you so much. Yeah, we'd love to see you.
[00:23:10] Carrie Richardson: Wonderful. On that note, I think we've said all we can today
[00:23:14] Carrie Richardson: I want to thank you for joining us today, Dave. And I just want to reiterate that on July 31st, there is a four hour event being hosted by Encore Strategic. It's a pre day at CompTIA ChannelCon, and they're going to go through the fundamentals of the Pumpkin Plan for TSP.
[00:23:31] Carrie Richardson: So if you've been struggling in your business, if you feel like you're just on a hamster wheel right now, if your business is running you and you're not running your business, coming into Vegas a day early, Skipping the pool and the craps table might benefit you this time. Dave, thanks so much for joining us and sharing some information with us today.
[00:23:47] Carrie Richardson: I I'm not sure if I'm going to be at ChannelCon myself, but if I am, you know where I'll be the day before.
[00:23:54] Dave Cava: Thank you so much, Carrie. Thanks for the opportunity. It's been great talking to you today.
[00:23:57] Carrie Richardson: All right, have a great day. And for everybody else [00:24:00] out there, keep winning.