This Q&A appears in CRN's 2020 Rising Stars report, which highlights some of the most dynamic, profitable and fastest-growing resellers, MSPs and consultancies featured in CRN's recently released VAR 350.
The full Rising Stars report can be viewed here (brief registration process required)
Key vendor: Cisco, HPE, Dell, VMware, Microsoft
VAR 350 ranking: 276
Revenue: £10.8m (+19%)
Net profit margin: 10.5%
What would you attribute your growth and high profitability to?
We don't shift tin. Everything we do is a recurring revenue or project based. And we really hone in on just a handful of partners with which we try to hold as many accreditations as we can to bolster our credibility. We're not in the stack it high, sell it cheap arena, which is probably why our profit margins are so good.
What does recurring revenue stand at as a percentage of the total and how is that changing?
Roughly 40 per cent of our business is recurring revenue. That's steadily on the increase. I imagine that's the case for most businesses in the channel, but we're probably early adopters.
Since MXLG acquired SICL in 2018 it has acquired two other MSPs, namely 365 ITMS and Koris. Will they be integrated?
They probably will be in the next 12 months. That's only a probably at this stage. But our model around the M&A is a little different. It isn't to centralise services; that's not what we do. Our model is to add additional heads and funding rather than strip stuff out. There's a reason these businesses are successful, and we want to continue that success.
What is the long-term growth plan for SICL and the wider group?
For SICL it's just double-digit organic growth. For the group structure, it's the same, but in terms of the M&A piece the ultimate goal is to get the collective group of businesses to a turnover of circa £150m. As a group, We're probably around £37m at the minute.
What are the advantages of an MSP working with private equity, and MXLG specifically?
MXC [joint owner of MXLG alongside Liberty Global] specialises in backing companies in our channel. The guys from MXC are all originally from IT-related companies, so offer the experience of running similar businesses. That's an advantage compared with other companies out there that offer similar funding.
The advantage to [MSPs] going down [the private equity] route is that there is a massive need at the moment to be more competitive. Having strong financial backing makes a world of difference in a competitive landscape. Gone are the days when you could find business easily. It's all about being innovative and bleeding-edge. We have a saying in the office that the USP has gone. It absolutely has. It's about being customer focused. It's all about the customer experience. Often, things that provide good customer experience - accreditations and systems - are quite high-ticket items, so funding becomes key at that point.
What are the benchmarks or metrics a good businesses in your sector should be aiming for?
A recent stat showed customers are already 60 to 70 per cent of the way through a buying decision before they even approach someone in our industry. Certainly when I started in the industry that was a much smaller number. So anything that alludes to customer experience is a really important metric for us. It's actually our key focus for 2020, to the extent that we have now promoted internally a director of customer experience. One of our key measures this year is to implement the net promotor score.
What other major trends will hit tech providers in the 2020s?
The simplification of AI. It's a bit like when cloud first came out, when everything was termed as cloud. I think over the next three years AI will be on a similar journey to cloud and it will become very clear what AI is and what it can do for respective businesses. At the minute it's still just a phrase that's thrown about.
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