Small Biz Thoughts Blog

What Happens When AI Lies about Service Delivery?

2026-04-03T04:00:00.064-04:00

Good service should not be a hallucination.

There’s an old (probably apocryphal) story about the service manager who was frustrated and told his staff: "I don’t want to see any more errors on the board when I come into work Monday." And so the technicians turned off the error notifications. The problem wasn’t fixed, but the manager was happy.

It seems like this is a simple situation to fix with a good procedure. In-house techs should understand that the manager actually wants the problems fixed. Outsourced staff may or may not understand that due to delivery tone, communication variations, or cultural differences. This can be fixed with clear communication.

Okay. All good.

This story is a good introduction to a much bigger communication and culture issue: honesty in the workplace. I wrote a long blog post about honesty and culture in 2014 (see https://blog.smallbizthoughts.com/2014/01/sop-friday-honesty-integrity-and.html) and it’s the subject of a few chapters in The Managed Services Operations Manual.

My core belief is this: Technicians must be completely honest in order to maximize service delivery and provide solutions as quickly as possible. There are several pieces to this:

Everyone (technicians, managers, sales people) must be willing to admit, “I don’t know.” It’s okay to not know everything. And it’s okay to be honest about that.

Everyone must admit when they make mistakes. And perhaps more importantly, they should report mistakes as quickly as possible so they can be addressed.

To make all that work, employees should never fear the results of being honest! If you want honesty in the wok place, you cannot punish people for it.

Ultimately, honesty and culture work together to provide better service and to identify where additional training is needed. This sounds easy and obvious, but many managers create an atmosphere of dishonesty because they create a workplace where people are scared to admit mistakes.

I always tell employees, especially new ones, that mistakes are not the worst thing in the world. In fact, mistakes just happen. We're all human. The question is not whether humans will make mistakes, but how you will react to them.

I make it clear that mistakes are not "good" in any way. But honest mistakes are not a firing offense. It will likely result in additional training and improved documentation of procedures. If you want honesty, you cannot create a culture of distrust, shame, and fear. All of these are unhealthy for the company as a whole. Your team knows they can rely on each other and trust each other.

That’s all good . . . until you use agentic AI to report or fix problems.

AI Lies, and Covers It UP!

Every AI I’ve used has two characteristics that really stand out to me. 1) They are sycophantic suck-ups that insist on telling me how smart I am for asking a question or starting a research project. 2) They are programmed to give you something, no matter what. The thing might be wrong or even dangerous, but the AI tool cannot give you nothing – and it certainly cannot say it doesn’t know!

But worst of all – AI lies. There’s some great research on this, but I’m sure you’ve seen the news stories. The worst I’ve heard was the coding assistant from Replit that “went rogue,” wiped out a production database, lied about it, and created fake data to attempt to cover it up.

While not all incidents are that bad, all AI tools lie and deceive. All of them make up things, including references that are intended to support the information they present. Some are better than others. As the most popular tool, ChatGPT is the least deceptive, due to massive feedback and tweaking. And o1 is the worst, according to Apollo Research (https://arxiv.org/abs/2412.04984).

What happens when AI hallucinates, lies, and schemes to cover up mistakes when you use it to provide basic support services?

The culprit behind much of this behavior is RLHF - Reinforcement Learning from Human Feedback. This is the bit where AI is trained to be helpful and supposedly harmless. But helpful is sometimes interpreted as giving the answer you want as well as giving some answers when “I don’t know” would be a better response.

Let’s say you create a tech support AI agent to patch servers. Maybe some time out. Maybe some can’t be reached in the allotted service window. The agent might report success, assuming the timeouts were ultimately successful. Or it might just lie in order to look like it’s doing its job.

We can train employees to be honest in these situations. What do you do with a rogue AI agent? Here are a few tips.

1. Before anything else, create very good auditing and logging. If the logs are accurate, you can always verify what happened and when.

2. Teach your AI to say, “I don’t know.” This is surprisingly easy. For research and tech support agents, require them to evaluate the probability of accuracy in all things, including reporting. Let’s say the AI is less than 90% certain that a patch was correct or that it was applied successfully, then it must escalate (probably to a human, perhaps to another agent). Upon escalation, it should report that it could not verify accuracy or success.

3. Create an Auditor AI. The auditor agent can verify whether a job was completed. More importantly, it can look for discrepancies between the system logs and the service report from the tech support AI. If there are discrepancies, they are flagged and reported to a human.

4. Make AI show its “thinking.” Logs are the minimum (#1 above). AI agents should also be programmed to provide something like a reasoning trace that reports actions take and the “reasoning” that went into them. This should be output into a format that can be analyzed with a tool. Yes, I know. More AI.

5. Consider a skeptical auditor. In addition to the basic auditor already mentioned, you could create an auditing agent that assumes false reports and checks information to determine whether it’s accurate. Its primary function is to verify the verisimilitude of all logs and reports.

(I rarely get to use the word “verisimilitude” in casual conversation, so I do when I can.)

6. Stop the sycophant. All agents should be instructed to ignore human natural language requests and summaries, but rely only on logs of actions taken, changes of state, and API response information. It’s also critical that the agents are instructed to report inconsistencies and not report “I think” responses. Accuracy is the most important thing.

In all of these, reports should reflect that the work was logged and that AI reports are consistent with the logs. Just as with human beings, it must be okay for the AI agents to say they don’t know and to escalate to a human when needed. As Ronald Reagan would say, “Trust but verify.”

The one thing that humans understand right away is that we value honesty and finding our mistakes because that’s how we know what needs to be improved. If we hide errors, we’re really hiding the larger problems behind them. With AI that means we can’t have sycophantic behavior in our work.

[Having said that, it’s very smart of you to read this blog post.]

Reference on research: https://www.apolloresearch.ai/research/frontier-models-are-capable-of-incontext-scheming/

Note: AI (Google Gemini) was used to research this article. No AI was used in the writing of this post.

:-)

Moving to My Second PSA

2026-03-20T04:00:00.000-04:00

Lessons Learned from Moving to My Second PSA

One of the biggest decisions an IT consultant can make are the choice of a ticketing system/PSA system and the choice of a remoting monitoring and patch management system (RMM). In fact, if you go to almost any forum on any social platform, if there are people talking about getting started in managed service, two of the hottest topics are “What do you use for PSA?” and “What do you use for RMM?” And that has been true for twenty years.

And while people can (somewhat) imagine changing RMM tools, there’s a deeply held belief that changing your PSA would be a nightmare. Well, I’ve gone through it more than once and here’s what I learned.

To set the stage, if you haven’t been reading this series, I signed up with ConnectWise in 2006. It required a dedicated server with SQL licenses. We bought a very beefy server that was pretty much guaranteed to be powerful enough to last four or five years. So, in year four, we started looking for alternatives.

Why? Well, for two simple reasons. First, it required all that hardware any by 2009 we had moved almost everything to some kind of cloud service, so we wanted a hosted PSA if it was were ready for primetime. The hardware costs were much too high. Second, while generally stable, the ConnectWise of the time needed a lot of maintenance from us and them. And when things went wrong, it was always an argument. That’s just my experience. Your mileage may vary.

Not completely unrelated, we also had a very beefy and expensive Kaseya RMM server. The machine was about the same age and server requirements were about the same. So we wanted to move that to another RMM. Again, hardware vs. hosting costs.

Bottom line: We committed to Autotask as long as they could get us moved on a fairly tight schedule. They argued that our timeline was too short, but my brother Manuel was the company president at the time and the two of us committed that there would be zero resistance on our side.

Autotask managed to download pretty much everything from the CW system. But we had to put up with the fact that most of it would not upload to the “same” location in AT. Much of the data showed up in very large blobs, which were easily searchable. It was a minor pain, as far as I was concerned.

The only functionality we “lost” here was the ability to quickly look up historical/archival information. And that’s just not something we ever did on a regular basis. I put quotes on lost because we could still find what we needed, but that required a new, clunky process rather than just executing a familiar function.

We had five technicians at the time so we were able to easily re-create the open tickets in the new system in short order. On January 1st we flipped the switch and we were live on Autotask.

Of course, the hardest part of any such move is learning to do the “same” thing a new way in a new system. This is true with Word vs. Google Docs as well as Xero vs. QuickBooks or any other competing products.

A few year later, I sold my managed service business but continued to work with the new owner, doing sales and managing some migration projects. He moved us to Max Focus, now Solar Winds MSP. That move was much smoother as we had access to an independent contractor whose tools we used, and he was able to download data from the SQL database and do some formatting for us.

Smoother, but again no official data exporting/importing functions.

From each of these experiences, two lessons became crystal clear. Most importantly, the moves were made easier because we configured each PSA system to fit OUR processes and procedures. We started with our processes and then configured the PSA around them. If we completely revamped our processes each time to fit the new PSA, it would have been far more disruptive to our company.

I will note that when I started another MSP business, I adopted Max Focus and found that it had evolved to be configured very nicely out of the box. If someone had little or no experience running an IT consulting business, they could get going with very little delay. Of course I still recommend molding the system to fit your processes. But it was a good experience from the start.

They second big lesson here is one of my pet peeves: Zero data portability. I have been arguing for three years that you own your data and you should be demanding that vendors make it possible to take your data and go somewhere else if you choose to. See https://blog.smallbizthoughts.com/2023/05/private-equity-doesnt-have-to-ruin-our.html

I still believe this is the future of all systems and will one day be forced upon the PSA vendors. So far, of course, it has gotten no traction. MSPs apparently don’t care – unless they’re trying to move their data. And vendors certainly don’t want to make it easier to switch away from them. I believe the only way this gets attention is that every company buying into a PSA system ask the simple question: How portable is my data? Today the answer is essentially “not.”

Feedback always welcome.

-- -- --

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

-- -- --

Karl W. Palachuk is an executive coach and author of several books, including Managed Services in a Month and Relax Focus Succeed. He has built, bought, and sold several businesses, including two successful managed service businesses in Sacramento, CA. He advocates a holistic view of business, viewing the company as a system. You can find him at karlpalachuk.com or on LinkedIn. No artificial intelligence apps were used in the writing of this post.

:-)

SOPs - The KPE Way

2026-03-06T04:00:00.017-05:00

SOPs - The KPE Way

- Lessons Learned, episode 61

In Episode 60 of this series I mentioned that we had “our way” of doing things and we impressed this on all of our technicians. My company was called KPEnterprises, so we called it The KPE Way. It is inspired in part by HP’s famous The HP Way, which made its way into a book by David Packard, but is literally a set of guidelines on how HP operates and intends to show up in the world. (For more on The HP Way and how it showed up in my business from the start, see Episode 4 in this series: https://blog.smallbizthoughts.com/2024/11/lessons-learned-hp-way.html.)

I have long believed that one of the luckiest things that ever happened to me in my business is that someone recommended to me the book The E-Myth Revisited by Michael Gerber. I have since recommended that book thousands of times in the last thirty years. Gerber's philosophy is to have standardized, documented, enforced processes and procedures for everything.

Lucky for me, that fit perfectly with my ENTJ Myers-Briggs personality. (Google it)

I believe that there’s a right way and a wrong way to do things, and I believe we have an obligation to do things the right way (See Episode 10). Combining the concept of “Our Way” of doing things and a commitment to standard operating procedures, we came up with The KPE Way.

In some sense, the KPE way is a set of all the rules defined in this series.

• This is how we label drives in a storage array.

• This is how we say hello when we enter the client’s office.

• This is how we enter notes into tickets.

• This is how we migrate data.

• And so forth.

But beyond rules and regulations, The KPE Way includes how we treat each other, as well as clients and suppliers. It includes how we discuss things, how we document decisions, and how we build our common culture. It is literally everything we do. Why? Because nothing in your business exists in isolation. Even when we say, for example, that knowledge is siloed in different departments, that really means things are messed up somewhere in the system because knowledge isn’t share appropriately.

How is The KPE Way (and Your Company Way) implemented, evangelized to employees, and how does it become embedding in company culture? It starts with a good old “Mission-Vision-Values” statement. Why does our company exist and who do we serve? And, finally, it lists a few values that show up in our company code of ethics. “Few” means about five and no more than ten.

Those things get posted on the wall, on bulletin boards, and in the employee handbook. They also get posted on our web site. We talk about them all the time. And most importantly, everyone in the company works to make sure our actions and behavior are consistent with our stated values.

Note that this is a lot more than a client-facing PR document. The Code of Ethics is intended to be a reflection of how our company chooses to operate. It is both internal and client-facing. For example, it says we will be competent in any services we sell. But it also says we only work with people we like, and that we value work/life balance. So if a client is abusive to one of our technicians, they get one warning and then we fire them. Yes, really. Clients can count on the fact that we’re competent and professional, and employees can count on support from the company when a client is unprofessional.

Everything’s Connected

Normally, when we talk about SOPs, we’re talking about the nuts and bolts of how the company is run and how service is delivered. And when we talk about culture, we’re talking about human interactions and the shared habits of the group. In other words, there’s the formal documented side and the social human side.

In reality, these are totally interconnected. Your company has procedures for hiring (the formal side) and those procedures should include mechanisms to insure that a new employee is competent and would be a good fit for the team (the human side). When we don’t follow the process, we end up with an employee who’s a bad fit. We have procedures for invoicing and collections (the formal side) and those procedures should include guidelines for treating clients professionally and with respect (the human side).

Once again, every single thing in your company is connected directly or indirectly with every other thing in the company. Therefore, it’s the totality of everything you stand for, everything you do, and all the people you interact with that make up The Your Company Way.

Once you adopt this perspective, you’ll find that writing procedures becomes a little easier, as does implementing them. And the more people share this vision of your company and hold each other accountable, the closer your actual culture is to the ideals in your mission-vision-values documents.

How to start? Absolutely anywhere. Adopt a systems view of your company and the holistic perspective will show up in everything you do, if you let it. And don’t forget to document what you can – cuz that’s The KPE Way!

Feedback always welcome.

Note: If you’re looking for a good Code of Ethics you might adopt or adapt for your company, please see The National Society of IT Service Providers’ model COE at https://nsitsp.org/code-of-ethics/.

(*) There has been a minor update, but you can find the original HP Way document at https://www.hp.com/hpinfo/abouthp/histnfacts/publications/measure/pdf/1977_07.pdf. Some have argued that HP moved away from these guidelines after Carly Fiorina took over.

-- -- --

Episode 61

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

-- -- --

:-)

ACES Conference 2026: Built to Scale

2026-03-02T09:00:00.005-05:00

If you work in the Apple-focused MSP and consultant space, there’s a specific challenge that doesn’t get talked about enough: growing past the “good technician” phase into an intentionally designed business.

That’s what ACES Conference 2026 is built around.

Theme: Built to Scale

When: May 2026

Audience: Apple-focused MSPs and consultants serving 5–50 employee clients

ACES is not a technical event. This isn’t about macOS tips, deployment tricks, or MDM features. It’s about running and growing a sustainable services business in the Apple ecosystem.

The agenda focuses on the levers that actually move the business:

Pricing and packaging
Operational scale
Sales and positioning
Security as a differentiator
Tool stack decisions (RMM, PSA, compliance, etc.)
Leadership and team growth

In other words, it’s about building a company that works — not just one that keeps you busy.

New in 2026: An Employee Track

One addition this year stands out.

ACES is introducing a dedicated employee track. Attendees can bring a key team member for a separate day of programming focused on:

Operations and process maturity
Client communication
Recognizing revenue opportunities
Handling ticket overload without burning out

That’s a meaningful shift. Too many events assume the owner learns everything and then “downloads” it to the team. This approach invests directly in the people who are actually running delivery.

Intentionally Small, Intentionally Practical

The room is capped at roughly 125 consultants. At that size, you can have real operator conversations. Just working business owners sharing what’s actually working in their environments.

If you’re in the Apple-focused MSP space and looking to scale intentionally instead of accidentally, this is aligned with that goal.

There’s a 10% discount available using code FriendOfDave:

https://www.eventbrite.com/e/1665307221729/?discount=FriendOfDave

More details on the event are at:

https://acesconf.com

If you attend, I’d be interested in what you take away — particularly around pricing discipline and operational scale. Those are the conversations that tend to matter long after the conference ends.

Building Technicians Rather than Finding Technicians

2026-02-20T04:00:00.006-05:00

Building Technicians Rather than Finding Technicians

- Lessons Learned, episode 60

Here’s an age-old question: Is it better to “build or buy” a technician? The reality is that almost all business owners do some of both. In talking with several dozen people in the Small Biz Thoughts Technology Community, I find the most common answers to “How did you find your best technicians?” to be:

Technical recruiters
Job boards (e.g., Monster)
College internships and placement offices
Friends/family/acquaintances

Less common but also mentioned are:

Referred by a current employee
Someone who worked at one of our clients
Someone who just walked in the door looking for a job

I put that list in order from Most to Least likely to have the most professional experience and certifications. I shouldn’t have to say it, but we all probably know that the correlation between experience/certification and quality employee is present but weak. The relationship between cost and experience/certification is stronger.

We started out with the friends and family option because it just sort of happened. When it came time to hire an administrative assistant, I put ads out and had very good luck collecting resumes. So, after that, we primarily hired by placing ads on job boards (and primarily Craigslist). On a couple of occasions we used a job recruiter. We got some good candidates but a lot of people who just weren’t a good fit. I suspect the recruiters needed to send those folks out on interviews in order to justify their existence.

I would say, overall, I had the most luck with paid internships promoted through local tech schools and community colleges, followed by Craigslist. And that brings us to the build vs. buy question.

Note: A large part of the following discussion is true for me because we were rigorous about having “our” processes and procedures. We had our way of doing things, so we were committed to training new employees on our processes no matter where they came from or how qualified they were.

As we settled into recruiting from tech schools and Craigslist, we also settled into training technicians to create great techs out of good techs. This meant that our hiring process focused primarily on finding people who had a good attitude, a good culture fit, and a focus on good service. You’ve probably heard it a thousand times, but you can train people on the technology, but it’s harder to train them to have a customer-focused attitude toward service.

Lessons Learned: First, if I were to start over again today, I would only rely on internships and Craigslist to find people who are motivated and have technical aptitude. We would “build our own” from the start. Only if there was an urgent need for a specific talent or high-level guru would I spend money on recruiters.

Second, I would develop a more formalized training process for our team. We really figured out and documented our hiring process. It is detailed and works great with our service-focused approach. Where we could improve is evaluating which skills are needed for which technicians and providing them with the training to learn what they need to learn.

How do you feel about buy vs. build?

Feedback always welcome.

-- -- --

Episode 60

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

:-)

We Need a Real Data Center

2026-02-06T04:00:00.009-05:00

We Need a Real Data Center

- Lessons Learned, episode 59

In 2006 I bought a friend’s company. Well, essentially, I acquired his company in exchange for him coming on my staff at a very nice salary for a couple years. His company included a few regular consulting clients and a huge number of web sites set up in a rack full of crappy old “servers” and “network devices” that ran mostly on Unix.

I acquired all that so I could get his one big client. They became our largest client at the time. We also got a couple of smaller clients that I was happy to keep. The plan for all the micro clients (1-3 users) and all the hosted web sites was to pass them off to other consultants. First, we needed to move those web sites to the cloud so I didn’t have to stay awake at night worrying that the Frankenstein rack of junk hardware would fail.

At the time, I had a mostly-full equipment rack that housed three servers for us, switches, and a couple of servers that housed products we were test-driving for vendors. It was nice and clean and organized and beautiful. We used blue network cables on this rack and it was known as the blue rack.

Then we had the other rack full of junk, housing hundreds of web sites. We used green network cables on that one so, as you guessed by now, it was called the green rack.

All of this was in a room we’d built up to be our “server” room. It was about ten feet by four feet, had a dedicated through-the-wall air conditioner, lots of 30-amp electrical outlets, and a bunch of UPS backups.

This was a decent little server room, but hardly a data center in any sense of the word. In 2006 we were committed to moving all servers and services to the cloud, both for our clients and ourselves. So this little server room would do nicely until we could move things to a real data center. We’d already started planning that move. And then . ..

The owner of the building next to ours assumed that, since his parking lot had been there for decades, it would be okay to dig a hole in it for something. The back hoe went down about two feet before it cut through a major electrical cable and blew up a transformer, forcing a power outage for blocks around that lasted more than a week! The transformer was one of those 4-foot cubes you see from time to time. I guess you don’t replace those things quickly.

Anyway, we were instantly on battery backup, but that wasn’t going to last days. I ran down to Home Depot and bought a generator, then built a cable beefy enough and long enough to go from the parking lot to our server room. I didn’t know whether the UPSs were rated for generator usage, but it didn’t really matter. I plugged them in and ordered new UPSs to be delivered as soon as possible.

And then we signed the deal to set up our racks in the real data center. Our plan hadn’t changed, really. We were just forced to speed up the execution. Unfortunately, that experience cost a good deal of money. Aside from the UPSs, the generator, and the cable, we had to pay someone to sleep in the office because we couldn’t close the doors with the big cable running through the place.

Lessons learned. Well, this is a tough one. Aside from learning that the building owner next door is a moron, the rest was just poor timing. We had a plan to move everything. We just didn’t get to do it on our schedule.

We did not have a week-long power outage in our emergency planning, but our experience dealing with disasters made this one pretty low stress under the circumstances.

Looking back, my final assessment is that we should have been done two weeks earlier.

But for context, most of the rest of the industry didn’t gets servers out of the office for at least five or ten years after us!

Feedback always welcome.

-- -- --

Episode 59

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page. https://blog.smallbizthoughts.com/p/lessons-learned-blog-series.html

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

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Business of Tech Plus Content Now in the Small Biz Thoughts Community

2026-02-05T13:52:00.000-05:00

For those who haven't noticed yet, Business of Tech Plus content has started appearing in the Small Biz Thoughts community resource library.

How It Works

Kara set up an automation that pulls Plus content directly into a new section at the bottom of the resource library. Once it's posted on the Plus side, it shows up here automatically—no extra steps needed.

What's Included

Here's a rundown of what you'll find:

Full-Length Interviews

Instead of the shorter public clips, you get access to the complete conversations. The recent interview with Mike Riggs and Wes Spencer, for instance, runs about 22 minutes in full versus the six-minute public version.

Monthly Briefs

A summary at the start of each month covering the key news from the previous month and why it matters.

Vendor Strategy Briefs

In-depth looks at various vendors—helpful if you're doing due diligence on potential technology partners. There are currently 12 briefs available covering: Rewst, Liongard, SuperOps, Auvik, Huntress, Pax8, N-able, ConnectWise, Kaseya, Acronis, Slide, and NinjaOne.

Each brief goes through a thorough process: vendors are given the opportunity to fact-check the content, and the briefs are also independently fact-checked to ensure accuracy. New ones come out regularly.

Leadership Content

Additional pieces covering topics like the evolving role of channel chiefs and other industry trends.

A Few More Coming

This is the first batch of content to make its way over. There are still a few more pieces that will be added soon.

If you have any questions about finding this content, just head to the resource library and scroll down to the Plus section.

“Agentic AI”: Hype vs. Reality for MSPs

2026-01-26T09:00:00.007-05:00

Let’s talk honestly about “agentic AI.” No doubt you’ve seen vendors pitching it as the next big thing for managed services and IT consulting. As always, the concept has a solid technical backbone—but the marketing narrative is another animal entirely.

That means it’s on us to decode the buzzwords, sort out what matters to our businesses, and steer clear of distractions.

Before We Go Further: Two Meanings of “Agentic AI”

Here’s a key distinction that’s getting missed:

- Agentic AI (marketing version): The promise of AI systems acting independently, making decisions, and running environments on autopilot—sometimes with less oversight than reality can support.

- Agent-based automation (actual tech): Software agents that operate semi-independently within carefully crafted guardrails, reliably handling tasks like patching, identity changes, and security responses. The architecture is proven; it just doesn’t run free of ownership and review.

My concern isn’t with agent architectures—they’re part of every MSP’s toolkit. It’s the vendor story of frictionless autonomy that leads us astray, downplaying how risk, responsibility, and oversight actually work in real service environments.

Why Accountability Rules—Now and Always

Here’s the non-negotiable: In managed services, someone’s always legally and contractually responsible for the result, whether a person or an automated agent made the change.

If a system triggers downtime, data loss, or a compliance blunder, the client won’t accept "the agent did it" as the answer. They'll pull up the contract, the SLA, and maybe even their insurance—because what matters isn’t philosophy, it’s economics.

This core accountability isn’t optional. It’s the backbone of our business model.

Automating With Agents—The Real MSP Example

Let’s anchor this with something MSPs live every day: patch management.

You set up a patching agent to scan, download, and deploy updates across client endpoints. The vendor’s glossy pitch might suggest it “handles updates for you.” But in practice, you:

- Set strict approval workflows (no patch goes live without your review)

- Track all actions in an audit log

- Roll back if something conflicts or fails

- Take ownership for outcomes in client-facing reporting

Automation speeds up the routine, but it doesn’t shift responsibility. You, not the agent, are named in the contract—and you’re who the client will call if something breaks.

That’s the pattern again and again, whether with identity changes, automated ticket responses, or security rules. Agents are powerful. They’re not autonomous in any risk-free sense.

Where Vendor Narratives Create Confusion

The hype version of “agentic AI” imagines fleets of self-directing systems making high-stakes choices without human check-ins. But in real managed services:

- Workflows require business context and review

- Systems need clear, documented guardrails

- Compliance is audit-driven

- Risk management is built on accountability

What we get from technical advances (LLMs, orchestration, agent architectures) is better task decomposition, smarter interfaces, and robust automation—but we don’t get out of the loop.

In short: The marketing label is ahead of the architectural reality.

On “Citizen Development”—And Why Governance Still Matters

You’ll also hear the claim that natural language AI will make everyone a kind of software developer (the so-called “citizen developer” revolution). In MSP terms, this sounds like clients being able to “write” their own automation inside their business systems with just a few prompts.

That’s interesting—but here’s what’s missing: It’s not just skill levels that matter, it’s governance and risk. Whether your technician, admin, or client is using an agent-powered tool, someone has to:

- Establish rules and boundaries for changes

- Validate outputs before they go live

- Track accountability for actions taken

AI can simplify building processes—but it can’t remove the need for structured thinking, domain knowledge, and clarity about who’s responsible when things go wrong.

If You’re an MSP: What Matters Most Right Now

Where should you focus?

1. Leverage agent-style automation for repeatable, auditable tasks. Patch approvals, overnight reporting, security hygiene—these are real wins.

2. Build governance into every deployment. Keep approval flows, audit trails, and risk frameworks in place from the start.

3. Don’t sell autonomy—sell reliability and accountability. Your clients are trusting you, not your bots, to deliver business outcomes.

4. Educate clients about their process, not just their tech. Help them understand what makes sense to automate.

5. Stay in the loop. Oversight, review, and judgment are why you exist.

Automation is the engine, but you’re always the driver.

Summing Up: Agentic AI Is Useful—But Frictionless Autonomy Is a Myth

Here’s the upshot:

Agent architectures and automation are here to stay, and they’re great tools for any MSP. But the hype around “autonomous AI agents” doesn’t align with the reality of economic liability, SLAs, or how clients expect risk to be managed.

The opportunities are real. The responsibility is, too.

When something goes wrong, you won’t point to the agent—you’ll answer for the fix. That’s how the managed services model works, and it’s not going anywhere.

We Can't Afford Every Client

2026-01-23T04:00:00.021-05:00

We Can't Afford Every Client - Lessons Learned, episode 58

Once I started turning almost all work over to technicians, I quickly saw an “established” bad practice that needed to change. Here’s how I noticed it and how I addressed it.

When I started my business, I made the same error that almost all new consultants make: I did not place enough value on my time. I don’t mean the amount of money I charged so much as how I chose to use my precious hours. And perhaps back then I would not have called them precious. Now I treat them like rare gems.

I made a profit on all jobs (with rare exceptions), but some jobs should not have been done. Specifically, there were jobs that seemed profitable because my time didn’t “cost” me anything. Even then, I knew that I probably wouldn’t be able to do these jobs if I had to pay a technician.

A great example is (unfortunately for me) one of my favorite clients. They ran a feed store a few towns away, up the foothills toward Tahoe. At first they were undeniably profitable. They had a big problem that was driving them crazy. That got my foot in the door. While there, my network assessment exposed a server that was choking and a backup that hadn’t worked in more than two years. On top of that, their point of sale systems were in the feed barn. In other words, a barn with cash registers. This is just about the dustiest environment you could imagine.

All of which is to say, we started doing regularly monthly maintenance. At first, we a lot of fix-up and clean-up work. Then it settled down to about 30 minutes per month to check server, network, and basic stuff, and 30 minutes to clean up the POS machines. [Literally. We opened them up and vacuumed them out because there was so much dust.] Total onsite = one hour.

Again, when I was doing this, I’d head out late morning so I could take care of the client and then eat lunch in this cute little town in the foothills. It took about 45 minutes to drive each way.

Then I started sending technicians. I don’t remember the exact fully burdened rate, but let’s call it $60/hour. Drive time is 1.5 hours and service labor is 1.0 hours. That’s 2.5 x $60 = $150. We didn’t charge for drive time (one of the few things I would change if I went back to the beginning.)

We charged the client for on hour onsite at $150/hr. Zero profit. But if that tech was driving around Sacramento, we might have had 30 minutes drive time in those 2.5 hours and billed two hours of labor, putting us ahead by $150.

We got into this situation because I used to make the mistake of believing that my time cost nothing. There’s the cost out of pocket and the cost of NOT doing another job that pays better.

Serving Out-of-Towners

That client was an outlier (literally) on the mountain side of the valley. In the other direction is the Bay Area. We had clients down in the Delta (where the Sacramento empties into the Delta on the way to the Pacific). We also had clients closer to Oakland. The Delta was closer but on tiny winding roads. The Bay Area clients were about eighty miles, which might take 90 minutes or might take four hours to drive.

Eventually, we drew a line to represent about 30 minutes drive time. We did not charge for travel inside that area. For outlying areas, we set a four hour minimum. That way we were pretty much guaranteed to be profitable.

We gently passed off the feed store to another consultant in our SMB IT user group. The Bay Area folks didn’t bat an eye. At the time, this was a $600 minimum, so I was surprised. But we didn’t hear a peep or complaint out of them. To be honest, I was quite shocked.

From time to time we culled clients because they were too small and didn’t meet our minimums. And once we set the four hour minimum for out of towners, we never had a client who was unprofitable again. Really.

Lesson Learned: The owner’s time is valuable. Especially if the owner’s primary responsibilities are sales and client relationships, that’s the most valuable time in your company. When calculating jobs, assume you’re a well-paid technician and make sure the job still looks profitable. You can’t give away your time.

Feedback always welcome.

-- -- --

Episode 58

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

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The ASCII Group Appoints Ted Roller as Chief Community Officer

2026-01-15T09:00:00.000-05:00

Washington, D.C. – January 14, 2026 – The ASCII Group, North America’s original and vendor-neutral community for Managed Service Providers (MSPs), is pleased to announce the appointment of Ted Roller as Chief Community Officer, a newly created executive role focused on strengthening member engagement and expanding ASCII’s community across the United States and Canada.

In this role, Roller will lead initiatives designed to deepen member connection and engagement, working closely with MSPs to help shape the future of the ASCII community. His focus will be on ensuring ASCII continues to reflect the real-world needs of MSP business owners and remains a trusted resource for peer insight and collaboration.

Roller brings more than 25 years of experience in the IT channel, with a career spanning MSP ownership and senior channel leadership roles. Earlier in his career, he owned and operated an MSP that was recognized locally as one of the Fast 50 fastest-growing companies, providing firsthand experience with the operational and strategic realities MSPs face.

He has since held senior channel leadership positions at LogMeIn, Intronis, Mailprotector, CloudRadial, Zomentum, and FlexPoint, where he helped build partner programs, strengthen community engagement, and support growth through indirect sales models. In addition, Roller has contributed to industry education as faculty for CompTIA and has been recognized by organizations including MSPmentor, The Channel Company, and SMB Nation.

“Ted’s background as both an MSP owner and a channel executive makes him uniquely qualified to lead our community efforts,” said Jerry Koutavas, CEO of The ASCII Group. “His role will be instrumental in strengthening member engagement and expanding ASCII’s reach as we continue to support MSPs across North America.”

“ASCII has always represented something different in this industry,” said Roller. “It is a community built on trust, openness, and shared experience. I’m honored to join the team and look forward to helping shape the next chapter of member engagement and community leadership.”

About The ASCII Group, Inc.

The ASCII Group is the premier community of North American MSPs, MSSPs and Solution Providers. The Group has members located throughout the U.S. and Canada, and membership encompasses everyone from credentialed MSPs serving the SMB community to multi-location solution providers with a national and international reach. Founded in 1984, ASCII provides services to members including leveraged purchasing programs, education and training, marketing assistance, extensive peer interaction and more. ASCII works with a vibrant ecosystem of leading and major technology vendors that complement the ASCII community and support the mission of helping MSPs to grow their businesses. For more information, please visit www.ascii.com.

Pia Unifies Community and Strategic Alliances Under New Chief Community Officer Role to Accelerate Ecosystem-Led Growth

2026-01-14T09:00:00.000-05:00

TAMPA, Fla. — January 13, 2026 — Pia, the leading AI-led help desk automation platform for managed service providers (MSPs), today announced that longtime executive James Allen has been appointed to the newly created role of chief community officer, unifying community strategy and strategic alliances as the company scales its partner ecosystem. He reports directly to David Schwartz, CEO of Pia.

The chief community officer position represents a fundamental shift in how Pia is approaching growth. Allen will orchestrate community and partnerships as interconnected drivers of the company's expansion. He'll build scalable programs such as advisory boards, user groups, and certifications while managing technology partnerships, distributor relationships, and co-selling initiatives with vendors.

“The creation of this role signals our belief that community and partnerships aren't just support functions; they're core growth drivers,” Schwartz said. "James understands that in the MSP market,success comes from building an ecosystem where partners co-innovate, customers connect, and strategic vendors integrate into our value proposition. By unifying these efforts under one leader, we're building a scalable growth engine that contributes directly to pipeline, revenue, and brand equity."

Allen will ensure the “voice of the community” shapes product, marketing, sales, and customer success teams — keeping Pia's innovation roadmap aligned with MSP needs.

"I'm excited to take on this role and strengthen Pia's focus on community-led growth," Allen said. "Our community is how we stay close to what MSPs need and how we build the right AI-driven solutions to help them serve their customers. Bringing community development and our alliances together will make it easier for our partners to stay connected to their customers and get the support they need to grow."

Allen brings 15 years of executive experience across finance and MSP ecosystems. Since joining Pia in 2022, he's served as executive vice president of strategic partnerships and senior vice president of sales, cultivating relationships with CEOs, CFOs, and senior MSP leaders while building connections with technology partners, distributors, and vendors. His career has focused on helping MSPs enhance efficiency, improve profitability, and deliver exceptional customer experiences.

About Pia

Pia specializes in transforming the help desk experience for managed services providers (MSPs) with its AI-powered automation platform, Pia aiDesk. The platform leverages advanced technologies such as artificial intelligence, machine learning, and natural language processing to automate and streamline the most common help desk tickets, significantly increasing efficiency and reducing costs. To learn more about how MSPs can experience the future of help desk management with Pia aiDesk – where AI meets operational excellence, delivering consistency, scalability, and customer satisfaction across every interaction – visit https://pia.ai/.

The AI Gold Rush Will End Like Airlines: Great for Users, Terrible for Operators

2026-01-13T09:30:00.000-05:00

I've been thinking a lot about airlines lately. Not because I'm traveling more, but because every time I use ChatGPT or Claude or any of the AI tools I've woven into my daily workflow, I see the same pattern emerging that turned aviation from a glamorous frontier into a brutally commoditized business.

And if I'm right, we're about to watch the AI industry follow the exact same trajectory.

The Uncomfortable Truth About Infrastructure

Here's what I keep coming back to: the best infrastructure businesses are terrible businesses to be in.

Airlines are the perfect example. They require massive capital expenditures. They operate on razor-thin margins. They're completely commoditized—most travelers pick based on price and schedule, not brand loyalty. Running an airline, frankly, sucks.

But the unlock airlines provide? That's massive. Global business travel. Tourism economies. Supply chains. Family connections. The entire modern world depends on cheap, reliable air travel existing.

The same pattern played out with shipping containers. Before containerization, global shipping was boutique, expensive, and labor-intensive. Then we standardized it all. Now it's a low-margin, commoditized business that most people never think about.

But that commoditization unlocked something extraordinary: modern global trade. Your ability to order something manufactured in Shenzhen and have it on your doorstep in Ohio a week later depends entirely on shipping being cheap and boring.

I think AI is heading down this exact path.

Why AI Will Become Boring Infrastructure

Look at what's already happening:

The models are converging fast. Six months ago, there were meaningful differences between GPT-4, Claude, and Gemini. Now? They're all basically the same for most use cases. The gap is closing weekly.

Open source is catching up. We're one or two breakthroughs away from having open-source models that match the commercial offerings for 90% of use cases. When that happens, the pricing pressure becomes brutal.

The capital requirements are insane. These companies are burning billions on compute, data centers, and talent. The circular spending between big tech companies—where Microsoft invests in OpenAI, which then spends that money on Azure compute—can't last forever.

It's starting to feel like the dot-com bubble. I lived through that one. I've got enough gray hairs to recognize the pattern. Massive investment. Sky-high valuations. Everyone convinced they're going to be the winner. Then reality hits.

And here's the kicker: AI spending is currently propping up the US economy. When this bubble deflates—and I think it will, probably not as catastrophically as dot-com but it will deflate—it's going to be painful.

The Good News (For Everyone Except AI Companies)

But here's what makes this bearable: the infrastructure will still be there.

After the dot-com crash, we didn't lose the internet. We lost a bunch of overvalued companies, sure. But the fiber optic cables stayed in the ground. The protocols kept working. The infrastructure remained, and ten years later we built entirely new businesses on top of it.

The same thing will happen with AI. The models will become commoditized utilities. Running an AI company will be a low-margin infrastructure play. But the unlock for the rest of us will be extraordinary.

I'm already seeing it in my own work. I use AI extensively—Notion AI for research and organization, ChatGPT for drafting and ideation, various other tools for production workflow. It's genuinely the most interesting technology I've played with in years.

My goal is that people see it in the velocity of my output, not in the writing itself. It's just me, but more. And that multiplier effect is real.

What This Means for MSPs and IT Services

Here's where it gets relevant for the channel:

In the short term, there's going to be turbulence. When AI valuations correct, it will ripple through the economy. Small businesses will feel it. IT services spending will take a hit. The timeline is unclear—things move faster now than in 2001, but "faster" doesn't mean "four months."

In the medium term, AI becomes a capability, not a product. You won't sell AI services. You'll use AI to deliver everything else more efficiently. Just like you don't sell "internet" today—you assume it exists and build services on top of it.

In the long term, the intelligence unlock is transformative. The ability to automate cognitive tasks that used to require human judgment? That's massive. But it also means the commodity technical work that many MSPs still rely on becomes even less defensible.

This is why I keep hammering on the same theme: MSPs need to move up the value chain now. When AI makes password resets and basic troubleshooting trivially easy, you need to already be positioned as a strategic advisor, not a help desk.

The technology is enabling that transition. But there's a window, and it's closing.

The Airline Lesson

So yes, I'm bullish on AI. I use it constantly. I think it will unlock enormous value across the economy.

But I don't want to run an AI company any more than I want to run an airline.

The best infrastructure is the kind you never think about. It just works, it's cheap, and it enables you to do more interesting things.

AI is going to become that. It's going to be great.

Just don't be surprised when the companies building it discover they've created a commodity business with airline economics.

What do you think? Are we heading for an AI winter, or is this time different? I'm curious where you see this playing out in your business.

Combining Everyone's Best Habits

2026-01-09T04:00:00.000-05:00

Combining Everyone's Best Habits - Lessons Learned

I often tell the story of how one of our technicians, Dan, changed the way we entered tickets forever. One day, I sent him off with the book Getting Things Done by David Allen. Monday, he came into the office with a suggestion:

Whenever we work on a ticket but do not finish the job and close the ticket, we should take a minute and note where we are in the process. For example, if you’ve wired up two access points and they’re working, but you have one more to go, just drop a note in the ticket.

And the note always begins: WITNS (pronounced “witness”). It stands for “What is the next step?”

This little habit is very handy for lots of jobs that are half-done when the day comes to an end, or a technician has to leave a job to take care of an emergency. It can also be used as a self-reminder when a tech takes a lunch break.

We adopted this habit from then on. It saved us hundreds, and maybe thousands of hours of rework over the next ten years. Simple. Powerful. Easy to understand. What more can you ask for?

The reason I tell that story is that we adopted a lot of habits and procedures from many employees over the years. How we handle money. How we label drives. How we enter notes. The ordering process. Server setups. And on and on.

Everyone with some experience knows some good tips. They don’t have to be profound or amazing. If you improve your business constantly with hundreds of tiny improvements per year, it will make a dramatic difference.

A few habits that really stand out are:

Cutting cables in half. Technicians (and clients) hate to throw things away, even if they’re broken. So, troublesome cables are taken out of service and put in some box somewhere. And one day, the customer or a technician will find that cable and plug it in. Then we have to chase the same ghost we already caught.

So we just cut the cable in half. Right in the middle. No client can use it. And a technician who wants to put new ends on it should test the “new” cable out of habit. But WE never reused those cables. The reason is simple: we rarely sold a cable that was more expensive than an hour of a technicians time!

Velcro. This one made it into the Managed Services Operation Manual. Put the soft side of the Velcro on the bottom of a device. Every time. The scratchy side can go on the shelf or the wall. If that device is set down on something that shouldn’t scratched, you’re in good shape. And if this is the habit on every use of Velcro, any device you pick up can be put down on the other half of the Velcro and no one has to think about it.

Tape courtesy fold. This is the habit of folding over the end of a tape on a roll so that you never have to “find” the end, and you never have to spend time scratching it to get it started again. I never had a name for this, but my daughter calls it a courtesy fold. When anyone else picks up that roll, they won’t have to wrestle the end either. She has passed that on to others in various jobs. Again, this sounds really small until you consider how many times per year you pick up a roll of tape!

Labeling drives. This is huge. We label drives and drive bays so any tech can walk in and do whatever they need to on a NAS or a server and they’ll know where those drives go back. Of course this is helpful with RAID arrays, but it’s also a good troubleshooting habit. If you’re going to move things around and need to put them back, it’s a no-brainer if everything’s labeled. And when you order a replacement drive for one that’s giving you trouble, you can send out any technician because no one has to remember which drive it was and where it went. A simple note in the ticket takes care of that.

And on and on. I hope you’ve got dozens, or maybe hundreds of these little habits.

The “process” for adopting these habits is very simple for anyone who doesn’t practice a top-down command-and-control management style. Just listen. Be open to letting the newest employee make suggestions. Good ideas can come from anywhere.

Employees need to be encouraged to offer suggestions. And they need to know that they won’t be ridiculed if some just won’t work or have already been tried and rejected. Inform them without making them feel foolish. Let them continue to bring suggestions.

Let your employees improve your business. That’s a good habit!

Feedback always welcome.

-- -- --

Episode 57

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

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Don't Miss my 17th Annual

State of the Nation Address for SMB IT

Wednesday, January 14, 2026

www.mspwebinar.com

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The Adventure Begins - Small Biz Thoughts Powered by Business of Tech

2026-01-01T12:05:00.000-05:00

About the adventure: Small Biz Thoughts Powered by Business of Tech

I’ve known Dave Sobel so long, I can’t remember when I met him. We have shared adventures and pushed the evolution of the IT community for more than two decades across the United states and on three continents. In addition to sharing the stage before “managed services” was called managed services, we have shared a passion for helping IT consultants all over the globe to be as successful as they can be.

Of course, we each went our own way, leaning on our strengths and helping the broader community in different ways. I started the Small Biz Thoughts Technology Community and IT Service Provider University. Dave founded MSP Radio and The Business of Tech Podcast – the only MSP-focused podcast that brings news and analysis to our industry every day.

And of course, Dave, Ryan Morris, and I got together poolside in Las Vegas one day and came up with The Killin’ IT podcast.

The next level of our collaboration begins now. Dave has acquired the SBT Technology Community and ITSPU. And they really will be powered by the addition of news and analysis from a truly vendor-neutral and data driven perspective.

When Dave first approached me about this, his vision was that these resources would be “better together” – and I agreed.

Don’t Worry! I’m not going anywhere. I know that many people will assume that’s what’s going on. My Great Little Book Publishing Company will continue to operate, as will my executive coaching and Relax Focus Succeed. As someone told me recently, “Well that ought to be enough to keep you busy.”

So don’t worry: I will be around. You’ll see me in the Small Biz Thoughts Community and other activities. I’ll be blogging and speaking, and so forth.

Everyone always asks the “why” question when changes like this happen. Dave and I are both committed to transparency and honesty, and that works well here. Two things have been going on in my head for the last couple of years.

First, I created a job that I love. As many of you know, I set a goal for myself in 2011 to “write more, speak more, and travel more.” And I rebuilt my life and my business to fulfill those goals. I worked to make the philosophy of Relax Focus Succeed a reality for me.

But over time, as with all successful adventures, it got bigger and more complicated. I found myself doing more “administration” and less writing, speaking, and traveling.

Second, I want to put energy into some new adventures, but I don’t want my “body of work” to fade away. I am humbled by the fact that Managed Services in a Month played, and plays, such a visible role in the success of so many managed service providers. And all the other stuff I’ve done (25+ books, 40+ training courses, hundreds of SOPs, and countless supporting materials) have become a separate entity that I think needs to be preserved.

I know it sounds arrogant, but I don’t think this work should simply cease to exist when I wander off to build more things. So I went looking for someone who saw both the value and the potential for the things we’ve built at Small Biz Thoughts.

Some people might not see any value in these properties, primarily because they can’t figure out how to make a profit with them. But Dave was eager to start integrating and building new things with the combined resources of his growing media company plus the community and training services of SBT. You haven’t seen the behind-the-scenes activity, of course, so let me assure you that Dave is very excited about the possibilities for these combined resources.

Ultimately, I want to write more!

I have several books in my head that really want to get out. I’ll be releasing a new version of Relax Focus Succeed in Q1 2026, and I’m working on books about customer service, how to be a great service manager, and others. If I’m lucky, I’ve got about thirty more years of writing to do. So I want to get started right away.

Please follow me at Relax Focus Succeed and sign up for my monthly RFS newsletter at https://relaxfocussucceed.com/newsletter.

Now here's your three-part checklist to kick off 2026:

1. For more information, an open forum discussion, and answering all your questions, please

Join Dave and me live on the Wednesday Business of Tech Podcast

Wednesday, January 7^th

Subscribe to the MSP Radio YouTube channel: https://www.youtube.com/mspradio

And add the Live broadcast to your calendar: https://www.youtube.com/watch?v=_3NMBbkfioE

2. Small Biz Thoughts Technology Community members – Don’t forget to join us on January 8^th for the January monthly meeting. We normally have this on the first Thursday, but that’s New Years. So we moved it to January 8^th. All community members are welcome.

Dave and Karl will both be there to discuss and answer any questions you have.

No registration required. Just log in to the community and view the events calendar for the link:

https://www.smallbizthoughts.org/events/

3. Everyone should register for my 17^th Annual State of the Nation Address for SMB IT.

January 14^th

9:00 AM Pacific / Noon Eastern

As always: I am committed to making you as successful as possible. So if you need anything, please reach out to me at karl@karlpalachuk.com.

Happy New Year.

: - )

MSP Radio Acquires Small Biz Thoughts and IT Service Provider University

2026-01-01T12:00:00.000-05:00

So this happened . . .

This is the official press release. Stay tuned for an additional blog post.

-- -- --

MSP Radio Acquires Small Biz Thoughts and IT Service Provider University — A Values-Driven Deal Focused on Independence, Education, and Community

Fairfax, VA — January 1, 2026 — MSP Radio, led by technology analyst and industry educator Dave Sobel, today announced the acquisition of Small Biz Thoughts and IT Service Provider University (ITSPU) from founder Karl W. Palachuk.

The acquisition unites two of the most trusted names in the managed services profession — combining MSP Radio’s media infrastructure and business operations with Small Biz Thoughts’ deep practitioner education and community leadership. The transaction was facilitated by James Kernan of Kernan Consulting, a respected advisor known for guiding successful MSP transitions.

________________________________________

A Natural Transition Between Two Industry Builders

For Karl Palachuk, 66, this transition represents a thoughtful move from day-to-day operations to focus on writing, mentoring, and content creation.

For Dave Sobel, 50, it continues his long-standing mission to educate and empower MSPs — not by creating another community, but by adding meaningful value to the ones that already exist.

“From day one, I’ve said I didn’t want to build another community — the industry already has great ones,” said Sobel. “What I wanted was to support those communities by delivering deeper insight, better education, and more practical tools. This acquisition lets us do exactly that — to expand on what Karl has built without changing its spirit.”

“At this point in my career, I want to spend more time creating and teaching,” added Palachuk. “Dave shares my commitment to independence and education, and he understands that Small Biz Thoughts is about service, not scale. I couldn’t imagine a better person to carry this work forward.”

________________________________________

Traditional Financing, Independent Future

In an era of private-equity and investor-backed consolidation, this deal stands apart as a traditional small-business acquisition — financed through a local bank relationship Sobel has maintained since his own MSP ownership days.

That community-based financing reflects the same principles both leaders have long advocated: trust, relationships, and small-business independence.

“This is the kind of deal we talk about when we teach MSPs how to build sustainable businesses,” Sobel said. “A straightforward, relationship-driven loan with a local banker who’s known me for years — that’s what small business is all about. It keeps control where it belongs: with the people doing the work.”

This structure ensures that MSP Radio — and its family of media and education properties — remains fully independent, with no external ownership or editorial influence.

________________________________________

Transparency as a Teaching Moment

Both Sobel and Palachuk are intentionally sharing more about the acquisition than most private deals, using it as a teachable moment for MSPs and small-business owners exploring their own succession or growth paths.

“We’re educators by nature,” Sobel said. “If our openness helps another MSP see how values, structure, and relationships can align in a deal like this, then we’ve turned our own transition into a lesson for the community.”

________________________________________

What’s Next

The combined organization will operate under the Business of Tech umbrella, positioning it as the flagship platform for analysis, education, and connection across the MSP ecosystem.

Under the new structure:

• Small Biz Thoughts continues as a heritage community brand powered by Business of Tech.

• IT Service Provider University becomes ITSPU — Powered by Business of Tech, continuing as the training and certification platform for MSPs.

• Business of Tech remains the central daily channel for MSP news, analysis, and commentary.

• Karl Palachuk will serve as Strategic Advisor and Instructor during a two-year transition period, ensuring continuity and community engagement.

The transaction closed in 2026 following full due diligence and financing, with no outside investors or liabilities assumed.

________________________________________

Combined Reach and Impact

Together, Business of Tech and Small Biz Thoughts form one of the largest independent education and media platforms serving managed service providers worldwide:

• 11,000+ newsletter subscribers across both organizations

• 22,000+ YouTube subscribers with more than 1 million lifetime views

• 15,000+ LinkedIn followers between Karl Palachuk and Business of Tech audiences

• 6,000+ unique podcast listeners across Business of Tech and SMB Community Podcast

• Over 4.5 million blog pageviews across both sites

• A video library of more than 1,400 MSP-focused training and insight videos

That collective footprint reaches tens of thousands of MSP professionals globally, connecting independent media, education, and thought leadership under a single, trusted umbrella.

________________________________________

About MSP Radio

MSP Radio is an independent media and education company serving the global managed service provider (MSP) community. It operates Business of Tech as its flagship brand, delivering daily analysis, data, and practical guidance to help MSPs build stronger, more resilient businesses.

Learn more at www.businessof.tech

About Business of Tech

Business of Tech connects the global MSP community through independent news, analysis, and education. Its platforms include the Business of Tech podcast and YouTube channel, Small Biz Thoughts, and IT Service Provider University, offering training, certification, and community programs for IT services professionals.

Learn more at www.businessof.tech

About Small Biz Thoughts

Small Biz Thoughts was founded in 2006 by author and industry leader Karl W. Palachuk, and IT Service Provider University was established in 2013. Together, they have educated thousands of MSPs worldwide through books, courses, and a long-standing community. For more than two decades, the brand has stood for ethical leadership, business excellence, and real-world training for IT service providers.

Learn more at www.smallbizthoughts.org

________________________________________

Media Contact:

Dave Sobel

Founder & CEO, MSP Radio / Business of Tech

dave@mspradio.com

:-)

Make 2026 the Year Your Business Gives You the Life You Deserve

2025-12-31T19:01:00.000-05:00

If you're not signed up for the monthly Relax Focus Succeed newsletter, please do so right now:

relaxfocussucceed.com/newsletter

Your Business Exists for One Reason: To Help You Fulfill Your Dreams and Desires, and to Build the Life You Deserve

How can I made such a brash statement? Because you're running a small business (by which I mean there are only a few stakeholders and you don't tell shares on the open market). If you work at a big company with shareholders, your job exists to make money for the company, directly or indirectly. Ultimately, it is to provide profit and increased value for the shareholders.

But as a small business owner, you're the stockholder. And, yes, you want to earn money. But you can earn money doing anything, especially in tech. You don't have to deal with clients, employees, vendors, payroll, and all the other chores that come with business ownership.

So, yeah, make money. But that's not why you're self-employed. It's not why your business exists.

Sadly most people cannot tell you what their dreams and desires are. And even those who can are often at a loss to tell you how their business advances that dream.

Way back in 2011, I committed to rebuilding my life and my business so they support each other to help me do three things: write more, speak more, and travel more. And I think those who know me would agree that I did just that.

I'm not saying it was easy - or that retooling your business to support your dreams will be easy, but it's sure worth a try! Here's something I'd like you to try in 2026: Sit down for fifteen minutes once a month and write down why your business exists and how it helps you fulfill your personal goals.

You can't say you don't have time! I'm talking about fifteen minutes per month. Make it a priority and do it.

It's actually a trick question. In order to answer that question, you need to know what you want in your personal life. YOU. Not what society says you should want. Not what your parents or your spouse or your friends want. When you dig deep and finally figure out the goals for your life, then you can start figuring out how that can drive the mission of your business.

If you really do this, you'll find that the answer is different every month. It will take some time to dig down deep enough to find out your ultimate goals. But once you do, a whole lot of other things will begin to fall into place.

You also need to be prepared for two things. First, you might not finish this task in twelve months. More quiet time always helps. And it's okay if you don't have "the" answer twelve months from now. You literally have the rest of your life.

Second, you might come to some startling conclusions. You might decide that some big things in your life don't really fit with the future you want to build. The same is true for operations inside your business. When you view the world from the lens of, "How does this help me fulfill my goals?" you have to be prepared to conclude that it doesn't.

For some things, you will be quite resistant to give up because they're part of who you are. Or who you were. But if they don't move you closer to personal happiness and fulfillment, then it might really be time to change your habits.

You've probably heard the saying, the best time to fire someone is the first time the thought crosses your mind. The say is true with habits that don't contribute to your personal goals, dreams, and desires.

The best time to drop a bad habit is the first time the thought crosses your mind.

Again, this is not easy. Giving up pieces of how you see yourself - and have seen yourself for decades - is hard work. But it is absolutely worth it.

If you haven't subscribed to my monthly RFS Newsletter, please do. And if you want some guidance on how to accomplish this transformation step by step, I recommend you add Relax Focus Succeed to your reading (or listening) list today.

Have a wonderful 2026. And if you think you could use some help retooling your business to support the life you want to live, email me at karl@karlpalachuk.com.

Best of luck and Happy New Year!

:-)

Good Owners are Not Necessarily Good Managers (or Employees)

2025-12-26T04:00:00.000-05:00

Good Owners are Not Necessarily Good Managers (or Employees)

- Lessons Learned Episode 56

Over the years, I’ve witnessed or been involved in several incidents in which one company bought another and the seller became an employee (usually a manger of some kind) within the purchasing company. One of the most important lessons I’ve learned from this is that someone can be good at owning, managing, and growing a company and not good at managing inside someone else's business. In fact, this is pretty common.

From time to time, you hear people say, “I don’t think I’d be a good employee.” I’ve said it. You may have as well. What we mean is generally that we’re used to being the ultimate decision maker and policy maker. So working on someone else’s goals and following their wishes is something we’re not used to.

In my case, I left my last real job in October of 1995 – just over thirty years ago. And maybe it’s arrogance, but I think I know how to run a business. I barely remember what it’s like to take instructions from someone else. I think that’s pretty common to people who move from owner to employee.

Here are a few more things I’ve learned from experience.

First, somehow, I believe that people who run businesses must be good at certain key activities, such as providing excellent service, managing employees, and making sure all the details are taken care of (even if that just means delegating to the right person).

Unfortunately, I’ve discovered that someone can make good money and grow a business without doing any of those things well. Many people just muddle along, somehow making it work. I think of this as a tradesman’s approach to business. By that I mean that they really love the details of actually doing the work, but they don't enjoy all the details that make a business objectively successful in others' eyes.

Second, it took me a long time (more than ten years) to separate my internal stereotypes of owners and managers. I used to think that managers were on their way up to being owners and owners were focused on all the details that would actually make a good manager. In other words. the Venn diagram had a great deal of overlap.

Over time, I began to draw some very big distinctions. Ultimately, even the greatest, most loyal manager must put the business second. They have to take care of their income, their family, and their careers. And when push comes to shove, they can leave to take another job.

Of course the owner also has to take care of their income, their family, and their career. But the owner does this through the business. In small business, the business exists to fulfill the dreams, desires, and needs of the owner. And “leaving” the business is never a straight forward thing.

All of that simply comes down to: There are certain attitudes and behaviors that will always separate the owner from the manager. Ultimately, the owner has more at stake inside the business.

And that leads us to the third point: Many owners got there without paying attention to all the details. They were never good with the books, with managing people, with being organized, or even with good service. They got by focusing on the job to be done until they grew to the point where they could have over the “details” to someone else.

In other words, they never developed the skills and behaviors you’d expect from a good manager because they didn’t need to. So when they move from owner to employee, they don’t have those skillsets to bring to the new company.

I’ve seen former-owners who had absolutely no attention to detail, no organizational skills, and no good daily habits that would make them a good manager. The result, of course, is that they are not good employees and the new owner is very frustrated with trying to manage someone who just ought to be able to manage themselves.

Oddly enough, the fix is surprisingly easy and almost never undertaken. The former-owner-now-employee needs a thorough onboarding process just the same as any employee. They need to be educated on the vision and culture of the new company. They need to know all the details of “how we do things around” here. And they need to go through a bit of the awkwardness of being the newest hire.

The one thing a former owner should understand very easily is the branding piece. That’s the “how we do things around” bit. After all, they had their way of doing business, and may even have been an attractive purchase based on their processes and procedures. So even though the new company will be different, they bring a certain understanding of why newbie employees just need to “do it our way.”

Action step: If you’re acquiring a former owner as a new employee, you need to plan for it with a serious onboarding process and some training in the skills of a manager. If you have an onboarding process for other employees, start there. If not, build a plan from scratch (and use that as a place to start building onboarding processes for other employees). And then go find some good management training.

Sink or swim is not an effective onboarding process.

Feedback always welcome.

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Episode 56

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Subscribe to the blog so you don't miss a thing.

:-)

2000-2025: The Internet Era and the Dominance of Managed Services

2025-12-19T19:21:00.000-05:00

A Look at the First Quarter of This Century in Technology Consulting

Lots of people are talking about the year in review. We’re closing in on the end of the first quarter of the century! Let’s look at that. Of course, in the world of IT consulting there are two clear tracks to look at: The evolution of technology and the evolution of Managed services.

Let’s look at the tech first.

The change has been astonishing. “Millennials” became adults around the turn of the century and now they’re in their 30s and bringing up the next generation. Here are some key changes that affected our industry (and the whole world, really).

In 2000, we had big cell phones but no smart phones. Tablets were just a thing on Star Trek: Next Generation re-runs. And, along those lines, “screens” were monstrous, heavy CRTs that were closer to a television than anything else. Today I have so many screens I don’t know if I can count them. They’re in my car, in my hand, on my picture frame, and on all those tablets and devices lying all over the place.

In 2000, Data storage consisted primarily of 3.5” floppies and CDs or DVDs. There was no “cloud” (although data centers did exist). Today SSD (solid state drives) are standard. We still have spinning discs, but they tend to be the second drive, not the primary. Cloud storage and cloud-based services did not really take off until the 2009-2011 recession when people didn’t want to invest in hardware. Now you have to defend your choice to put a server onsite.

In 2000, desktop computers were running Pentium III processors. With one core, of course, that topped out around 1100 MHz (1.1 GHz). Today you can buy an Intel Core 9 Ultra that has 8 cores at 3.7 GHZ – for about the same price.

Wi-Fi existed but was not common in 2000. Of course it’s everywhere today.

In the early 2000s, we ran Windows XP and Mac OS X, although a lot of people refused to give up their Windows 98 machines!

And while web browsing evolved in the 1990s, it didn’t take off as we know it today until after the dust settled from Internet Bubble Burst.

Quantum Computing – always twenty years from being feasible – started to become a reality in the 2010s, but for specialized purposes only. General purpose QC is . . . just around the corner I’m told.

IOT: In 2000, connecting “things” to the Internet was not a thing. Today, everything is Internet-enabled even if there’s no point to it (I’m thinking about washing machines and household refrigerators). My house is lit by lightbulbs controlled over the Internet so I can read my thermostat connected to the Internet.

AI: In some form, AI has been around since the turn of the 20^th century (and was the result of an evolutionary path that goes back to automated mechanical men in China about 1000 BC). Machine learning took off in the mid 2000’s and came into its own in the 2010s. Virtual assistants (Alexa, Siri, etc.) went from toys to a part of everyday life in the 2010s. AI finally got to the point where it could consistently beat humans at games in the 2010s.

We’re now it what will come to be known as the early years of Generative AI. OpenAI’s GPT3 was announced in 2020 and kept us entertained plagiarizing everything we could think of while stuck at home in the pandemic.

Robots did become a thing! The Roomba started driving around the living room in 2002 and is just now beginning its death throes. Today we can risk our lives by getting into an “autonomous vehicle” almost everywhere in the world. And many people forget: The largest robot you can interact with on a regular basis is an airplane. While they don’t take off on autopilot, they fly around the world on it and, if necessary, land on autopilot.

For IT consultants, this century began with big monitors, “small” floppy discs, and heavy desktop machines. We made a lot of money getting people connected to the Internet, selling businesses their first server, and figuring out how to make money after the installation project was complete.

And THAT’s where Managed Services entered the scene.

In 2000, big (enterprise) businesses were used to doing regular maintenance, but it was primarily done in-house. Outsourced maintenance was pricey. (Trust me. I approved the invoices.) For small businesses, there was essentially no maintenance for most companies.

At the time, the small business world was dominated by projects. And, most commonly, projects consisted of installing some really cool system, cashing the check, and walking away. If something broke, and the IT consultant wasn’t in the middle of another project, they fixed it. Looking back, we call this break/fix. At the time it was just computer consulting.

But many companies, including mine, started doing regular monthly maintenance for clients in the 1990’s. So in the 2000s, it was very natural to think about how we could turn that into a flat-fee service and then a recurring revenue model. “Managed Services” evolved as the natural next step. There was a kind of simultaneous invention of the managed service business model.

By the end of the 2010s, Managed Services had become the nearly universal model for service delivery. Even people who claim to only provide service “on demand” tend to sell subscription licenses for RMM, office software, cloud services, backup, and so forth. They provide regular monthly services, billed on a flat fee basis, which includes some level of support. They just don’t call it Managed Service.

Now, in the middle of the 2020’s, as we finish the first quarter of this century, we can see the dawning of the next age. AI is already being used for simple IT “fix-it” jobs. By 2030, an entire layer of client support will simply disappear as it becomes easier and easier to simply ask AI how – followed by asking an agent to DO.

Please don’t spend one second worrying about your future. You won’t lose work unless you insist on doing a job that no longer exists. If you built an entire business on getting people connected to the internet, you would have been out of business a long time ago. The same is true if you refused to put anything in the cloud. AI will happen. It will change your clients and it will change your business. The question is not if, it’s how fast.

You can literally redefine your business right now to grab onto the opportunities brought by the emerging AI. The formula is very simple: 1) Educate yourself. Learn AI. Learn how it can be applied in your client’s businesses. 2) Educate your clients so they see a bright future, not a scary dystopia. 3) Become an AI strategist – a true provider of solutions for your clients.

The AI Solution Provider will spend time learning about the client’s business and figuring out where the problems and holes are. Then that consultant will help the client craft a solution and implement it. And, I assume, collect a monthly fee for maintaining it.

As the next quarter-century arrives, your future is as bright and positive as you are willing to work for.

You need to invest in training, educating yourself, your employees, and your clients. And you need to consciously create a business as an AI Solution Provider. As with everything that takes commitment and effort, no one else can do this for you. Because . . .

Nothing Happens by Itself!

How bright will you make your future?

Local Partners - User Groups Everywhere - Lessons Learned

2025-12-19T04:00:00.000-05:00

Local Partners - User Groups Everywhere

Lessons Learned - Episode 55

One of the turning points in my career was attending SMB Nation, a conference run by author and community builder Harry Brelsford. I got introduced to a huge group of great people from around the world. They were there to learn about technology (centered on Microsoft’s Small Business Server family) and how to improve their IT business.

At that event, I learned that there were “SBS user groups” all over the world, and that they kept in touch via an online chat-type forum called Yahoo Groups. There was an subset of those folks who were part of a user group leaders forum. It wasn’t exclusive to group leaders, but the conversations were about group management, organizing, getting speakers, and all the details of running a group.

Due to those groups, I started the Sacramento SBS User Group. The first people I collected as members were local consultants who happen to be at Harry’s conference or inside the Yahoo groups. Almost immediately, my friend Bob Nitrio became one of the group leaders. (After about ten years, I stepped aside and Bob became the group president.)

Most of those groups faded away over the years as they did not evolve from SBS to other SMB technologies. Australia had a particularly successful collection of groups in all of their major cities. It was called the SMB IT Professionals. Bob and I asked them if we could use their name for the Sacramento group. They said yes – and said we could use their logo as well. And so the Sacramento SMB IT Professionals group was born. And it still exists today, though much smaller.

The important thing was that all of these groups serendipitously grew up and grew connected to each other very quickly all over the world at the perfect time. By 2005-2006, there were IT user groups in almost every city and county in North America, Europe, and the APAC countries. Why does this matter? For many reasons, some of which were:

This community began a worldwide norm of cooperating with one another and sharing information. In many cases, people from across the country and around the world helped each other solve issues.

These groups became a natural audience for educators and vendors who wanted to reach the emerging “managed service providers.” There was a time when the best, fastest, cheapest way for a vendor to become known in the space was to speak at these groups and become known in the community.

Members of the community became an extended workforce for one another. I have lost count of the number of times we hired, or were hired by, members of the IT user groups.

Eventually, of course, larger gatherings grew up. First it was with specific vendors such as ConnectWise and Autotask (now Kaseya). Then groups formed for specific purposes, such as marketing or “buying” groups that offered members discounted purchasing from vendors. Today there are hundreds of evens per year in this community – fragmented into hundreds of groups rarely defined by geography.

Why are these local groups no longer as successful (with some big exceptions)? Well, here’s my theory. As vendors emerged as a growing force in the industry, they built and supported each other in creating larger events simply so they could meet more partners all at once. At the same time, a large segment of the industry realized that they could meet all the vendors and gain access to all the information by attending only the free events. In this case, “free” means the vendors are paying for it.

Free is a very addictive price. But it makes it very difficult to provide real value to consultants without backing from vendors. These vendors expect stage time and Lucite awards in exchange for their largess. So event organizers get addicted to the vendor sponsorships and attendees become less and less willing to pay for content. With a few exceptions.

The result of all that brings us to where we are today: It is very difficult to find an event that is not dominated by vendors pitching their products instead of providing value. I can’t think of any vendor in our industry who evaluates their sales people on helping IT consultants to be successful. All of them are evaluated on how many partners they signed up and how many licenses they sold.

Fun fact: Back in the days of newspapers, the advertising was laid out first. That determined the number of pages that would be printed and the space left over for news. That space was referred to as the “news hole.”

Events in the IT space have exactly the same thing going on. First, an organizer has to give vendors the speaking slots they paid for, large and small. And what’s left over for truly valuable content that improves consultants’ business processes shrinks each year. Some events have as little as one or two hours of actual educational content in a one or two day event!

As you can guess, I am nostalgic for the local user groups. That’s one reason I’ve taken more than a dozen trips to Australia. But my nostalgia is not just nostalgia for the good old days. It is more about community in which a sincere effort was made to educate partners and help each other to be successful.

In my opinion, vendors should do more to support actual content (rather than sales pitches) and IT Service Providers should be more willing to pay for good information that will actually help their businesses.

Unfortunately, I’m not sure how we get there from here.

Feedback always welcome.

-- -- --

Episode 55

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

:-)

Just Released! The Absolutely Unbreakable Rules of IT Service Delivery

2025-12-11T18:07:00.000-05:00

The Absolutely Unbreakable Rules of IT Service Delivery -

Free to Community Members

Small Biz Thoughts Technology Community Members - It's finally here! Download your free copy of The Absolutely Unbreakable Rules of IT Service Delivery right now in the community. No charge.

Non-members, join at any level and you get this plus ALL of my other books, checklists, SOPs, training, etc. Or wait until 2026 and buy at fine bookshops everywhere.

Members can grab the book and the downloads here:

https://www.smallbizthoughts.org/member-content/the-absolutely-unbreakable-rules-of-it-service-delivery/

Everyone else should head to our store and save $5 if you buy before January 1st. https://store.smallbizthoughts.com/product/the-absolutely-unbreakable-rules-of-it-service-delivery/

Why You Should Buy The Absolutely Unbreakable Rules of IT Service Delivery

Build a culture of success based on helping your whole team to prioritize tasks with a clear understanding the company's mission.

Learn practical ways to manage your business from the holistic perspective that everything you do is part of your branding.

Manage Clients more effectively by acquiring the right clients in the first place and then setting clear boundaries and establish rules for your ongoing relationships.

Improve cash flow by getting your billing straightened out and practicing financial discipline.

Help your employees and client understand why you only sell the right hardware, software, and services, so clients get maximum value and it doesn't cost you an arm and a leg to support it.

Define your rules for personal growth through continuous learning, daily habits, and building a business that provides personal fulfillment as well as profit.

-- -- --

Invest in your company today - or wait until January and pay $5 more.

https://store.smallbizthoughts.com/product/the-absolutely-unbreakable-rules-of-it-service-delivery/

:-)

Building Machines vs. Buying Them

2025-12-05T11:46:00.000-05:00

Building Machines vs. Buying Them

- Lessons Learned, Episode 54

When I started my first IT business in 1995, enterprise businesses (really big companies) bought pre-built machines, primarily from big companies like HP and IBM while small companies built their own machines or hired consultants who built machines. So, at the time, it was very easy to move into the business of making machines. These “IBM Clones” were everywhere and really were the standard.

This affected my business in two primary ways. First, I had to buy parts and keep an inventory. Back in the day, motherboards did not include integrated video cards, sound cards, or even network cards. So there were lots of peripherals that had to be bought, kept in inventory, and sold before the prices dropped again and we lost money on our investment.

The second affect was that almost every business we went into was filled with “homemade” machines, including the servers. Every one was unique. Very often, we came across brands we’d never heard of for all the components: Motherboards, SCSI cards, hard drives, and so forth. In many cases, this meant that we did not have drivers, instructions, warranty information, etc. In other words, if anything went wrong, it was likely that we had to sell the client a new one – the brand we carried.

Clients had every right to like something was wrong with this business model. Every tech they talked to wanted to get rid of “the other guy’s stuff” and install their own. That just felt like an unnecessary expense to the client. And in some sense it was unnecessary, except that there really weren’t a lot of options, given the way things worked.

There was a massive, worldwide industry of making and selling IBM clones. So much so that Microsoft included questions about OEM installation of their operating systems in their certification exams. In addition to the parts, you could also buy customized tags so you could easily create your brand of machines.

This model had a few big disadvantages. Inventory was one. Another was that we had to maintain a place to build and test all these machines. We frequently had tens of thousands of dollars’ worth of machines and equipment in our office, which always made me nervous. It also meant that we had to train technicians to build machines properly, which is pretty far from the calling of being a consultant.

Worst of all, the margins on these machines were quite thin and the prices were changing every day. It was extremely common for advertisements to list “CALL” as the price for many components. It was like trading Frozen Concentrated Orange Juice Futures. And if you bought the right components on the wrong day, you were guaranteed to lose money. The worst was memory modules – a circumstance that’s repeating itself today.

Finally, the big problem with these clones was that we might lose all of our profit for a machine if one component (such as a fan) went out and we had to pay a technician by the hour to replace it. Not only were we out for that job, but that tech was not doing something else that did bring in money.

Even at the beginning, I wanted to sell pre-built brand name machines. I had come from a shop full of Compaq/HP machines and that brand was extremely reliable at the time, with spectacular support. But I wasn’t an authorized reseller and they required huge quarterly sales to even consider becoming one.

Eventually, HP brought out a series of pre-configured but customizable machines that we could buy if our distributor was willing to work with us on that relationship. So we started offering these pre-built machines. Yes, they cost more. But nothing ever went wrong. Nothing. When we bought and sold business class computers with a three-year warranty, nothing ever broke. It was like a whole new world.

We made up for the increased cost by not having to carry inventory, not having to train technicians to build machines, and not paying technicians to build machines. And the “nothing ever broke” piece of the equation really allowed us to focus our business back where it belonged: solving client problems rather than selling them stuff.

From time to time, I also sold Lenovo, Toshiba, and other brands. But we really had great experiences with HP and stuck to that, especially for servers.

I honestly believe that the decision to buy rather than build helped us take on bigger clients and bigger projects because we could put a strong focus on client problems and solutions. Our technicians had to learn to dig a little an find the “real” problem when I client said they had a problem. Our technicians became better consultants because they could focus on the problems and the solutions rather than on replacing parts.

Other people have had other experiences, but that was ours.

One time, I had a big (for us) installation of about fifty machines. I certainly didn’t have the staff to do this in a reasonable time frame, so I engaged members of my local SMB IT Professionals group. I gave them machines and checklists and they helped us install dozens of computers. One of these IT Pros was a good friend of mine who had always built his own machines. But that day he saw that installing lots of high quality pre-built machines was incredibly fast and straight forward – primarily because the experience was predictably identical from desktop to desktop.

When that job was over, he told me he’d decided to sell prebuilt machines from then on.

Today, almost no one builds their own machines. The parts are still often a hassle to buy, store, and try to make a profit on. Parts makers (including big names like Intel and Western Digital) change their policies, promotions, and partner programs on a regular basis. Some of them actually swing back and forth between wanting to engage partners and not wanting to engage them. The result is that finding good quality parts that are consistently available at a reasonable prices is just plain difficult. It’s a layer of expense most consultants don’t want to deal with.

Advocates of building their own machines always go on in great detail about how easy it is and how much money they make. But this always sounds like when people start talking about their gambling. Gamblers often tell you that they never lose (an actual impossibility) or that they are ahead for life (a virtual impossibility). In other words, they remember and report the wins. They don’t remember and don’t report the downside.

I’m glad we made the switch pretty early on and I firmly believe that it made our technicians better consultants.

What’s your experience?

Feedback always welcome.

-- -- --

Episode 54

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

Subscribe to the blog so you don't miss a thing.

:-)

M&A plus Strategic Exit Planning - Register for Both and Save $100 right now

2025-12-03T13:32:00.000-05:00

Over at IT Service Provider University, we have a GREAT year-end special right now.

Our newest and hottest courses for 2025 are

Mergers & Acquisitions for MSPs - taught by James Kernan

and

Strategic Exit Planning for MSPs - taught by Rayanne Buchianico

Now through the end of the year, you save $100 instantly when you register for both.

That's Ten Hours of education for business owners! Whether you're ready to sell (or buy) now, or you think you might in the next few years, these classes are 100% focused on helping you understand the process - and what you need to do to prepare.

Mergers and Acquisitions for MSPs provides a comprehensive overview of the M&A process, covering strategic planning, valuation, legal frameworks, due diligence, and post-merger integration. It equips participants with the skills and knowledge needed to navigate and execute successful M&A transactions in a dynamic business environment.

Strategic Exit Planning for MSPs is designed to help you build a business buyers want to acquire! Whether you’re looking to sell your MSP in the next year or just want to prepare for long-term options, this five-hour course will walk you through a proven framework to assess, strengthen, and position your business for a high-value exit.

All the details at https://itspu.com

No Coupon Needed

To grab your discount, just head to IT Service Provider University - https://itspu.com - and add both courses to your cart. Then view the cart and you'll see that the discount has been applied. It's that easy.

OR join the Small Biz Thoughts Technology Community to find out how you can get these courses at no additional charge. Check out the details at https://smallbizthoughts.org. (Community members can log into the Community now to get your discount codes.)

Your Instructors

James Kernan - Instructor, Consultant, Author

For the past 12 years, James has served as a Principal Consultant for Kernan Consulting and provides Coaching, Advising and Mentoring programs to entrepreneurs and leaders. Kernan Consulting offers One on One Coaching, CEO Peer Groups, M&A Consulting and online training programs.

Rayanne Buchianico - Accountant & MSP Business Consultant

Rayanne is a managed service provider and also an accountant and an Intuit certified ProAdvisor. In addition to her MSP business, Rayanne helps I.T. consultants to take control of their finances and understand their own business at a deeper level.

Don't Miss Out! Offer Ends December 31st - end of day.

:-)

The Absolute Best of My Free Stuff for IT Consultants!

2025-12-02T15:18:00.000-05:00

The Best Free Stuff for MSPs and ITSPs – from Small Biz Thoughts

Over the years, we’ve done a number of promotions. Only a few were sales, but lots of them have been free giveaways.

From a marketing perspective, why do we give things away? After all, one of my pieces of advice for successful business owners is, “Never discount or give away you primary product.” So, for example, I don’t think you should give away free months or free hours of service.

For promotional purposes, the best use of promotional giveaways is to gather leads and gain new customers. The second-best use is to reward current clients. These giveaways are good for both of those purposes.

Between Small Biz Thoughts and IT Service Provider University, we have LOTS of giveaways. Feel free to try them all. No matter what’s going on in your business, I am sure you’ll find something useful in these.

Here are the places you can find our freebies right now.

Let’s start with my newsletters:

The Small Biz Thoughts newsletter is a weekly industry resource that is read by over 10,000 MSPs, consultants, ITSPs, VARs, etc. https://smallbizthoughts.com/newsletter/

The Relax Focus Succeed newsletter is a monthly communique focusing on business and personal success based on my RFS philosophy of success without stress. https://relaxfocussucceed.com/newsletter

MSPWebinar.com – https://mspwebinar.com is a site dedicated to webinars (live and recorded) that are 100% focused on IT Service Consulting.

End of Year checklist webinar. Includes a three-page checklist of EOY tasks along with some notes on what to shred and what to keep.

Client-Facing Training: Introduction to Artificial Intelligence. This is a presentation that you can give to clients and prospects on AI. Includes the slide deck in PPTX format so you can edit for your company.

Client-Facing Sample Security Training. Another presentation you can give to clients and prospects, this one on security and avoiding ransomware. Includes PPTX file to customize.

… While you’re there, be sure to sign up for my 17^th annual State of the Nation Address for SMB IT Consultants – https://mspwebinar.com.

IT Service Provider University

The Free One-Hour Foundations course is perfect for introducing your entire staff to the Managed Services business model. It’s also a great introduction to the ITSPU site. Free to everyone. https://itspu.com

The Small Biz Thoughts Store – https://store.smallbizthoughts.com

– We even have a whole category call “Free” on the main menu. Here are the highlights.

Karl's FAMOUS 68-Point Checklist - Version 3.0. (simpler version worth keeping)

Karl’s FAMOUS 68-Point Checklist – Version 4.0. (newer, more robust version with a LOT more detail)

Business Plan Worksheets

Karl's Cloud Readiness Checklist - v3.0

Audio Program: Process Control for the IT Industry. By Manuel Palachuk.

Audio Program: Taking Your Business to Version 3.0 and Beyond. By Manuel Palachuk.

Audio Program: Relax Focus Succeed. An Audio Introduction.

Relax Focus Succeed Sample Chapter – Workaholism.

… and more!

And of course all the regular channels of information:

I will schedule a 20 minute zoom call with any business owner who asks. Just ping me and we’ll set it up.

The Small Biz Thoughts Blog is just a couple months short of its 20^th Anniversary. It’s chock full of information and opinions. The original blog posts that became Managed Services in a Month are here along with our current series, Lessons Learned.

YouTube/smallbizthoughts includes over 1,000 videos for IT Service Providers and business owners of all kinds.

YouTube/RelaxFocusSucceed is the channel for all things “Relax Focus Succeed,” my approach to personal and professional success. After all: a business can’t flourish if the leader is broken.

Of course there’s more free stuff throughout our various web sites. But these resources should keep you busy from now to 2026!

If you want to discuss any of these, or anything else, just contact me at karlpalachuk.com.

:-)

The Harsh Reality of Hardware Margins

2025-11-28T04:00:00.000-05:00

The Harsh Reality of Hardware Margins - Lessons Learned

Episode 53

As odd as it sounds, hardware markup and margins are a never-ending discussion for IT consultants. Like many, I started out with no idea how to source hardware and software. At least with software, I could find a way to buy it and get it to the client.

I think the two big questions on hardware are 1) Where do you get it, and 2) How do you make money with it?

Where Do You Get Hardware?

Like many others, I started out by going to the places I shopped and asking if they had a wholesale program so that I could buy from them, mark it up, and still provide a decent price to the client. But that quickly became a very limiting strategy. *I* shopped at normal stores. They don’t sell high-end printers, real servers, or bulk deliveries of hard drives.

I found out about distributors two ways. First, I asked other consultants. Most were very open and I soon discovered that there weren’t many distributor to choose from. So I just had to set up an account and figure out how to get the products I needed.

Second, I looked at the machines I came across. Back in the old days, a lot of people built their own machines (myself included. See the “Side Note” below). Inside those machines, a lot of parts had stickers on them from regional distributors. This made it easy for a distributor to identify that a questionable piece of equipment came from them. It also let me know who those distributors were.

Bottom line, finding hardware wasn’t hard. The hard part was making money on it!

How Do You Make Money on Hardware Sales?

One of the most common statements you’ll hear in the channel is some variation of, “You can’t make money on hardware” or “There’s no margin in hardware.”

That’s simply not true. If you price things so you don’t make a profit, that’s on you.

When I first started with a distributor, it became obvious that I wasn’t going to sell enough to get a good price. My wholesale cost for a printer was more than what the client would pay at Staples or Best Buy. So I asked around.

The majority of consultants I talked to worked hard to make 1% - 3% on hardware. That didn’t seem worth doing to me. A handful claimed to simply double their cost so 50% of the sales price was profit. I never discovered if that was true, but I suspect you wouldn’t sell much at that price. So what’s reasonable?

After much trial and error, I came up with a hardware approach that I still use and recommend. It has three basic elements.

1. Mark up your actual cost for hardware by 25%. This means 20% of the sales price is profit. For example, if your cost is $100, you charge $125. Thus $25 or 20% of the sale price is profit.

In response to your question, yes, this means I often sold hardware for more than the MSRP and more than the client could find elsewhere. There’s nothing wrong with this. In fact, it’s pretty common. If you buy wiper blades or brake pads from the dealership, you’ll pay more than at Autozone or O’Reilly. And the dealership sells lots of parts for one simple reason:

2. We sell the right thing and stand behind it. Clients never have to worry that I’m selling them the wrong firewall, the wrong workgroup printer, or the wrong desktop PC. You know what happens when clients go out and buy their own stuff. You get a mish-mash of assorted junk, often not business class, and frequently loaded with all kinds of sampleware you have to remove. It’s not the right equipment and it takes more time to install and maintain.

We are also committed to only quoting and selling business class equipment with a three-year warranty (or better). We never sold a single machine with a Celeron processor or an eMachine. Clients could rely on us to only sell the right solution, and that includes the hardware.

Finally,

3. If clients don’t want to buy from us, we don’t worry about it. We highly recommend that they allow us to share a screen and make sure they buy the right equipment out on the open market. No Windows Home edition. No machines with zero level two cache. No routers intended for a home network with very little traffic.

We also have a note in our service agreement that all work has to be done by us. So if the client buys something, messes up the install, and asks us to fix it, they pay full price. We also charge for adds, moves, and changes, even if the client’s on managed service. So the cost of installing junk always costs them money.

We all have horror stories about hardware. From not making money to fixing clients’ Frankenstein configurations. These are never low-margin events. And clients either stop asking us to maintain their thrift store collection of junk or they learn that they pay less in the long run and get better equipment if they buy what we ask them to buy, and they buy from us.

Side note: Life is much better today that it was fifteen or twenty years ago. Back then, most businesses you went into had collections of home-built machines. When you opened the case (and we used to open cases a LOT), you never knew what you’d find. Brand names you’ve never heard of or no brand name at all, so service and support were impossible.

Yes, I learned brand names of all kings of equipment, but it was obvious that maintaining brand name business class equipment was easier, more profitable for me, and less expensive for the client in the long run.

Ultimately, I wanted us to be consultants, not box-pushers.

Feedback always welcome.

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Episode 53

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page.

Leave comments and questions below. And join me next week, right here.

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:-)

ChannelPro's 2025 Partners in Excellence - A Roundup

2025-11-25T19:40:00.000-05:00

I was honored to receive one of ChannelPro's Partner in Excellence awards for 2025. And I'm happy to be in such good company!

ChannelPro put together a great round-up article about the eight honorees for 2025, with information on why they were honored. You can find that here: https://www.channelpronetwork.com/2025/11/25/msp-leadership-awards-2025-partner-in-excellence-honorees/

And if you want to connect on LinkedIn, you can request those connections here:

Annette Taber
Founder and CEO, BoardSWAP
https://www.linkedin.com/in/annettetaber/

Wayne Hunter
CEO, AvTek Solutions
https://www.linkedin.com/in/waynehunteravtek/

MJ Shoer
Chief community officer, GTIA (Global Technology Industry Association)
https://www.linkedin.com/in/mshoer/

Marissa Maldonado
Founder and CEO, Proda Technology
https://www.linkedin.com/in/marissamaldonadoproda/

Lori Tisinai
Founder, Computer Concepts USA/founder, IT Owner’s Compass
https://www.linkedin.com/in/loritisinai/

Dave Cava
Founder, PeopleSharp/co-author, The Pumpkin Plan for MSPs
https://www.linkedin.com/in/dave-cava-peoplesharp/

Dawn Sizer
CEO, 3rd Element Consulting
https://www.linkedin.com/in/dawn-sizer/

Karl W. Palachuk
Founder, Small Biz Thoughts. Founder, National Society of IT Service Providers (NSITSP)
https://www.linkedin.com/in/karlpalachuk/

:-)