Small Biz Thoughts by Karl Palachuk

SOP Friday: Software Upgrade Policy

2012-01-27T06:00:00.000-08:00

I wrote awhile back about Activating and Registering Client Software and Hardware. And I wrote a few weeks ago about your Hardware Replacement and Upgrade Policy. This is a very different Software topic.

You need a policy (or at least a philosophy) about software upgrades, even if you don't sell software. Because it is central to the success of our clients, we need to give them good guidance. Here I'm going to address three topics regarding software upgrades: Philosophy, What you sell, and patching.

Software Upgrade Philosophy

Perhaps the most important message you can send your clients about software is a consistent approach to upgrades. When something's new, the only decision is whether to buy it. But when it gets older you have to decide what to do about "generations" of software. I'll use the Microsoft office suite as my primary example since it is in most client offices.

Clients inherently know that life is easier if everyone has the same version of Office. This is particularly true of older software. Office XP and Office 2010 are not compatible. You can open Office XP docs in 2010, but you have to "save as" the old format in order to open with XP again. Once someone updates the file, it's all over.

Macros are particularly troublesome since Visual Basic also changes with each software generation.

Even things that are supposed to be 100% compatible are not. In our book business, we have seen that complicated documents we save in Word 2010 have problems opening successfully in Word 2007, even though they are supposed to be the same format.

Realistically, many offices cannot afford to upgrade everyone's Office Suite just because one person got the new version. Having more than one version can cause a serious reduction in productivity for some offices. Each has to decide what it's worth. As a result we're okay with skipping a generation. This makes the upgrade process more affordable. And, if the client buys open licenses, they can legally install the current version or the most immediate previous version. So staying in sync is easy and doesn't cost more.

Ideally, we like clients to agree to only skip one generation. Look at your own clients. The handful with "that one" Access 97 database have a hundred times more trouble with Microsoft Office issues than any of your other clients. They don't see the difference because they only see their office, but you see the difference all the time.

When companies commit to only skipping one generation, it means they have to shell out some money up front for new software every five years or so. But in the long run, they definitely save money. So you have to work to convince them to keep up with the upgrade policy. And, whenever a new version of Office is released, you have to remind them of the "best practice" in this area.

Another important policy is to match up the hardware generation with the operating system generation. For example, we will not install Server 2003 on new hardware. Period. It doesn't have the right drivers. It might not recognize some of the new components. It certainly can't take advantage of the newer features (in this example, 64 bit processing).

By the same token, we won't put SBS 2011 on a five year old machine. We don't want to install a 2011 operating system on any machine older than 2011. The hardware won't be beefy enough. It won't have all the components to take advantage of new features (like hardware-level virtualization). And it often can't be upgraded to provide reasonable performance without a huge cost. See my article on Hardware Replacement and Upgrade Policy.

Summary: Pay attention to the software "generation" and develop your philosophy about upgrades. You need to balance client needs with costs. For us that means it's okay to skip a generation, but don't skip two generations. And we like to see the hardware and operating system from the same generation.

What You Sell

We have three primary policies about what we sell regarding software.

First, we sell the latest operating system.

Second, we decide between OEM and Open Licensing depending on the client's needs.

Third, we sell other upgrades when they're really needed.

Many year ago I was asked to give a second opinion to a prospect. They had purchased several new computers, which shipped with the new Windows 98 operating system. Their "consultant" had quoted additional software costs and labor to remove the Windows 98 and install Windows 95. His reasoning: Windows 95 is stable and no one ever trusts the first generation of a Microsoft product.

The client asked me what I recommend. Of course I said that I would never replace a brand new O.S. with something that's three years old and based on old technology. This amounted to a consultant who only knew one O.S. and was afraid to support the new one. That's just an unsustainable business model.

We sell the latest operating system. That means Windows 7. That means SBS 2011. Even in the days of Vista, we sold Vista. Techno-goobers and pundits didn't like it, and it was a P.R. nightmare for Microsoft. But as an operating system, it worked great.

When you don't sell the latest operating system, you deprive your clients of many new features, and you increase their overall support costs.

We don't upgrade just to upgrade, but when we sell a new computer, we always choose the latest operating system. Through the whole fiasco of trying to make Windows XP live forever, we simply sold the latest, greatest, and most secure operating system available. That policy never steered us wrong.

As for OEM vs. Licensing, we have changed our tune. We used to drink lots of Microsoft Kool-Aid and push licensing. And for many clients it made a lot of sense. But for smaller clients, Open Licensing has fewer advantages.

Here's the argument for Open Licensing from Microsoft:

1) You get the latest office suite (or operating system). If you want to use the previous version, you could install that as well.

2) You have a perpetual license so you never have to un-install the software.

3) If you buy two years of software assurance, you can get the next version at no additional charge if it's released during that 2-year period.

4) Legally, you can uninstall the software from one system and install on another. So, if your hard drive or mother board fails, you can legally install this software on another machine. You can't do that with OEM. It dies when the machine dies.

Open License makes great sense for larger organizations. You can deploy it en masse and know that everyone is legal. You can maintain consistency throughout the organization, which saves more money over the long run in large companies. Re-installing as needed is simple and you don't have to worry about whether its legal. Overall, management and maintenance is easier with Open Licensing.

With OEM, the key drawback is that you're buying something that will die. Not might, will die. It lives with the machine. So despite client claims that they can do whatever they want, they can't. Luckily, Microsoft licensing authentication has gotten very good, so you spend less time convincing clients that you can't break the license agreement for them.

The key advantage to OEM is that it's a lot cheaper. A secondary advantage is that you can sell one license at a time. OEM has a five-license minimum.

With regard to price: When you sell OEM, you have to tell the client that it's a bit of a gamble. As long as the machine lasts, they can use that license. If the machine lives ten years, they can use that license for ten years. Since you only sell business class machines with a three year warranty, they are guaranteed at least three years of life. But if the machine dies in the fourth year, they have to buy Office again. For most clients this is a complete non-issue. Even if they keep the machine for five years, the chances that they will have a failure that requires the purchase of another copy of Office is pretty slim.

With regard to the five-license minimum: For really small companies that buy 1-4 computers a year, they will have a tough time staying eligible for the Open Licensing unless the office licenses are bought at the same time as the SBS licenses, and they have software assurance so that they can add additional licenses for two years. This becomes a simple math problem. And a pain in the neck when that Software Assurance expires.

The bottom line is that OEM is usually the best choice for very small clients and Open Licensing is better for larger clients. The big exception would be small clients who are Not-for-Profit organizations. They can use Tech Soup to get software at extremely low prices, so they can afford to buy 10 or 15 copies and be legal everywhere.

Patches, Fixes, and Updates

Finally, we get to patches, fixes, and updates. This one is pretty easy: Install 'em! Unless there's a major reason not to, we install all the latest patches, fixes, and updates. This is true for operating systems and software.

Just do it.

Most updates are minor and only affect microscopic pieces of the overall code. These are delivered via Automatic Updates or by manually running Windows Updates. We use Zenith RMM (Continuum) to push the most important updates. They currently deploy security updates, but will be expanding to additional updates as well.

I know some people freak out about every update that comes along. But realistically, 99.999% of the time, nothing bad ever happens. So we don't have a policy based on the exception to the rule. We have a policy based on the rule: Apply the latest updates.

The reason is extremely simple. Call tech support (for Windows, Office, QuickBooks, or any other program). The first question they ask is whether you've applied all the latest updates. If the answer is no, then they say to go apply those and call back.

You do the same with your clients. It's amazing how many issues simply go away (or never appear in the first place) when you have all the patches, fixes, and updates installed.

Just do it.

And what about Service Packs? Well, those do make us a little nervous. But not too bad.

I'm old enough to remember NT 4.0, Service Pack 6a. How much does it suck to have the latest Service Pack be a re-release of the service pack with a minor fix? It's a huge flag that says, "Let others try it first."

Microsoft has flip-flopped about service packs. In the first place, they were intended to be a collection of all the paches, fixes, and updates for the operating system or software. But then they went through a phase of adding serious functionality. Then they removed some functionality due to lawsuits. Then they went back to only providing updates. Then they made a few exceptions to that.

Then, they invented the "roll up" so that the latest version of NT 4.0 is not SP6a, but SP6a plus the latest roll-up. (Shoot Me Now)

So . . . Here's our policy about these major Service Packs, Feature Packs, and Roll-ups: Wait for about a month after they are released. If the world does not come to an end, then schedule installs for all clients. These updates are never critical. After all, they contain mostly old patches, fixes, and updates that you've already applied. They just make it much easier to get all the latest stuff installed quickly and in an orderly manner.

Once in a great while there's a problem. But for the most part, service packs these days are uneventful. So be diligent, but don't be afraid. Give it a little time to see if there are problems, then go ahead and install.

- Implementation Notes -

As with all policies, you first need to spell out what you want to do with regard to software upgrades, and what your philosophy is. Write it down. Explain it to your team.

You also need to add these policies to your constant communication with clients. Put it in your newsletters. Add it to your discussions when you sell software and deliver new PCs.

Make sure everyone on your staff is promoting your vision about how software upgrades should be handled.

There are no specific forms for implementing this SOP. You might write up a brief description of the procedure and put it into your SOP binder.

This kind of policy requires that everyone on the team

1) Be aware of the policy

2) Practice the policy

3) Correct one another's errors

4) Support one another with reminders

Your Comments Welcome.

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About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: The First Client Visit

:-)

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Nominations Open For the SMBTN "SMB 150" Contest

2012-01-25T06:47:00.000-08:00

SMB 150 Contest!

Once again, SMBTN and SMB Nation are pleased to announce the SMB 150 influencer contest for 2012. Nominations are open now and one lucky nominee will be awarded a BlackBerry PlayBook if nominated by Friday, January 27th 8am PST. An awards dinner will be held to honor the recipients in sunny Los Angeles.

Be sure to nominate yourself and others for this voted upon and peer-reviewed award.

Don't delay, nominate TODAY!

Click here for SMB 150 Nominations
This year the SMB 150 program has some exciting improvements:

From the SMB Nation Web Site:

• Voting. In early 2012, a ballot will be presented with all of the nominations. Each candidate will have a photo and a biography/sales pitch/statement seeking your vote!

• Judges. We have recruited a panel of esteemed industry judges we’ll announce soon to oversee the election. The judges input will be weighted along with the voted. This validation step insure that truly the Top 150 are selected!

• Awards dinner! Awardees and members of the public will be invited to attend an awards ceremony and dinner in Los Angles in late April 2012. It will truly be a magical evening!

• Sponsorships! Allowing us to the take the SMB 150 to the next level is the platinum sponsor from BlackBerry! Contact me for additional sponsorship opportunities. Nominations accepted! Click HERE to nominate yourself or a like-minded accomplished SMB IT leader. You know how you are; you know who they are! Just do it!

So click the link and let the SMB 150 voting begin! It’s election season, folks!

About the SMBTN:

The SMB Technology Network™ is an organization of over 600 consultants, solutions providers, and value-added resellers who provide technology products and services small-to-medium sized enterprises. The organization seeks to improve the quality and strength of the SMB market by providing programs to educate their members, opportunities for them to network, and to create alliances with interested SMB vendors.

:-)

SOP Friday: Keeping Your Standards and Procedures Organized

2012-01-20T06:00:00.000-08:00

Last week we talked about hardware upgrades. Next week we'll talk about software upgrades. Today we're going to take a bit of a break and talk about the SOP (Standard Operating Procedures) process as a whole. How do you organize all this stuff so you can find it, use it, and make your business more efficient?

Of there isn't one perfect way to do things, so I'll just talk a bit about what we do.

First, consider who creates SOPs? Answer: Everyone.

Everyone has duties. The receptionist, the office manager, the bookkeeper, the service coordinator, the technicians, etc. Everyone who does something has to document what they do. Ideally, each person in a role will inherit documentation and procedures. Also ideally, that person will update those procedures. For example, when a web site changes or you switch to a different payroll system, someone needs to update the instructions for payroll.

Maintaining documentation should be a piece of everyone's job description. Employees won't put a priority on it if you don't.

Note: For all documentation, we tend to have one file for each policy. Yes, you can combine them into a large document, but that's actually harder to manage when it's large and you need to make changes. You might occasionally scoop up all your documentation into a single document, but it is probably easier to manage day-to-day if you keep it in individual files. You can still flag the files with categories and sub-categories in order to make them easier to organize.

Second, consider where you put documentation.

I'm not sure why, but the default answer people want to give is that 1) All documentation should be in the same place, and 2) All documentation should be in some big, electronic thing that's 100% accessible from anywhere on earth. That might work, but we haven't found that approach useful.

Administrative folks use one set of files and folders to do all their work. So we created a "Policies and Procedures" folder within that work area for them. That way, they don't have to go log into some tool they never use. For us, the full path is x:\Operations\Policies and Procedures.

Technicians never go there. Why would they? In fact, they don't have permissions to the Operations folder. Technicians have a different place to store stuff: SharePoint. They have an area filled with monthly maintenance checklists, technology SOPs, favorite white papers, New PC checklists, etc. This information is available no matter where the technician is - inside the office or out.

Note: IF your admins use SharePoint all the time already, then keeping their documentation in SharePoint makes sense. But if they never use it for anything else, you're setting yourself up for failure if you ask them to go do this one thing only occasionally.

Third, consider who manages the overall documentation.

At America's Tech Support, this is Mike. He knows where all the documentation is for admins and for techs. He cleans things up occasionally. If we need to print things out to store in a binder, he does that (but not too often).

The person in charge of documentation is responsible for making sure it's organized and accessible. There's nothing worse than trying to find documentation you KNOW you have, but you don't know where it is.

Documentation naturally divides into two simple categories in the I.T. business: Admin and Tech. But one top of all of that is a third category, Company Policies. Company policies are the "philosophy" topics we've discussed and the SOPs that apply across the board. For example, the philosophy about three-year upgrade cycles (see last week's article) and the SOP on Date Formats apply to everyone.

Everyone, especially technicians, needs to know about the philosophy on three-year upgrade cycles. But they don't need to edit it, print it out, or deal with it in any way. Similarly, everyone needs to know and use the approved date formats, but they don't need to edit it.

I prefer to keep these company-wide policies and procedures in with the Admin policies and procedures. These items need their own sub-folder and should only be edited by management types. You won't edit them very often, so it's important that keep them where you can find them!

Finally, consider how you'll backup up all your SOPs.

Ideally, you're already backing up the core data files, and x:\Operations\Policies and Procedures is part of that. You'll also need to backup SharePoint, or occasionally do a file/folder copy over to the Operations folder.

Electronic Options

Aside from SharePoint, there are plenty of electronic options for saving all your docs. For us, the PSA system has never been convenient. We used to use ConnectWise. Now we use Autotask. Both are great for time tracking and billing. Both are clunky for things like this. It's just not what they do.

In my opinion, this activity is so straight forward that you just don't need a big database filled with Word and Excel docs in order to organize your documentation.

. . . and you might just decide to keep it all in one big file.

Bottom line: whatever works for you is what you should do. But don't just let everyone put their documentation in whatever folder they feel like. Then it will be lost forever. Whatever you decide to do, you should have a very clear policy about where documentation is located and who uses which system. And this should be so thoroughly embedded into your daily operation that you never have to ask someone to help you find documentation: It will always be in the only place you will ever look.

Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Software Upgrade Policy

:-)

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2012 - The Year For Managed Services

2012-01-17T09:21:00.000-08:00

I know many people are still break/fix. To be honest, I don't know how they survived the last 3 years.

For those who adopted a managed service model immediately before or during the current recession, it has been a life saver. If you have even one or two clients who prepay for services on the first day of the month, you know what a boost that is for cash flow. It's nice to know that some piece of you nut is covered no matter what else happens.

Now imagine having 100% of your clients on managed services. All the money flows in on day one. The only variables are product sales (hardware/software) and project labor. The core revenue of you company is set.

Believe me, this model reduces stress AND makes it easier to run your company. Regular maintenance might be boring, but it dramatically reduces other work. Maintenance can be scheduled. Most of it can be done remotely. When you do start work on a client project, try to clean up all the tickets they have in the system. Thus the work just flows.

For MSPs that went into the recession with a 100% MSP model, the experience has been a gradual tightening of the belt. As clients slowed down and laid off employees, the per-desktop pricing model reduced their I.T. expenditure . . . and your revenue. Unlike the break/fix crowd, clients can't cut spending to zero and just wait til things break. So there was a gradual reduction in revenue and clients reducing staffing a little here and a little there.

I firmly believe that we'll see a reversal of that in 2012. It won't be fast, but clients will slowly add a desktop here and an employee there. One. One more. One more. In this scenario - with no change in your service agreement - clients will begin paying you more. As they add employees, the per-desktop pricing model will gradually increase your revenue.

We did sales during the draw-down in order to maintain revenue. We needed a few extra clients in order to counteract the reduced revenue from client reductions in force. Now, we have a stronger base. And as clients add desktops, we expect to see a gradual increase in revenue.

I am frequently asked, "Is it too late to get into Managed Services?" Absolutely not. In fact, as I wrote to someone yesterday, I think the managed service model is THE model of the future. It is becoming the default process for delivering technical support. And there are some very clear parallels with other support entities out there.

My favorite adviser on MSP Sales and Marketing is, of course, Robin Robins. She loves to give examples from other service industries, such as heating and air conditioning. These folks do a great job of marketing seasonal maintenance. They'll tune up your heater and your air conditioner. They'll tell you to change your filters. Then they'll put their sticker on your water heater and air conditioner. And when you need service . . . who ya gonna call?

We see the same model with window cleaners and even carpet cleaners. They ink a deal to provide regular service. Of course they get other work as needed.
And they serve their clients under contract before they serve "strangers." In fact, that's a big mantra of the managed services crowd. Think about what happens the first time there's a big heat wave and all the marginal AC units fail. Clients with maintenance agreements get priority service while strangers wait and sweat.

So, managed services is the emerging default model for service delivery. For us and for other companies that provide service.

There will always be break/fix companies. And they will struggle more and more each year.

It's never too late to adopt a successful business model. Managed Services is that model. And 2012 will be a great year for anyone who's on board.

What does your year look like?

:-)

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In-Person Microsoft Events in the NorCal Area

2012-01-15T20:12:00.000-08:00

Got a note from my friend Suzanne Lavine over at Microsoft. Here are some upcoming in-person events in the NorCal area. These and other in-person events are always listed in my free weekly newsletter. Sign up now at SMB Books.

If you know of other in-person events I should list, please email me. Thank you!

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From Suzanne:
In Person Events

Mark your calendar (PS I’ll be attending, presenting, or hosting each of these events)

February 2nd 8:30 – 11:30 Microsoft and Synnex Licensing Bootcamp (details below)
Register: https://msevents.microsoft.com/cui/EventDetail.aspx?culture=en-US&EventID=1032500165&IO=cPLxA4q7x6kI%2bD3BYM0iiQ%3d%3d … PS recommend staying for IAMCP lunch……

February 2nd 12:15 – 1:30 IAMCP Lunch with Neal Potter – State of the Union on Microsoft partner program, new products, how to compete, Cloud, and more.
Register: www.iamcp.org search for Northern California chapter (invitation should be posted next week Monday)

February 20th 12:30 – 1:30 PM Lunch provided for those who register. NorCal 2nd Open Door Day. Come to the Microsoft SF office to network with your Microsoft team and other service providers, MSP’s, ISV’s, and other important people.
Register: Email suzl@microsoft.com

February 21st VAR Summit at Microsoft Mountain View office 9:00 – 4:00
Register: Mark your calendar, details coming

. . .

Details for Feb 2nd:
Join Microsoft and SYNNEX for a focused discussion on Licensing Microsoft Solutions for partners selling into Small & Medium Businesses.

Are you leaving money on the table? Do you struggle with the complexity of Microsoft licensing?
Want to augment your ISV or Services practice?

This power-packed three-hour boot camp is great for client-facing sales managers, account executives, and technical resources who are new in their role or who need a refresher on Microsoft's licensing programs. And, if you're already a Microsoft licensing expert, attend this Bootcamp and test your knowledge! We will review trends, tools, scenarios and tips to help you and your customers.

In just three hours, you'll learn how to:
• Grow your business with the right licensing programs for your customers
• Discover techniques to position Annuity with Microsoft Software Assurance
• Enhance your profit margin with best practices
• Understand Microsoft Cloud licensing options for your customers
• Leverage incentives, rebates, financing and promotions to save money
• Connect with local resources and knowledgeable experts
• Increase your revenue, decrease your cost of sale and provide superior service to your clients
• Review Key Licensing Scenarios: Virtualization, Business Intelligence, Cloud
This event is designed to give you the knowledge you need to advise your customers, save money and build a Microsoft roadmap.

REGISTER TODAY
San Francisco – Thursday, February 2nd from 8:30am – 11:30am PT
https://msevents.microsoft.com/cui/EventDetail.aspx?culture=en-US&EventID=1032500165&IO=cPLxA4q7x6kI%2bD3BYM0iiQ%3d%3d

These Microsoft Bootcamps are co-sponsored with SYNNEX Corporation. For more information, contact microsoftsales@synnex.com or call 800-456-4822 x4810.

. . .

Suzanne Lavine
Northern California/Nevada – Partner Territory Manager, Microsoft Corporation
Commercial Small/Mid Market & Partner Focus

W: 415.972.6434 | M: 510.703.4220 | suzl@microsoft.com
My Blog: http://suzlavine.wordpress.com/

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:-)

SOP Friday: Hardware Replacement and Upgrade Policy

2012-01-13T06:00:00.000-08:00

When do you replace hardware? Well, that's more complicated than it appears at first. There's the "ideal" policy, the reality of dealing with clients. And then we have the reality of dealing with clients in the worst recession in sixty years.

General Rule for Success: "We Like To See . . ."

Let me just take a sidebar here and explain a powerful rule of success if you are a computer consultant (or any kind of consultant). You need to have a philosophy about how things are done. In some way, this is a core belief that leads us to create all these other policies.

It boils down to this: The combined total of all the advice you give will move your clients in the right direction. It will give them better performance from their computers, more efficiency from their employees, and save them money in the long run.

We are this month celebrating clients with 5th anniversary, 7th anniversary, 8th anniversary, and 10th anniversary, as our clients. When I look back on all the advice that's been given and taken, I can honestly say that we saved them money "in the long run" because of our advice.

Newbies to our company don't understand how we can have so few service requests. We have weeks where basically nothing happens. That's because we are very firm in pushing our philosophy about hardware, software, licensing, maintenance, and spending money wisely (which might mean spending more in the short term).

The key phrase to memorize here is We like to see . . . because it gives clients confidence that you have a big-picture philosophy about how things are done. We like to see hardware replaced every three years. We like to see Exchange on a hosted platform. We like to see point-in-time backups. We like to see a documentation folder for each machine.

When you go into a client with strong philosophies about how things are done, they feel more comfortable relying on you to give them good advice!

- - - -

Anyway . . .

There are two major policies here. First, there's a policy regarding upgrades. That is, upgrading existing hardware. Second, there's the philosophy regarding replacement of hardware.

Upgrading Existing Hardware

This used to be more of an issue in the "old days" when 1) Technology kept improving at a fast pace, 2) Things broke, and 3) Components were installed separately.

Today, most of the core components are built into the motherboard. LAN card, Video, sound, printer, RS-232, USB: It's all onboard. So if something goes wrong you normally just call the manufacturer because it's covered by the warranty. (See next topic.)

But, aside from that, things don't break. Well, rarely. I don't remember the last time an onboard LAN went bad, or a sound card or video. I think I recall one bad LAN port in the last ten years. And all I really recall is that someone had taped over it with a label that said to use the add-on LAN card. So maybe it wasn't bad at all.

We used to get faster and faster modems. But now 56K is the top. You either get one or you don't. LAN ports have been 100 MB or 1 GB for so long that no one every upgrades. Sound is onboard. Very few people want an upgrade in the business environment, unless they're doing something special. Every machine has five or more USB ports.

The point is: We almost never have to address upgrading existing hardware. But when we do, here's our policy:

General
It is this company’s core belief that a business class machine’s useful life is 3 years.

Upgrading Hardware
We do not upgrade hardware in machines that are more than 3 years old. If we're looking for a manufacturer part, we end up spending a lot of time trying to find the right thing and get it ordered. We almost always lost money once we consider the labor involved in getting such parts.

In addition, we are much more likely to experience additional problems once we start replacing stuff. For example, we've had a motherboard go bad after upgrading memory. Yes, we've done it a million times. But suddenly something goes bad and it's an issue that has to be addressed.

The only two possible exceptions are:
1) A retrofit (not upgrade) of a business critical machine in an attempt to keep it alive long enough for its replacement to come on line.
2) We have explained our policy to a client and they are willing to pay for both our time to find the correct parts and all time for all installation and troubleshooting of issues arising from that installation.

So far, we haven't had too many clients that are so endeared to a machine that they select option 2.

Replacement Hardware

Note, please, that this discussion involves all hardware except printers. That means that we're talking about servers, desktops, laptops, routers, firewalls, switches, . . . everything.

Printers are an exception because we tend to sell business class HP printers, and they never die. One time we had a client who built their annual conference registration system around HP Laserjet 4 printers (a wise choice). I had bought a used HP4 from a client. So it was 5+ years old when I bought it. When I decided to move to a faster printer, I sold it to this client for their conference registration system. Five years later, they retired that system and there was my old printer in the pile, in perfect working order. Finally donated to charity along with the rest.

As for everything else . . . Our general rule is that a business class machine’s useful life is 3 years. There are several reasons for this.

First, we sell business class machines. So they're built to last that long. They're built with better parts and better processes. They're inspected more carefully. And they really should last three years trouble-free. This is true of HP. It's true of Lenovo. It's even true of Dell. IF you buy business class machines.

You can take a "home" grade PC (or low-grade server) and boost the memory, boost the cache, boost the hard drive, etc. You can spend just as much as a business class machine, but you'll have an upgrade home machine. It won't be designed to last three years. You need to start with good equipment and figure out how to reach your price point. Never start with cheap equipment and spend your way up, because it will never become business class.

Second, we sell only servers and workstations that come with a 3-year warranty. For everything else (firewalls, switches,etc.) we require at least a one-year warranty and we really push the three years. We always quote equipment with three years worth of warranty, whether it's standard or an upgrade.

Our managed service agreements require that all covered equipment has to be under warranty. If not, all labor is billable. There are two very simple reasons for this:

1) Equipment designed to have a three year warranty almost never has any issues within the first three years. In fact, it also never has issues within the first five years! It's "business class" and just works.

2) In the fourth or fifth year, under extended warranty, we can still just call the manufacturer and say, "Come fix your stuff."

Third, technology marches on! Whether a client wants to admit it or not, you have to upgrade sometime. Old machines get slow. They get bogged down with lots of programs. They get asked to do more than they were intended to do. Hard drives begin to slow down because of re-reads and re-writes. Older machines have fan issues, even if they're not obvious, so they're hotter and slower.

AND all the equipment in your office has to work together. When you replace a desktop here and a desktop there, pretty soon the server is the slowest machine in the office. It's working overtime just to keep up with all those fast desktops.

Network equipment also gets old. Ports go bad. But more importantly, older chipsets are slower than newer chipsets. New kinds of protocols come into existence and the routers and switches don't know what to do with them. VOIP is a GREAT example of this. Very often, manufacturers will put a 100 MB port on a firewall that can't possible pump out data faster then 30 or 40 MB. Yeah, you get a link light. But you don't get the data flow you're paying for.

That approach worked great when you were moving from a 1.5MB T-1 to a 6 MB DSL line. But with a 70 MB cable connection or 1GB Fiber, you are totally wasting your bandwidth potential and slowing down everything in the office.

Older, slower equipment is just going to get older and slower. Period.

A philosophy of regular three-year upgrades will always keep your client working efficiently with quality equipment.

There's a very weird mentality with equipment. Sometimes we find ourselves saying, "It still works." Well, yeah. So what. The first Compaq Proliant I ever installed with Windows NT 3.5 is still working today. Pentium, baby! With a blazing 96 MB of RAM. 16 GB SCSI drives. It takes ten minutes just to POST. But it works!

The fact that you can turn on a stereo amplifier built in 1974 and it works is NOT impressive. It's solid state. It should just work. But does it give you the performance you want?

A switch (or even a hub) that's five, ten, or fifteen years old will "work." It will turn on. The lights will blink. Data will flow. But that doesn't mean it's a good idea to use that equipment in the backbone of a client's network.

A five year old server will turn on. It will load the O.S. Lights will blink. Data will flow. But that doesn't mean it's a good idea to use that equipment in the backbone of a client's network.

The Sales Pitch

Many clients accept the three year rule. This is due, in large part, to the fact that we harp on it all the time. We remind them of the age of their machines. Sometimes we even label machines with the year they were new. We quote replacements for three year old equipment. We encourage the clients to officially adopt a three year replacement policy. And when machine are absolutely brand new, we remind them that it will be old in three years.

I would say that "most" clients accept this policy. Most of them allow us to replace servers in three years. So, while they might extend the warranty for a year, they begin getting quotes to replace it at the same time. Most clients try to adopt similar policies with desktops, but they tend to be closer to the four year mark.

And a four year old desktop is not horrible these days.

But, as you know, the new desktop machine that replaced it is blazingly faster! I love projects that require a decision make to sit down at three or more of their employee machines and work on a project. They see how painfully slow they are making their employees work. It really helps them see that we're not just pushing hardware to make money.

It's funny how little attention is given to desktop machines, given that they are the most important productivity tool for 90% of all employees in our clients' offices.

So we're not just pushing hardware sales. We really are working to make them more efficient and profitable. This policy is not meant to serve US. It is meant to serve the client. After all, when we're working on an old, slow piece of crap, we're getting paid by the hour. With that policy in place, we'd make a lot more money working on old equipment!

I know you know how it is.

We are so "into" technology that we can't stand being on old, slow machines. But some people somehow convince themselves that they're saving money.

You need to believe this philosophy deep in your heart: Old machines cost money! You need to speak this philosophy when talking to employees and clients. You need to work it into your web site, your newsletters, and all of your client conversations.

"We like to see these machines replaced every three years."

Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Keeping Your Standards and Procedures Organized

:-)

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I Didn't Like Myst and I Don't Like Google+

2012-01-12T10:14:00.000-08:00

Last night my daughter asked me, "So what comes after Facebook?"

All I could think of was, "Well, it's not Google+"

I'm not a "gamer." I have enjoyed video games over the years, but I've never really been addicted to any. I've never built a monster computer in order to play a video game.

The game I've tried that I liked the *least* was Myst. I received it as a Christmas gift one year. It has no instructions and no apparent point. You're on an island. You can walk around. You can poke things and look at stuff.

When I first got the game, I installed it and spent about half an hour being totally frustrated. No instructions. No point. No goal. Just walk around the island. I couldn't figure out how to do anything. And there was my cute daughter to play with, so I shut it down.

On probably a dozen other occasions, I loaded the game, wandered aimlessly around the island, realized I couldn't figure it out, and then shut it down. Then I uninstalled it and never considered trying again.

Someone finds Myst entertaining. It's a very popular game. And there are sequel games. But I found it confusing and not entertaining.

My impression of Google+ is about the same. I go there because hundreds of people have added me. Then I spend half an hour putting people into circles. But I don't know the point of that and then realize that I'm putting people into circles they're already it.

So I look to see what else there is to do. Then I close it down and do something else.

I see that Google+ is different from Facebook, but I don't see a compelling reason to use it instead of Facebook. It reminds me a bit of the Microsoft small business financials product. Everyone who got it installed it, looked around, realized it was like QuickBooks with fewer features, then uninstalled it.

It might be a great product, but there's no compelling reason to switch.

Strangely enough, I believe Facebook's popularity is about to reach its zenith. I don't know what will replace it, but it won't be Google+ (in my opinion). Just as Facebook came out of nowhere to replace Friendster, Yahoo Groups, and MySpace, something else is hiding in the wings waiting to take down Facebook.

(Note, please that Friendster, Yahoo Groups, and MySpace still exist. But their market share has been destroyed by the popularity of Facebook.)

Sometimes we convince ourselves that something is so big that it can never go away. Like the Magellan search engine. Or Overture, Alta Vista, Lycos, Infoseek, Excite, and a dozen others. Oh, and Yahoo. Dominance is a fleeting thing on the Internet.

Probably the biggest thing Facebook has going for it is that the universe is not expanding as fast as it used to. Despite the addition of billions of people in China and India, new Internet connectivity won't guarantee an expanding user base as it did ten or five years ago. That means that market share will come by stealing actual users and not merely by acquiring new users.

It's a new game and Facebook is perfectly situated to play the old game.

I'm sorry for Google+. I mostly like what they do as a company. I give them more money than I give to Facebook. But right now Facebook is winning the social media game. If you're only going to participate in 3-5 social media sites, one will be Facebook.

:-)

Bend Over, California Employers, Your State Government is at Work Again

2012-01-11T14:43:00.000-08:00

Employees might not know what all the alphabet soup stuff stands for on their paychecks, but their employers should.

One of the taxes employers pay is Unemployment Tax. This is basically a STATE program. So why do we pay Federal Unemployment Tax (FUTA)? Well, that's to pay for the administration of the unemployment system. But there's an extra amount of tax thrown into FUTA to provide a government-based "insurance" program to make sure the states can't go broke.

It's kind of like the Federal Deposit Insurance program.

So California gave out more unemployment payments than they had money to pay for. Since we have the most screwed-up state legislature in the world, and a series of horrible governors that goes back three generations, this state simply pays for things with no plan to pay them back.

Well, the feds have a plan. They loan the money to the state unemployment department. And when the money is not paid back, employers get an extra bill from the Feds.

So, if you are lucky enough to be an employer in the State of California, you will need to make an additional lump-sum FUTA payment this month for every employee. See the State EDD site for details: http://www.edd.ca.gov/Payroll_Taxes/Federal_Unemployment_Tax_Act_Tax_Increases.htm.

Assuming the State of California continues to be completely irresponsible next year and the year after, you can expect an additional .3% increase in FUTA rates until the State has a system to pay their bills.

- - - - -

PLEASE remember, on election day to Vote Against All Incumbents. I know you think your Assemblyman, your Senator, and your local elected officials are the exception to the rule. But they're not. The people who got us in this mess are NOT going to get us out.
I
am NOT opposed to taxes. I'm not one of those people who thinks every tax is too high and the government shouldn't do anything. Far from it. I enjoy clean drinking water and safe roads as much as the next guy. But I *AM* opposed to completely irresponsible elected officials.

At the end of the day, we don't send people into government so they can help us screw our fellow citizens by taking more than we give. We only ask elected officials to do one simple thing: Balance the services we can afford with the taxes we pay. If you don't have the money, either cut the services or increase the taxes. Those are hard decisions. But instead, we have hundreds of elected officials who can't make ANY decisions except to put off the hard decisions until after the next election.

Vote them all out. ALL OF THEM.

No one could do a worse job than the people who have been running this state for the last 30 years.

. . . just a little Wednesday afternoon steam.

:-)

Podcast Posted: "Own the Clouds" with Joyce Blonskij

2012-01-11T07:19:00.000-08:00

Over at Cloud Services Roundtable, we've posted an interview with Joyce Blonskij, author of Own the Clouds: The First Guide To Investing In Cloud Computing Companies.

This is part one of a two-part interview. I caught up with Joyce in her investment advisory office. Her book - Own the Clouds - The First Guide To Investing In Cloud Computing Companies - will be released at the end of January.

Joyce's book is a great introduction to stock market investing generally, but her focus is specifically on Cloud and Internet companies.

This is a great topic for I.T. consultants, especially those who have managed to save a little something extra and want to know where to invest for retirement. Too often we self-employed folks don't put away enough of a nest egg.

The book will be only $24.95, and that prices includes a number of give-aways you can find out about at see http://owntheclouds.com/. Joyce will be donating all proceeds from this book to charities, including Kiwanis House. http://www.kiwanisfamilyhouse.org/

Cloud Service Roundtable Members can download this recording right now and get the year started off right with an introduction to investing. It's particularly cool to have such a great guide with a hook into our area of expertise. Check it out today.

Download the podcast here.

:-)

The Most Popular Blog Posts of the Last Month

2012-01-08T15:39:00.000-08:00

It might be a nerd thing, but I love just looking at the "stats" from my blog. It is just plain strange what makes the top ten sometimes. In the last month I've posed 18 blog posts at http://blog.smallbizthoughts.com. Given the length of my posts, that's about half of a book. So it's interesting to see what people read the most. Ideally, I want the most popular posts to be the most recent. But it doesn't always work out that way.

Here are the most read blog posts from the last 31 days:

#1 = My 950th Blog Post from Dec 8, 2011
This tiny, pointless post just barely makes the 31 day limit. I'm not sure why people gravitate to milestone postings, but they do.

#2 = SOP Friday: Activating and Registering Client Software from Dec 16, 2011
This is part of the SOP Friday series, which has a lot of followers and several regular readers.

#3 = SOP Friday: Hiring Your First Employee from Dec 23, 2011
This is part of the SOP Friday series and part of a little mini-series of posts on employee hiring.

#4 = The Cost of an Employee from Dec 19, 2011
This is part of that little mini-series of blog posts about hiring your first employee. Not part of the SOP Friday series.

#5 = SOP Friday: Cash Flow Weekly Procedure from Dec 30, 2011
A very recent SOP Friday post.

#6 = SOP Friday: Defining Your Company to Clients and Employees from Dec 2, 2011
This is the first "top ten" that wasn't from the immediate past 31 days. It is a very popular post and might just stay in the top ten another 30 days.

#7 = Not Training IS Training from Dec 21, 2011
Just a regular post here. This one got a lot of feedback and also looks like it will be popular going forward.

#8 = SOP Friday: Running Regular Financial Reports from Dec 9, 2011
Another in the SOP Friday series.

#9 = Zenith vs. Kaseya from Dec 7, 2007
Here's one OLD post that is just amazingly popular. I have even added a not to it that warns that this is an old but popular post. This perennial favorite enjoyed it's 4th birthday last month. I think it's popularity comes from the fact that it is a popular article with the exact wording of a very popular search term. In fact, this is the single most popular posting in the history of http://blog.smallbizthoughts.com.

#10 = Sales Boost: Toner for The New Year from Dec 27, 2011
And, finally, a year-end post that got a lot of visitors.

Overall, most of my traffic comes from some pretty standard sources. Some posts have been linked from various web sites for years. So the overall popularity of some articles is related to a large number of hard-coded in-coming traffic. Thank you for that!

It's also the case that I "own" a number of search terms. For example, if you Google "Zenith vs. Kaseya" you'll find the ever-popular blog post above is very highly ranked. After six years of blogging about the same topics, content is king, so the hard-coded links keep increasing.

As a new year begins, I am honored to have a blog that continues to attract readers. In 2011, the number of visitors grew about 560%. I doubt we'll do that again, but I'll try!

Thank you all for your support!

:-)

Pssst. Hey. Did you know you can subscribe to my blog on the Kindle?

http://www.amazon.com/Small-Biz-Thoughts-Karl-Palachuk/dp/B0037CF0QM

SOP Friday: Employee Handbook

2012-01-06T06:00:00.000-08:00

This isn't really a procedure as such. It's really a policy with a handbook attached. The policy is really simple:

You need an employee handbook.

That's it.

The first question is, "When do I need an employee handbook?" The answer is that you should have one as soon as you have an employee. But don't freak out!

My basic philosophy is that you should make your employee as small as possible, not as comprehensive as possible. This advice applies to small businesses, of course. Once you have lots of employees and lots of extra regulations, then the advice reverses. But to start out, Keep It Simple!

You need an employee handbook basically because you need a place to put YOUR policies and clarifications. With every lesson you learn, you will create a policy and expand the handbook a little. With luck, it will never be too fat. Fat employee handbooks are not read.

Your employee handbook contains three kinds of information:

- Required information

- Really smart things to do

- Optional information

Despite everything I'm about to say, your employee handbook might be as small as five pages. You only NEED a few things.

Beware State Laws

Here's the deal with employee rules and regs: Almost everything you can think of (and a whole bunch you can't imagine) has been regulated by the government already. This includes how many hours an employee can work, who you can't discriminate against, when lunch has to be taken, wages to be paid, taxes, worker's compensation insurance, privacy, vacations, etc.

The good news for you is that you don't have to cover any of that crap. You have to somehow stay inside the law. But your employee handbook only needs to address the topics and issues that you believe need special attention.

You can find dozens of employee handbooks on the Internet. They cover all kinds of things that you consider to be common sense. Believe me, there is no common sense when it comes to human interaction. In my opinion, there's no point creating a document so big and cumbersome that no one reads it until an issue arises. What do you want employees to know? That's what counts.

Required Information

The first set of things you should include in your employee handbook are the most important things to keep your business running smoothly and cover your butt when an issue arises. These include:

- Your company vision and mission. Many people consider this "fluff," but it's really the most important thing. If you have a vision that actually guides your business, the rest of the book is almost irrelevant.

- Non-Disclosure Agreements. You should state that NDAs are required of all employees. Your NDA will be a separate document that you can keep in the employee folder, but you will state in the employee handbook that an NDA is a requirement of employment. This in turn allows you to tell clients that you require NDAs from all employees.

Believe it or not, that's it. 99% of everything else you come up with is covered by state and federal laws. So other than creating a document that educates people about the law, you don't need all that stuff.

Really Smart Things to Include

The second set of things to include in your employee handbook are "good ideas" like . . .

- Dress Code. Particularly in our line of work, technicians seem to think that torn jeans and an old t-shirt are acceptable. In our business, they are not. When we charge someone $150-300 per hour, we think they need to see a tech who looks professional.

- Work hours and philosophy. It is good to set the ground rules for when employees may work and when they are expected to work. For example, if you want to enforce a rule that you work 8 AM to 5 PM, you should state that. It eliminates many irritating discussions down the road.

- Pay Periods and Pay Dates. You should lay out when people get paid (e.g., 1st and 15th or 10th and 25th or whatever). Separately, you can publish the specific pay dates for the year.

- Holidays. You should list the holidays when your office will be closed. Again, you can separately distribute a list of specific holiday dates for this calendar year.

- Smoking policies. You should lay down when and where smoking is allowed, including what your rules are regarding smoking while at client offices.

- Company property. There are two parts to this. One is a statement that email, computers, files, and all electronic communications provided by the company are the property of the company. Therefore, you can read all emails, review all hard drives, etc. with no prior approval or knowledge of the employee. The second part has to do with tools and equipment. Very often in our profession, employees have hardware, software, cables, and other things that belong to the company. You need a statement that makes clear that these must be returned or paid for at the end of employment.

- Drug Free Workplace Policies and related policies. If you have clients who require a drug-free workplace policy of you, you should include a note to that effect in the employee handbook. As with NDAs, you will execute the drug-free agreement as a separate document if needed. You may be able to get by with just making a statement in the employee handbook.

Optional Information

Everything else is optional. There are an unlimited number of topics you don't need to worry about.

The basic rule here is that you will add sections as the need arises. If you have an argument with an employee about conflict of interest, then add a section on conflict of interest. Otherwise, don't worry about it.

And when you write up these policies, keep it brief! One or two paragraphs for each policy is all you need. Don't create a massive document that covers more than it needs to.

Optional things you might include are: Welcome message, at-will employment message, attendance policy, benefitsconflict of interest policy, disciplinary procedures, employment classifications, equal employment opportunity memo, harassment policy, how personnel records are handled, performance evaluation policy, personal phone call policy, and workplace violence policy.

See all the stuff we didn't put in the document? Keep it simple!

Sample Employee Handbook

Google "Employee Handbook Sample" and you'll find about a million hits. Some cost money. Some are free. Some are specific to your state or province. If you belong to ASCII or CompTIA, they also have resources and samples you can use.

As with any legal document, be very careful about simply downloading something and implementing it in your business. First, you might "implement" something that's actually illegal in your area. Second, you will probably end up with a document that neither you nor your employees will read. That is pointless.

In California, the state Chamber of Commerce has a toolkit for building an employee handbook based on a series of questionnaires you fill out. We bought this and used it. The final document is nice, but the process is very cumbersome. And the final "document" isn't a document at all: You have to generate it each time in order to print another copy since it does a series of database queries to generate you document. I think it's much better to have a Word document you can easily edit.

I'm kind of picky about these things, but I think you should have your employee handbook reviewed by an attorney that specializes in employment law. Yes, it will cost $250-500. But how many lawsuits will be avoided? Find someone who is willing to review your document and not write a whole new handbook for you. Shop around.

Implementation

Implementing your employee handbook is easy. First you create it. Second, you have it reviewed by an attorney. Third, you present it to your employees.

You should have employees sign a document that they have received and read the employee handbook. We frequently distribute the handbook on day one and have them sign the document on day two.

That's it.

You need an employee handbook because you need to start building YOUR policies and procedures, and the employee handbook is a great place to start. Hit the basics. Add to it as needed.

Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Hardware Replacement Policy

:-)

The Best I.T. Service Delivery BOOK EVER!

by Erick Simpson

Covers
- Deliverables - Pricing and Positioning - Staffing Requirements -
- Hiring, Managing and Training - Technical Roles and Responsibilities -
- Processes and Procedures - Target Markets - Customer satisfaction and Loyalty -

and More!

SOP Friday: Cash Flow Weekly Procedure

2011-12-30T06:00:00.000-08:00

- Overview -

Cash flow can make or kill your business. Even if you're technically "profitable," you can run out of money to pay your bills. It's largely a matter of timing.

For example, if you are owed $10,000 for work you've done, then you have a $10,000 "asset" called accounts receivable. But if that money won't come in for 30-45 days, it really does you no good. So, if you have $8,000 in bills due during that period, you have to come up with the money somehow. If you borrow and spend $8,000, then you have to be very disciplined to pay all that back when the $10,000 rolls in.

Think of money flowing INTO and OUT OF your business in 30, 60, and 90 day intervals. Balancing income and outgo can be difficult, especially since unexpected expenses always seem to arise.

In previous posts I talked about
- Running Regular Financial Reports
- Cash Flow: Dealing with Late Payments
and
- Cash Flow: Getting Paid in Advance

With luck, you are making good progress on getting paid in advance. If you need help implementing such a policy, I can help you make it happen in short order. I will write up the policy, announce it to your clients, collect credit card information, and set up all the automatic payments. I charge $250/hour for that service (paid in advance), so you might want to consider doing it yourself. It's really easy.

So anyway . . .

Now we need to monitor our cash as it flows into and out of the company.

I am a firm believer that the business owner needs to have a SIMPLE way to keep an eye on cash flow in order to make good decisions. For me, this means looking at basic cash flow numbers at least once a week. And to make the process even more relevant to daily operations, I think it's good to look at cash flow in relation to the largest expense you have: Payroll.

Quite simply, how are you doing with regard to money in the bank between now and the next two pay days? I choose two pay days because we pay twice a month (on the 10th and 25th). But our managed service contracts are all paid on the first of the month.

Note: Most clients pay us on a monthly basis. This is prepaid by credit card. Cards are run automatically on the first of the month. Depending on the card processor, the money settles into our account and is usable three business days later. Given weekends and Monday holidays, this means that the money might not be available to us for as much as six calendar days.

If clients choose to pay by check, they must pay for three months at a time. We call these "quarterlies" even though the quarter can start any month. Ideally, quarterlies are staggered so we don't have huge peaks and valleys.

The other key variable to consider is Accounts Payable - money we have to spend. We use QuickBooks to enter bills as they arrive. So we can look at AP and know what needs to be spent between now and the next pay period. See the table below. These are just fictional numbers to illustrate.

This Excel spreadsheet is NOT a super-detailed view of finances. It is a simple overview of the most basic information we need. Here's what you see there:

- Date.
This spreadsheet was run at the end of November. So it's after the last pay period for the month and before the first pay period for the next month.

- Cash on Hand.
This is literally the bottom line in the QuickBooks check register we use for paying all operational expenses, including payroll.

- Accounts Receivable.
We only list money here that we are sure will come in. So, if a client just received a bill and might not pay in the next few days, we don't count that. But if someone has terms of net 20 (our default), and an invoice has been out for ten days, then we are sure the money will come in.

We list quarterly payments that will be received. Again, these are checks that pay for three months service. Because the three months can start any time, this number varies from month to month.

Finally, we list monthly payments. These are clients who pay by credit card. This money "just shows up" on the first of the month. This number only changes if we add or lose a client, or if the number of machines on managed service changes. These numbers are based on contract amounts in our PSA system.

- Accounts Payable.
These are the bills we expect to pay between now and the next payroll date (the 10th). This number is larger during the first part of the month than the second because many bills roll in around the first and are due shortly thereafter (e.g., rent).

- Payroll Due.
This is an estimate based on previous payrolls and the estimated hours we expect to pay.

- Rinse, Repeat.
Notice that we also estimate income and outgo for the next pay period (the 25th).

Benefits
As simple as it sounds, you need to know whether you'll have an easy time or a tough time making payroll. Should you put off paying a bill? Should you restrict hours or give a tech the day off to save money? More importantly, how are you doing with the NEXT payroll? If you ding all the credit cards on the first of the month, the first payroll is easy. But if you have too much break/fix labor and not enough managed services, the second payroll might be difficult.

The primary benefit of this procedure is to have peace of mind. You can plan two or four weeks in advance.

But right away you'll find yourself thinking a little more strategically. Do you really need this or that? Should the tech hours be expanded or contracted? Will you be able to take an extra draw this month?

With this process in place, you will also be able to see cash accumulate as you prepare for an upcoming annual payment (e.g., worker's comp insurance, or annual Microsoft dues).

As you tune into your cash flow you will get a real sense of how money actually "flows" into and out of your company. One of my guiding philosophies is that you get better at whatever you put your attention on. So if you want to get better at finances, paying attention to cash flow is a great place to start. Look at this Excel spreadsheet at least once a week!

I am amazed at how many people have been in business for five or ten years and cannot rattle off their monthly or weekly cash flow numbers. As you work with this information, it will become an important piece of your decision making process. If a program costs $250/month, what will that do to your cash flow? If you hire a new technician, how many hours can he work?

And at a more basic level, are income and expenses in line with one another? Is one growing faster than the other? Is there a trend, or was that a one-time event?

- Implementation Notes -

Implementing this process is easy.

First, create a spreadsheet like the one pictured above. It's not too hard to figure out.

Second, for each pay period, copy the worksheet and create a new one. Name them based on pay period (e.g, Jan 10, Jan 25, Feb 10).

Third, go through this at least once a week. Monday is probably best. If you have an office manager, go through it with her. She should be able to fill in most or all of these numbers.

Fourth, once you determine that you have X dollars to spend on paying invoices, go ahead and mark them to be paid in QuickBooks. As soon as you're done reviewing cash flow, have your office manager print out the checks for the invoices you decided to pay.

Interestingly enough, that last little habit might tempt you to look at cash flow again tomorrow. Don't worry. That's a good thing.

One of the keys to success here is to Keep It Simple! Don't junk up the cash flow spreadsheet with details about types of expenses or detailed dates. The more complicated it is, the less likely you are to execute the process regularly!

Note: This entire process takes no more than 15 minutes. So it helps you run your business better, but it's not difficult or time consuming.

- Benefits -

The greatest benefit of watching cash flow is that you will become more profitable. How? Well, you'll plan a little more and probably spend a little less. You'll borrow less money and pay fewer penalties.

The more you take time to step back from executing your business and spend time examining it, the better your business will become. You will find yourself thinking more strategically about how you handle and manage money.

Holding a Mirror Against Your Warts

Warning. Some of this might not be fun. Within the first one or two weeks, this process will reveal whether you have huge problems with your business finances. The huge (potential) problems are 1) No regular income, and 2) Accounts receivable that's out of control.

When you start out with this procedure, you might find that your numbers are irregular or unpredictable. If so, that means that your A/R for hourly labor (break/fix) is too high. If you can't plan two weeks in advance to know what you're going to receive, then you have little or no managed service revenue. I'm not kidding you when I say that I would not have ANY employees unless I could point to a spreadsheet that showed how I'm going to pay them in the next two weeks.

With break/fix labor, the stream of money coming in can be very unpredictable. You will see this painfully clear as soon as you look at your numbers. If nothing else has motivated you to sign some service agreements, look at cash flow! We want to guarantee that we can cover our monthly expenses based on guaranteed revenue on the first day of the month!

As you monitor cash flow, you will see this monthly (and quarterly) number go up and up over time. As that number goes up, your stress will go down.

The other huge problem is accounts receivable. You shouldn't have any! Or at least you shouldn't have much. If all hardware and software is pre-paid (see Cash Flow: Getting Paid in Advance) and managed services are paid on the first of the month, then the only accounts receivable you have is for incidental hourly jobs and projects.

Projects are great. We always get paid in advance for the core of a project. That means 90% of the money up front and the rest is the "expected but unpredictable" piece of fine-tuning a project.

If you've been reading this blog for long then you know that I am adamantly opposed to giving credit for 30, 60, or 90 days. I hear all kinds of excuses about why that's not possible because your clients are different from every other client on earth. Well they're not. They're just not. You know that big corporation that says they never pay in advance? They do. They just don't pay YOU in advance. That government agency? Same thing.

The most successful consulting companies all get paid in advance. The ones who won't stand up to big money and demand it get paid in 30, 60, 90, or whenever.

If you have accounts receivable, you will be paid less than 100% of what's owed. Period.

This is an absolute truth of business. You might get 75% or 85% or even 90%. But you will never be paid 100% of the money you are owed when you extend credit.

You can believe me or you can learn from experience. Most people who learn from experience assume that their hard earned lesson was a one-time deal with a crappy client that they'll never have to worry about again. But believe me, there are plenty of other people willing to take your services and pay you less than fair value. Ignore the lesson or learn the lesson: the choice is yours.

As you look at your cash flow on a weekly basis, you will become acutely aware of the difference between money you are owed and money you will be paid. Note that "money you are owed" is NOT on the Excel spreadsheet. Why? Because it doesn't matter. The money you are owed is irrelevant. It is unimportant. It is FICTION.

The reality is that you have to focus very closely on a much smaller number: "Accounts Receivable For Sure." That's reality. That's the money you KNOW you're going to receive. Someone owes you $30,000 or $10,000? All of your clients combined owe you $15,000? So what? You can't spend that. You can't use it for payroll. You can't take it to the bank. You can't do anything with it.

The only money that matters is the money you are actually going to receive in the next 10-15 days. Actually. Really.

Why? Because you can actually spend money that you receive. You can pay employees with real money. You can pay rent with real money. Promised money that might show up is not relevant to running your business. As you go through your cash flow week after week, focusing only on the "Accounts Receivable For Sure," you will begin to realize that you need to beat down and eliminate your accounts receivable.

Banks and accountants think accounts receivable are an asset to your business. But if you're a small business, they are a cancer that can eat you alive. Eliminate accounts receivable until you have revenues over $2 million/year. Then keep AR as small as possible.

- Forms -

The only real "form" for this is the Excel spreadsheet discussed. You will also need to keep track of your managed service contracts and have a calendar that shows who pays monthly and who pays quarterly.

Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Your Employee Handbook

:-)

Now Shipping:

The Network Migration Workbook:

Zero Downtime Migration Strategies for Microsoft Networks

The Super-Good Project Planner for Technical Consultants

2011-12-28T09:00:00.000-08:00

I set up a small page for this book at http://www.supergoodprojectplanner.com. Please check it out when you get a minute.

The Super-Good Project Planner for Technical Consultants

An E-Book on Practical Project Management

by Karl W. Palachuk

Another great binder project! This is an E-book package on project management. Designed specifically for Technical Consultants to manage the kinds of project they see every day in their consulting practice.The e-book is delivered as two documents in a single download.

Make every project a successful and profitable project!

Perfect as a place to start managing your next server installation. Based on the best practices of KPEnterprises Business Consulting, The Super-Good Project Planner for Technical Consultants covers the basics of project planning in the real world of the Small Business I.T. consultant.

Then it jumps right into a down-and-dirty, get-it-done process for creating and implementing projects that work. The primary audience is the technical consultant.
But this process, with very little fine-tuning, should work for just about any SMB project.
We show you how to

Meet all the project goals
Maintain excellent communication with the client
Manage expectations
Stay profitable

and
Avoid scope creep!

Product Description
This book is guaranteed to improve your business.

Thousands of companies have used this book to improve and standardize their processes, document their client networks, and take their businesses to the next level -- and so can you!

Buy Now!
Only $49.95

Book Specs:

E-Book - 8.5" x 11"
133 Pages + 20 pages of forms
Includes all sample Project Binder forms
Publisher: Great Little Book Publishing
Downloadable (no shipping!)

	Download Table of Contents	Download the Beginning of the Book	View Sample forms	Preview Ch.5 (Running a Project)
	pdf	pdf	pdf	pdf

Standard operating procedures will set you free!
Having standardized forms and procedures can go a long way to improving your company's success and profitability. Projects are simply the next step in that process.

Sample Projects
We have included three sample projects. With these, we've filled out all of the project forms so you can walk through it and see exactly how it's done. The projects are
- Moving a Web Site from Small Business Server to a Hosted Server
and
- Switching to a New ISP with Zero Downtime
and
- Moving from Hosted Email to Bring Email In-House with Zero Downtime

Buy Now! Only $49.95

- - - - -
:-)

Three Days Left to Save Big on Robin Robins' Amazing Bootcamp

2011-12-28T08:47:00.000-08:00

Got a memo from Robin this morning.

Please join me in Nashville. I will once again be on the panel to review the biggest, best marketing superstars of the year.

From Robin:

- - - - -

It just dawned on me that the deadline to get a FREE iPod and FREE Managed Services Online Marketing Toolkit is about to expire in 3 days (December 31st):

http://www.robinsbigseminar.com

(Seriously, I was enjoying a bit too much holiday cheer and suddenly realized I hadn't sent you a reminder.)

When you register for this year's Boot Camp, you'll get:
-A free iPod pre-loaded with the audio of the previous 2-year's Boot Camps
-A free copy of the MSP Online Marketing Toolkit
-$500 off your registration

You'll also get these free bonuses from the speakers:
-The 10 Biggest Sales And Marketing Mistakes Everyone Is Making And How To Avoid Them
-Strategic Planning And Effects-Based Thinking
-Quality Score And Landing Page Testing For Google

I URGE you to attend...

This is THE best event in the world for getting real, tangible marketing advice and sales strategies that are specific to your IT services business. I HONESTLY cannot image why any intelligent person running an IT business would stay home and miss out on this - and I don't mean that as a slight. I really just can't image what excuse - other than death or other unforeseen crisis - would keep someone away!

For a small pittance of a fee, you're going to leave with dozens of PROVEN, actionable marketing and sales strategies you can INSTANTLY apply to secure more new clients, boost sales and profits...and it's all going to be handed to you! Seriously, where else can you get this?!?!?!

I've done everything I can to make this as easy as possible...from keeping the price very low to putting a full money-back guarantee on your registration AND travel. I've also invested over $75,000 to bring in the country's TOP experts on sales, marketing and business growth strategy. That's because I WANT you to go...not implementing and struggling is NOT an option for you as my client. No, I can't force you to do anything, but I'm giving my best effort to get you moving again.

I promise this will be a life-altering and business-changing event for you.

Register here: http://www.robinsbigseminar.com

Dedicated to your success,

Robin

- - - - -

:-)

Sales Boost: Toner for The New Year

2011-12-27T08:03:00.000-08:00

Need a sales boost? I think there are some regular proposals you can send out to your clients. One good one is toner cartridges.

As you know, toner can range from a low of $30 per cartridge to a high of $150 or more. The $75-$90 range is very common.

And who uses toner? Everyone. Every single one of your customers.

Here's a project you can give to your sales department. That might be you or the office manager, too.

Step One: Find out what kind of printers each client has. Ideally, this will be in your Network Documentation Binder. It should also be in your PSA system (Autotask, ConnectWise, Tigerpaw, etc.).

So make a table. Maybe an Excel spreadsheet. It should list each client and the printers they have.

Step Two: Look up the toner cartridges used by these printers. Fill in the table with another column for cartridges. Some will be just black, some will be three cartridges, and some will be four. Write down very specific cartridge numbers.

Step Three: Look up these cartridges at your favorite supplier (Ingram, Synnex, etc.). Get your pricing for each. Fill in the table with your costs and preferred mark-up.

Step Four: Write a letter to each client along the lines of:

Did you know that we sold toner?

As you are painfully aware, toner is one of the most expensive office supplies you buy. That means you don't want to have a lot of it sitting on the shelf. I've attached a quote for a full set of toner cartridges for your [fill in the model] printer in case you're looking to spend some money this fiscal year.

In addition to simply selling toner, we can help you save money on all of your printing costs. First, if you're on platinum managed service, we can probably monitor your printers remotely for no additional charge. This will give us an alert if you need service - or if a toner cartridge is getting low. Or we can make printer checks part of the monthly maintenance at no additional charge.

Second, we can deliver toner only when "order toner" indicator goes on. This will preserve your capital by providing toner only when you need it. We've seen clients with thousands of dollars worth of toner cartridges in their supply cabinets. That's money you can be using for something else.

Third, we would like to help you find your next printer. Many modern printers don't "count" color pages if you print in black and white. Older printers counted a page as a page, so you bought replacement color toner even though you didn't need to.

We can help you choose a good workgroup printer that meets your needs, uses toner efficiently, and has reasonably-price toner cartridges. That will save you a lot of money in the long run. The second quote I've attached if for an HP [fill in the model] printer we've had a lot of luck with. This is a workhorse at a very reasonable price. We've also quoted a full set of toner cartridges so you can see what they cost.

Fourth, we can save in little ways. For example, if your printer is efficient with color toner when you print in black and white, we can configure it to print B&W by default. That will save you money every day. When you want to print in color, you just choose color on the same screen where you choose between portrait and landscape.

We are proud to serve your company every day.

I would like to schedule a meeting with you to discuss this or anything else. Please contact me if you're interested.

Thank you for your business.

You'll need to customize this letter for each client. But you probably have a few clients with the same printer. And if you've got a client with a mish-mash of printers, then life gets a little more difficult. But you can still address a sample printer.

As a general rule, you should sell one or two brands of preferred printers. You don't need to service them. But you should either sell something with a three year warranty or offer extended warranties.

You should ALWAYS quote a full set of toner cartridges with every printer quoted. First, many printers show up with baby toner carts that will run out right away. And, second, it gives the client a sense of what the cost is.

I recommend that you do NOT discount from your standard mark-up and try to compete on price. If you're within 10-20% of the street price, you'll be fine. Look at the work you did above, and the letter. Staples is not providing this service to your clients. Office Depot is not providing this service to your clients. Office Max is not providing this service to your clients.

This is about service. Don't make it about price.

If you sell managed print services, this is a great way to start that conversation.

Eventually, you will have most of your clients on one or two brands of printers. That makes their life easier and it makes your life easier. You can learn a brand or two. You can keep up with a brand or two.

Important Do-Not's

Do Not Keep an Inventory of Toner. If you're small, inventory is always a bad idea. If you pay $70 for a toner cartridge that you hope to sell for $80, you can tie up a lot of money waiting for someday. And if ONE cartridge sits unsold on your shelf for the next five years, you can throw it on the recycle pile. You just lost the profit on seven sales. In other words, you lost the profit on $560 worth of sales.

Do Not Compete on Price. Yeah, you might trim a little. But don't go to PriceGrabber and find the lowest price, then drop below that. Remember, your clients are probably buying at Stapes and Office Max. You have to be close to them. You're able to provide some value added service, but hand delivery. You're providing the big picture. That's worth something.

Do Not Fret if You Don't Get the Sale. Hey, these folks weren't buying toner from you yesterday. So you tried something and it didn't work. But guess what? Now the client knows you do more than remove viruses. They might just call you the next time they have a printer question or need a quote. You've laid the ground work and put your name on their desk one more time.

Good luck. If you hurry you might be able to get some year-end sales if people have money to spend.

:-)

Want to figure out how to make money with Cloud Computing?

Join the Cloud Services Roundtable today
and listen to a great series of podcasts!

www.cloudservicesroundtable.com

Nominations for SMB Awards Open

2011-12-23T06:58:00.000-08:00

Two "lists" are currently taking nominations. Please participate . . . This is your community!

- - - - -

1. MSPmentor 100 Survey Ends Today!!!

See the article at mspmentor.net.

Hard to believe this is the fifth annual MSPmentor 100 survey. Joe P and Nine Lives Media are looking for the world’s top 100 managed services providers.

Nominations ends tonight at midnight Eastern time, 9 PM Pacific. The survey is open to all MSPs worldwide.

Says Joe . . .
"The MSPmentor 100 results will honor The World’s Top 100 MSPs, plus MSPmentor will publish multiple regional lists honoring MSPs in North America, EMEA (Europe, Middle East, Africa) and AANZ (Asia, Australia, New Zealand). And we’ll celebrate the MSPs that created the most jobs and added the most headcount in 2012. Note: We’re still a bit light on MSPs from Central and South America — but we’ll honor MSPs in those regions, too, if we receive more participation. Plus, all survey participants are eligible for our global list."

Take the survey now!

MSP Mentor 100 Survey

Results will be unveiled in February 2012.

- - - - -

2. SMB Nation Accepting Nominations for the SMB 150

Got a memo from HarryB at SMB Nation. Once again, they're working with SMB Technology Network to gather nominations for the SMB 150 list.

You can make nominations right now at http://www.surveymonkey.com/s/W6SXLZ2.

Harry was very clear: You can nominate yourself or anyone else you wish. All you have to do is enter their name, contact info, and a reason for the nomination in that Survey Monkey form.

In early 2012, SMB Nation and SMBTN will generate a ballot with all of the nominees.

Thanks to Harry and SMBTN for providing this resource!

- - - -

:-)

SOP Friday: Hiring Your First Employee

2011-12-23T06:00:00.000-08:00

In November I talked about the Hiring Process for I.T.. Way back in 2008 I discussed Hiring Your First Employee, which covered my personal experiences.

A few days ago I addressed the cost of hiring a new employee. You might want to review that before you read this post.

Today we're going to look at some important things to consider when hiring your first employee. We're not talking about a contract employee or a sub-contractor. I consider these the seven "big picture" policies you should adopt regarding hiring your first employee.

This topic is important because it has a huge impact on your ability to grow and be profitable. Once you have a few employees, you will realize that labor is the most expensive thing in your company. It's hard to see when you're a sole proprietor because you don't pay yourself more or less based on the number of hours you put in.

- - - - -
Sidebar: The Real Expense of An Employee
First, let's remember a few key points about the real expense of employees.

First, being overwhelmed is a reason to address being overwhelmed. Hiring an employee is not necessarily the path to deal with the fact that you're overwhelmed.

Second, firing a few key clients might be more effective and profitable than hiring an employee.

Third, employees cost lots of money. Lots and lots of money. In ways you can't imagine until you've done it.

Fourth, employees have to bring in a lot more than their salary. You're not here to break even.

Fifth, hiring employees means selling more work!

. . . on the positive side . . .

Having employees allows you to grow your company in ways you can't imagine. You can do more things, serve more clients, make more money, and take a day off!

[end sidebar]

- - - - -

With that in mind, here are some thoughts about your first hire.

Thing One: Hire an Assistant First

Why are you hiring an employee? Is it because you're lonely? Probably not. Is it because there's too much work, or you see a bunch of work coming down the road? Probably.

Looking back over the last 16 years as a business owner, and having built more than one corporation with employees, I hold very firmly to this belief: Hire an Assistant First. That means a part time office manager, bookkeeper, general help. This will be someone who can pick up your shirts from the cleaner, run to the post office, get out the billing, file the paperwork, clean the office, and maybe generate quotes, fax contracts, and do a million chores you've been doing yourself.

As a technical service business, we automatically think the first hire is someone to provide technical service. But that's usually not the best choice.

The easiest way to increase capacity for technical service is to free up YOUR time. An administrative assistant will get that done.

There are lots of people out there who just want to work 10-20 hours a week. The best administrative assistant I ever hired was Lana. She had a kid (and then another), and she just wanted to work 20 hours a week - max. For years I asked her to work more and she just wanted to work 20 hours.

If you do decide to hire a technician first, just remember that you will have to train that person and do a lot of new paperwork. So you will lose more hours in your week! Many people do it that way, but it really is the tougher road to travel.

Thing Two: Create A Budget

I won't rehash the articles mentioned above. But seriously consider what it will take to hire someone and to make payroll twice a month (or however you do it).

Create a budget and tweak the numbers until they make sense. Cut a little here, add a little additional labor income. But be very realistic. It is a horrible feeling to lay someone off because you didn't plan right. (Ahem. Trust me.)

Be prepared to take a personal pay cut! Labor is your largest expense. That means money for the new hire will come out of your personal pocket at first. If all goes well, this is temporary, but be prepared if it's not.

In other words . . . PLAN the financing so there are no surprises.

Thing Three: Be Prepared to Train

No matter who you hire, you will need to train that person. In the short run, that means more time off task for you. And that's very hard to do when you are already feeling overwhelmed.

Take a deep breath. Spend some time at home every morning thinking about your business. Commit yourself to slowing down just a little so you can get more done.

Time spent training a new employee is "unproductive" in the short-term, but will make you money in the long-term. Ultimately, people will either be trained, or they will train themselves. If you train them, then they'll do things your way. If they train themselves, then whatever they end up doing is what represents your company. It is better for you to train them!

Read the E-Myth Revisited by Michael Gerber. For lots of reasons. In particular, giving up too much to the new employee.

Spend time each day showing the new hire one more piece of the business . . . and then hold her responsible for what she's been assigned.

Thing Four: Use a Payroll Service

Don't THINK about doing payroll yourself unless you are an accountant or bookkeeper.

Payroll is a monster pain in the butt - even with one employee. You have to keep aside money for deductions for Federal taxes, state taxes, social insecurity, Fed unemployment insurance, state unemployment insurance, etc., etc., etc. And then you have to transmit these large sums of money through a Federal Deposit Insurance bank with cover forms and blah, blah, blah.

Pay $50 and have someone else do it. Period. If you pay twice a month, you will end up with 24 extra filings, plus quarterly reports and filings, in addition to end of the year paperwork. So that's 29 government sponsored opportunities to screw up and have them put a lien on your house. Unless you count state and federal separately, in which case it's 58 extra filings a year.

Give up now. Just pay the $50.

. . . And don't think about paying anything if you can't make those tax payments. The state and federal governments DO have the ability to take away your car, your house, and you birthday. So do not ever run payroll if you can't pay the taxes.

With any good payroll service, you just jump online, enter hours per employee, and click submit. They'll give you reports with amounts that will be withdrawn from your checking. One amount will normally be for net pay (the amounts on the checks) and another amount for taxes.

The payroll service will file your state and federal taxes for you. They will handle quarterly reports. They will generate end-of-the-year W2s, etc. All you have to do is make sure you have cash flow to make the engine run. (Weekly cash flow projection is the topic for the next SOP Friday article.)

I recommend you find a payroll service that does NOT charge for direct deposit and does NOT pressure your employees to open accounts with a specific bank. Direct Deposit is extremely handy for everyone and is a service you can offer employees for free. So do it.

Thing Five: Paperwork!

You might as well start developing a process now. Create a hiring checklist. This includes creating a job description that stands out and is way better than what the competition is putting on Craigslist. If you want some tips, search my blog for "Craigslist." You can start here: Hacking Craigslist for Job Postings.

Your checklist should also include all the practical things you need the first day and the first week. Will the employee need keys, alarm codes, mileage reimbursement forms, email, logon credentials, Autotask or ConnectWise license, Zenith logon, Sharepoint instructions, etc.? You'll have to do paperwork for hiring: W2s, I-9s, emergency contact info. Set up payroll.

All employees must sign a non-disclosure agreement that covers both your intellectual property and procedures AND your clients' intellectual property and procedures. This must be binding even when employment has ended.

Does this person need a desk? A computer? An anti-static strap?

Think of everything you can and write it down. You'll forget stuff. When it comes up, be sure to update your checklist. It's going to be mostly the same with the next employee.

You will want to create a file for each employee. It will include all hiring paperwork. It will be a place to put information on certifications, letters of reprimand, and everything else related to that person's employment. This file should be in a secure place, under lock and key. This file will include their social security number and probably the routing information for direct deposit to their bank account. Don't be sloppy with this.

Thing Six: Hire Hourly Not Salary, If You Can

Many people have a vision in their head that they want to hire a salaried employee so they can work the person extra hours and not have to pay extra money. Well, the world just isn't that simple any more. First, many states have laws either limiting this or actually requiring extra pay for more than 40 hours. Second, if you just have a backlog and not a permanent need for an extra 1,000 hours of billable labor per year, then you'll be paying someone to sit around wasting time and money.

Salary is a much larger commitment. Someday you can make that commitment. But with a first employee, you need flexibility. You need to be able to send them home early, add a shift here, take it away there. You need to manage your employee as diligently as you manage money. It is very easy to let 3, 4, 5 hours get added to a paycheck. Well, see the earlier blog posts on The True Cost of An Employee.

Value every hour you let someone work. It will cost you full price.

Employee time is a bit like buying things on Credit Card. You buy more because you don't have to open your wallet right now. But you will have to open it within a couple of weeks . . . plus worker's compensation insurance, taxes, etc.

Be prepared to manage employees' time. Time = money.

Budget each week the number of hours you can afford. Assume that a few extra will show up for unforeseen reasons.

Give appropriate tasks to appropriate employees. That means, have the less expensive employees do as much as possible. Is a task REALLY technical, or can an admin do it? For example, if you need to send some reports to a client, do you need a tech to do that? One of the most profitable rules in our company is: If it can be done by an admin, assign it to an admin.

Thing Seven: Don't Feel Bad About Hiring People Part-Time

There are people who automatically assume that "employers" are big, rich companies with billions of dollars to spare. And they believe that handing out part-time jobs for low wages is a horrible sin and the root of all evil in America - and the world. Let me give you another perspective: That's just plain bullshit.

I can tell you from experience that there are LOTS of people who are happy to work 10-20 hours a week for $10-$15/hour. This was true before the recession and it's more true during the recession.

You are doing good things for the economy and the people you hire. You are trying to grow your business. You are literally the backbone of the international economy. More people are employed by micro businesses than Fortune 1000 companies! Be proud of that!

No, you can't afford health benefits or 401K's or paid vacations. But you can put money in someone's pocket so they can pay rent and put food on the table. You can buy them lunch from time to time. You can give them a place to hang out during "off" hours and continue their job search for full employment. You can let them use your phones and your laser printer.

When you hire someone, even part time, you give them a chance to get out of the house and contribute to our economy. No one wants to be unemployed. No one wants to sit around in their house feeling the months slip away without making progress toward a better life. YOU - the employer - can do something to help them.

No, you probably don't have $70,000 or $80,000 sitting around so you can give someone a "great" job. And you can't guarantee their employment for five years. But you can do something. You can do something that makes your business stronger. You can do something that helps someone get back in the job force. You can help someone pay the rent.

The kindest thing I can say about the Occupy Wall Street people is that they are overwhelmed with an economy they can't control. In the meantime, they are completely ignorant about the realities of running a business and trying to make a living as a self-employed worker. And they're really, really bad at math!

Ignore the bullshit.

This little mini-series on hiring your first employee has laid out some of the hard facts about making the jump from a one person company to a two person company. It is hard. And it is expensive.

You know that you might fail before you start. You take a bunch of your hard-earned money, and you place a bet on a stranger to help your company move to the next level. If you fail, you're back to being a one-person shop and trying to figure out how to re-calculate your future. If you succeed, you are NOT an evil mega-corporation.

Scary Fact: In my own experience, and with many consultants I've talked to, it is very likely that you will make about the same amount of profit with one employee as you did with none. If you don't manage it right, you'll make the same amount with two employees as you did alone. Really.

So you need to create a company that can actually make more money with employees than you did without. You have to be prepared to do things differently. And you have to focus on that bottom line.

I met about 1,000 new friends this year as I traveled around the country. Most of them are sole proprietors. Most of them have all of their wealth tied up in their business. They rely on their own wits and hard work to make enough money to pay the rent, make the car payments, buy food, cloth their children, . . . and maybe have enough money to keep one employee's family housed and fed.

I applaud every one of these hard working people. You deserve to be held up in honor as the backbone of America, not derided as evil because you can't pay an entry level technician $60,000 plus 401k.

Be proud of what you do, and what you contribute to our economy.

And if I can help you figure out how to hire someone and stay profitable, let me know.

Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Cash Flow - Weekly Procedure

:-)

Still the best Quick-Start Guide to Managed Services:

Service Agreements for SMB Consultants: A Quick-Start Guide to Managed Services

by Karl W. Palachuk

Now only $39.95 at SMB Books!

Save Big Money Right Now on Robin Robins' IT Sales and Marketing Boot Camp

2011-12-21T08:21:00.000-08:00

Join Me In Nashville April 11-14 for Robin Robins' IT Sales and Marketing Boot Camp.

If you sign up right now you'll get a free iPod loaded with all the presentations for the last two years. That's some awesome stuff!

Plus a copy of the MSP Online Marketing Toolkit

Plus save $500 right now!

Here are the deets from Robin:

- - - - -

Hey Karl,

Before you take off this week, please take 60 seconds to check this out...

We've recently opened registration for our annual IT Sales and Marketing Boot
Camp, which is our annual BIG event where the best and brightest IT business
owners, marketers and sales pros come to Nashville to share, collaborate and
learn fresh NEW strategies for marketing and selling IT Services (cloud, backup,
managed services, network upgrades and more):

http://www.robinsbigseminar.com

But here's why you want to go to the above site before the holidays...

From now until December 31st, we're giving away a FREE iPod to the first 50 who
register, PRE-loaded with the audio recording of the last 2 years' Boot Camps...

...PLUS, I'll give you a free copy of the MSP Online Marketing Toolkit, which is a
marketing 101 course for any IT business who needs to do a better job marketing
online via their web site, e-mail, Facebook, SEO, Google AdWords, etc.

You can also get $500 off your ticket right now with Early Bird pricing:

http://www.robinsbigseminar.com

Of course, the iPods will go fast and the MSP Online Toolkit will end on
December 31st. You can lock all this in with a flex pay plan AND we have a
BETTER than money-back guarantee on your registration.

If you have any entrepreneurial passion to really grow your business and start
generating serious profits, this event will give you tons of relevant ideas,
resources and the right direction you need to make that happen in 2012.

At least check it out:

http://www.robinsbigseminar.com

Dedicated to your success,

Robin

- - - - -

See you in Nash-Vegas, Baby!

:-)

Not Training IS Training

2011-12-21T06:00:00.000-08:00

My daughter recently got a dog. Like many (too many) dog owners, she rationalized that it didn't make sense to begin training the dog until it was in a stable environment. All the moving around during the Summer was too confusing for the pup. And the Fall semester at school was too hectic. And then she moved to a new apartment.

Guess what? The dog's six months old and trained . . . to bark. Trained to go where she wants. Trained to chew what she wants. Trained to eat whatever she finds.

In other words, NOT training is training.

So now we're beginning real training.

If you have kids, clients, or employees, you know it's the same story.

If you don't set down the rules, people figure out for themselves what's okay, what's acceptable, and what's preferred. Without your feedback, they try different things and continue doing whatever works.

This is why we have formal training. If you just send your technicians (or office staff) off to do their best, they will probably do well. But they won't do things YOUR way, and they won't do things consistently. It will cost you time and money. And it might cost your business it's reputation.

Similarly, with clients, if you let them do whatever they want, it will cost you time and money and freedom.

Consider the client who calls you at ten o'clock at night. If you answer, and help them, and don't charge extra, then you have trained them that it's okay to call you at night. If you stay at their office until six or seven or eight PM, then you have trained them that those are your hours.

It is sometimes hard for people to believe that their clients won't all leave if they say "no" to things like this. But trust me: They won't leave! Most businesses have reasonable rules and regulations. They have reasonable hours (e.g., 8:00 AM to 5:00 PM, Monday through Friday).

If you set such boundaries and enforce them, then clients will simply accept that you have reasonable limits. If you let them take advantage of you, they will. It's not a malicious thing. They're not trying to take advantage of you. They are just doing whatever they want because they have not bumped up against any limitations.

By not training your clients, you are training them to do what they want.

Look at what your clients do. They have reasonable hours. They charge for after-hours support. They are closed two days a week. They don't answer the phone in the middle of the night. And somehow, they're successful enough to pay your bill.

Yes There Are Exceptions

When I travel and speak, I frequently mention that we work 8:00 AM to 5:00 PM Monday through Friday. And 99.99% of the time, the first question I get is "Do you mean you never have to fix a server in the middle of the night?"

Well, well sell business class HP equipment and it's required to be under warranty. So, to be honest, machines don't break in the middle of the night. It has been YEARS since we've had a real after-hours emergency.

But, sure. If there's an after-hours emergency, we'll deal with it. We'll work on weekends for $300/hr.

There are exceptions to our rules. Same at the doctor or dentist who has to come in on their day off. Shit happens. We deal with it.

But we don't create a rule based on the exception. The exception exists because we have a rule. Too often, people use the exception to justify not having rules and not training their clients and employees.

Don't be afraid to start laying down the limitations and enforcing them. It's really not difficult. And it will make you happier and more profitable!

:-)

Check Out the #1 ranked Managed Services book at Amazon:

Managed Services in A Month

by Karl W. Palachuk

Buy it as a printed book, Audio CD, or ebook!

SMB Nation Announces Dates, Theme for 2nd Annual MVP Nation Event

2011-12-20T07:00:00.000-08:00

Regina over at SMB Nation forwarded this press release to me. SMB Nation's MVP Nation Event will be at the Microsoft Conference Center, Redmond, Wash., on March 2-3, 2012. Here are the deets:

- - - - -
Bainbridge Island, Wash. – November 8, 2011 – SMB Nation announced today that it will hold its 2nd Annual MVP Nation event at the Microsoft Conference Center, Redmond, Wash., on March 2-3, 2012. Based on the theme “Best & Brightest,” the conference is being touted as one that is geared toward those who “have what it takes to be the Best and Brightest in the IT Industry.”

MVP Nation will offer attendees the rare opportunity to learn directly from the esteemed Microsoft MVPs in a deeply technical environment. With a focus on the new Windows 8 technology, the two-day event will allow attendees to create their Windows 8 road map.

The event is one that is a gathering of three well-established communities:

The Microsoft Most Valuable Professionals (MVPs), who are award-winning technical experts focused on all Microsoft product groups.
Community members, who rarely have the opportunity to interact directly with the MVPs in a public event setting. Community members include IT Pros, consultants, resellers, channel partners and in-house IT staff.
Community sponsors, who can connect with MVPs and attendees to create amazing technology products and services.

“After our first MVP Nation last year in Seattle, we’re back with a focused two-day deep dive on everything Windows 8,” said Harry Brelsford, Founder and Chairman, SMB Nation. “The primary emphasis will be on server-side topics along with content on desktop, mobility and tablet issues.

Windows 8 is a topic that impacts everyone--whether you are an IT pro, developer, user. This event is for everyone who wants a deeply technical experience, which we have likened to “graduate school for geeks.” We joke that no “wimps” are allowed at the two-day brain explosion!”

This year’s MVP Nation event will follow the long-standing private and closed annual Microsoft MVP Summit that traditionally brings in 2,000 MVPs. MVPs represent more than 100 product groups. The MVP Nation event will provide an opportunity for both attendees and sponsors to meet and learn from the MVPs. In addition, the speaker roster for this year’s event includes many MVPs who will possess the latest Windows 8 information, since they will have just come from briefings held at the Microsoft MVP Summit.

MVP Nation has already gained support from an enthusiastic and well-known sponsor community including: D&H Distributing, Cisco, Microsoft, Intel, StorageCraft and many others that are well-known in the SMB community.

“First and foremost, we are community. We’re from the community producing a community event supported by the community and attended by community members. How cool is that?,” Brelsford said. “Beyond the amazing SMB Nation staff and tribal membership, we have enjoyed fantastic support from like-minded similar communities including the MVPs, user groups, trade associations and other affinity entities. And most importantly, we really recognize and realize the warm welcome we’ve already received from Microsoft Redmond. For the first time in years, an SMB Nation event returns to the Microsoft campus at the amazing conference center. We hope that our efforts satisfy the Windows 8 hunger of the technology community!”

For more information and to register for MVP Nation 2012, please visit mvp.smbnation.com.

- - - - -
:-)

Two Great Managed Services Resources:

Service Agreements for SMB Consultants: A Quick-Start Guide to Managed Services by Karl W. Palachuk
- Still the best Quick-Start Guide to Managed Services!

Now only $39.95 at SMB Books!

and

Managed Services in A Month by Karl W. Palachuk
- Check Out the #1 ranked Managed Services book at Amazon!

Buy it as a printed book or ebook!

The Cost of an Employee

2011-12-19T08:00:00.000-08:00

File this under "Massive slap in the face after being splashed with cold water."

In my SOP Friday series I have discussed The Hiring Process for I.T.. Next Friday I'm going to talk about Hiring Your First Employee.

But there's a bit of business to take care of before that: Do you have the money to hire your first employee?

This topic is important because it has a huge impact on your ability to grow and be profitable. Once you have a few employees, you will realize that labor is the most expensive thing in your company. It's hard to see when you're a sole proprietor because you don't pay yourself more or less based on the number of hours you put in.

(Note: Adjust figures as needed. Percentages are probably about right, but you might pay more or less, and make different assumptions regarding all numbers. It will be a good exercise to run the numbers for yourself, in your business, in your state/city/country.)

The Real Expense of An Employee

It's important to make a very rational decision when it comes to hiring. Yes, you're super busy and maybe even overwhelmed. But that doesn't necessarily mean that hiring someone is the answer. With employees come liabilities.

First, the employee will cost money. Let's say you pay $20/hr. At half-time, that's $400/week. At full-time it's $800/week. Then add Social Security, state unemployment, federal unemployment, and all the miscellaneous taxes. Depending on your state, this could easily be in the range of 10-15% extra.

Second, there's insurance. At a minimum, you have to have worker's compensation insurance. That's required by law. You have to decide where to get it. Absolutely shop around. You will pay way too much the first year, and less the next year. You'll need to shop this every 2-3 years for the rest of your life. Figure another 5-10% of gross wages.

You might also decide that this is the time to tune up your business errors and omissions insurance. If you don't have it, now's the time to get it. Then there's general liability. You have to be covered in case your employee backs his car into a client building, or blows up a $5,000 server. Depending on coverage and insurance company, figure $1,000-$1,500 a year for both.

Then you'll have to pay the employee for gas/mileage. Starting January 1, 2012, the federal rate is 55.5 cents per mile. If an employee makes ten client visits a week, at 20 miles each way, that's 400 miles or $222/week. Just over $11,000 for the year!!!

You'll end up paying for some meals for your employee. It might be McDonald's, but it's still $5 here and $10 there.

Your employee will need a desk and a chair. You might provide a computer, a waste basket, and some other niceties. Most of these are one-time costs.

You should have a PSA system (Autotask, ConnectWise, Tiger paw, etc.). So there's another license expense there.

Will you pay health benefits? Depending on the plan and the employee's age, this could be anywhere from $150/month to $1,000/month. It is best to wait on this if you can. Remember, this is a highly regulated element of employment, so you have to offer the same thing to everyone.

Again, what about 401K or some other defined benefit program? X% off the top. And you have to offer the same thing to everyone. And again, you will probably want to wait on this.

In all, expect to spend about 40-50% extra in additional costs for every hour of labor paid. You can only cut so many corners here. Let's figure low and add 40%. So your $400/week employee really costs you $560/week and your $800/week employee costs you $1,120/week.

Assuming there are unpaid days off somewhere, multiply those numbers times 50 weeks to get the real cost.

Let's do some rounding down. So without any benefits or health insurance, your $20/hr employee will cost you about $50,000 a year.

It is critically important that you get this straight in your head: That employee does NOT have to earn you $50,000 to pay for himself. You will have to train him, monitor him, work with him, and take YOUR time away from other things in order to make him productive and profitable.

Breaking Even is Not Profit

You've got an employee that costs you $50,000 plus a bunch of your time. Now consider how much money you need to bring in to make that worthwhile.

It's not $50,000. That's really not even breaking even. Give your extra time, hassles, and all the government forms, let's call the cost $60,000.

With all the money and all the hassles, how much does this employee have to bring in to make his presence worthwhile? An extra $10,000? An extra $20,000?

DO NOT fall into the trap of hiring someone just because you're overwhelmed. It might be easier to DROP a handful of really small clients rather than climb the mountain that leads to being an "employer." It might be more profitable to fire a couple of clients!

There are many paths to get away from being overwhelmed. Don't assume you have to have employees.

Let's assume you want this new employee to net you a modest $10,000 in extra profit.

That means you have to be able to BILL (and collect) an additional $70,000 the first year.

That seems like a big number, but it's very manageable. Remember that no one is 100% billable. You should be able to make your new employee about 50% billable the first year and 60-65% billable the second year. 50% means that you will pay him two hours labor for every hour you are able to actually bill a client.

That means you'll max out at about 20 billable hours per week. Multiply that by 50 weeks and you have 1,000 billable hours. If you charge $100/hour, that's $100,000. Looks easy!

That always looks so good on paper.

But it never works out that way in the real world.

You will work your ass off to reach these numbers. It is possible. But YOU and your employee need to be focused like laser beams on making billable hours the highest priority.

You can do it.

But it's much harder than it looks.

Where Do You Get $70,000?

Let's stop staring at that $100,000 number. Maybe next year. For now, let's focus on the more realistic $70,000 figure.

If you're a sole proprietor, that still looks like a huge number. You might have ten clients paying $1,000/month for a total of $120,000. So an extra $70K is a huge increase. How is it even possible?

Well, here's where you have to have a strategic plan. Do not fall in love with the idea of hiring employees until you have a plan.

It starts by dividing the problem into manageable chunks. Start by putting your new employee on standardized monthly and weekly procedures. For example, if he can knock out all of the client monthly maintenance checklists, he will touch every client machine AND learn your processes more quickly.

Next, divide up that $70K into weekly goals. You need to bill about 14 hours a week to reach that goal. So maybe give the tech a personal goal of three billable hours per day. And schedule the work in your PSA system so that the first three hours of each day are billable. If you can do that regularly, you'll have 15 hours/week!

Scheduling the truly billable work first thing each day will ALSO show you that it's not as easy as it looks. ;-)

The good news is: You went down this path because you're overwhelmed and need someone to help with the work. Just make sure it's billable work. So you've got a backlog. Put the new tech on the billable stuff.

The bad news is: If your tech is any good, he'll knock down your backlog in short order. This is actually a good argument for hiring someone half-time if you can. That way you have a longer lead time to generate additional labor and clients.

Another way to divide up the $70K goal is to figure out how many new clients you need to add. What's the size of your average client? How many servers? How many workstations? How many hours does it take to support them? How much money do they bring in?

Define an idea client. Then go out and start selling.

Work will not magically appear! I know you know that. But many people just don't accept the fact that they need to sell themselves in order to get new work. If your target client has 20 desktops, one server, and brings in about $1,700/month, that's $20,000 a year. Great. You need three of those. That's $60,000 plus project labor. That should get you to $70,000.

. . . Ugh . . .

Did you see what just happened? You became the sales guy. At least you became the person who needs to sell three ideal clients this year. In addition to all your other work. And you've lost a certain amount of your time managing an employee and dealing with all the paperwork, taxes, forms, insurance, and personnel issues.

It's hard . . . it's really, really, hard to hire that first employee. And it's a hard year ahead to make it work. As I've mentioned before, it took me several attempts to build a business that could support additional techs.

Now it's easy. But of course we have lots of clients, and we have processes in place. Building that from the ground up is hard work!

If you haven't already read it, PLEASE do yourself a favor and read The E-Myth Revisited by Michael Gerber. He tells the story of someone who started to grow, hired an employee, dealt with the "stuff" around that, lost the employee, and developed a successful process for moving forward.

This is hard.

But it's very possible! Millions of businesses have figured out how to do this! You can do it, too!

I didn't write this to discourage you. I wrote it to make sure you proceed with your eyes open. It's hard, but it's possible. And when you come out the other side as an employer that knows how to manage employees for maximum effectiveness, then you're on your way to a whole new world of entrepreneurship.

Stay tuned on Friday for my SOP installment on Hiring Your First Employee. December 23rd at http://blog.smallbizthoughts.com.

:-)

Scuba Santa

2011-12-17T13:39:00.000-08:00

My friend Allen Miller from Cincinnati has a pretty cool Christmas job: He's a scuba-diving Santa at the local aquarium. Check it out.

If you're in the area and want to see the show, visit http://www.cincinnatiusa.com/Events/detail.asp?ProdID=91743

Allen volunteers year round to go diving in the aquarium in order to help clean the facility. Then in December he spends his spare time entertaining the kids (and grown-ups, too, I'm sure).

Just another I.T. professional enjoying his hobby and helping the community!

There are a few more pix online at https://picasaweb.google.com/110151869371345559645/SantaTemp?authkey=Gv1sRgCOnclIGJ5baPcA

Allen is a member of the I.T. Pro user group and helped us have an extremely successful visit this year. Can't wait to go back. I love Cinci and look forward to going back.
:-)

SOP Friday: Activating and Registering Client Software and Hardware

2011-12-16T07:40:00.000-08:00

One of the most annoying things you'll ever come across is a new client who doesn't "own" the software on their systems. Their hardware is not registered to them. They have no warranties. The services that must be registered are not in the names or emails of anyone in the company.

In most cases, this client has no documentation.

So the former consultant disappears one day, or gets fired. You come in and look around. You can't log into the firewall or the server. Eventually you have to replace the firewall, crack into the server, sell the client a bunch of legal software and new hardware. You get the idea.

In end, you have to charge the client thousands of dollars for the goods and services they supposedly already bought from someone else. It's a horrible, despicable situation.

This kind of behavior makes me ashamed to be in the same business as these consultants. They are thieves and low life scum. But we see this again and again.

One of the reasons I developed the documentation that eventually became The Network Documentation Workbook is to guarantee to my clients that I would never leave them in such a situation. As I say in that book, the client owns the software, the hardware, the network, and the documentation. It is dishonorable and dishonest to leave them in the situation described above.

Your policies around software and hardware should focus on more than the basic rule that you should act honorably. Your policies should be clear, honest, and provide a sustainable process that contributes to the smooth operation and future profitability of your client.

Here are some basic policies we use to manage software and hardware with out clients.

Software Policies

- Installation
When we sell software to a client, we always install that software. Unless there are extreme circumstances, we install the software and we charge the client for it. Our managed service agreement states that all software must be installed by us. In addition, it states that all labor necessary to fix machines after someone else (including the client) installs software is billable.

It may not seem to you or your client that software installation is a skill worthy of a $125/hr technician. But it is. If you don't believe me, watch three or four of your clients install software. They put things in strange places. They don't choose the right options. They do it differently every time.

This is what you do for a living, and you will be careful to make sure that you can support the software you install. If the client does it, you don't know what actions they took or decisions they made. That can make it more expensive for you to support.

- Activation
We always activate software. Whatever the process, we make sure that this is taken care of. Some clients react favorably to a popup that asks them to activate software. Others will call on the phone or even log off their computer. It is a simple thing to activate the software and make it a non-issue.

This also eliminates the question of whether the installation is complete, so you can check the last box on the installation checklist!

- Registration
We generally do not register software unless it is required for support services. Normally, registration benefits the manufacturer and not the purchaser. It results in spam but few benefits, if any.

Of course, if product activation requires it, then we do register the software.

- Licensing
All licenses must be legally registered/recorded in the client's name. They paid for it. It's their's.

Hardware Policies

- Registration
As with software, all hardware that needs to be registered should be registered in the client's name. The same arguments apply.

- Lifespan
It is our core belief that a business class machine’s useful life is 3 years. Even if it is in perfectly working condition after three years, it's truly "useful" life is over. It is slow by today's standards. The hard drive is too small. It doesn't have enough memory. It doesn't have the latest ports and hardware options.

- Upgrading Hardware
We do not upgrade hardware in machines that are more than 3 years old. It has been our repeated experience that either there will be a significant loss of time vs. profit just getting the correct parts from our supplier, or some other hardware issue will exacerbate the scenario such as the motherboard failing after the memory is installed.

The only two possible exceptions are:
1) A retrofit (not upgrade) of a business critical machine in an attempt to keep it alive long enough for its replacement to come on line.

2) We have explained our position to the client and the client is willing to pay for the time to find the correct parts, plus all time for installation and troubleshooting of issues arising from that installation.

It is highly unlikely that any one client would ever be so endeared to a machine that they would select option 2.

Documentation

All hardware must have a Machine Specifications ("Machine Spec") sheet filled out and placed in the The Network Documentation Binder.

All licenses, software, warranties, and hardware registration information should be documented in the Network Documentation Binder and in the PSA system (under "configurations").

Storage

For every machine (server, desktop, printer, firewall, etc.) there is a pouch-type folder. If there is physical media for an application, it is stored in a folder for the machine on which it is installed. The same is true of warrantie and license information.

If there is electronic media, such as a downloaded application or update, those files must be saved in either the C:\!Tech or the D:\!Tech directory. See the SOP Friday article on The !Tech Directory.

The Most Important Process

The most important process regarding software and hardware is that it should be registered to the email address Administrator@[client_domain].com. If a human name is absolutely required, you can enter in the primary contact. But the email must be the administrator account for the client's domain.

Sometimes we think the primary contact will always be there. Maybe it's the owner. But time and time again, something happens so that the email changes, the company gets bought, the contact gets another job, etc. It is therefore critical that software (warrantees, etc.) be registered to an email address that you will always have access to. That way, you will always be able to deal with renewals or other issues, even if the primary contact is on vaction or gets hit by a bus.

All registration information must be recorded in the Network Documentation Binder and in the PSA system.

Implementation Notes

Implementing these policies follows a familiar pattern. First you need to decide on your policies. Then you need to write up your policies. After that, you'll meet with your staff and make sure they understand your policies.

These processes include policies on how you register software and hardware; storing physical media; storing electronic media; upgrade policies; and more. Don't think that this is a simple little policy. These inter-related policies affect sales and long-term goals as well as simple documentation.

When you have properly registered and documented software and hardware for your clients, you provide them with much more than the basic "proof" of ownership. When properly documented and stored, you'll have everything you need to recover or replace the client's systems in case of flood, fire, theft, or some other insurance-related incident. In fact, you'll have documentation you can fax right to the insurance company. For licenses, you'll save the client thousands of dollars because you won't have to re-buy licenses for damaged or stolen machines.

Over the long run, having all of this information properly registered will make upgrades easier to manage.

It will also make it easier for you to "retire" old equipment without leaving all kinds of software and paperwork behind. Because everything related to a specific machine is where it belongs, and where you can find it, cleaning up is easy.

How cool is it to donate old machines to a charity and include all the relevant paperwork and documentation?

As you can see, this simple-sounding process works its way into a great deal of the smooth operation of your business. Over the long run, this will make both your business and your client's business run more smoothly and profitably.

Your Comments Welcome.

- - - - -

About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

- - - - -

Next week's topic: Hiring Your First Employee

:-)

Check Out Erick Simpson's
Network Operations Center Operations Guide
The Best NOC and Service Desk Operations Book Ever!

by Erick Simpson

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Network Documentation Workbook - A Guide for Small-Medium Business Windows Administrators

2011-12-13T19:40:00.000-08:00

I set up a small page dedicated to this book. You'll find it at www.networkdocumentationworkbook.com. Please also see an older bog pst about this book.

This book is out of Print. It is available only at an e-book. he e-book version is only $79.95.

Basically, we've had a nice long run. Maybe someday there will be a version 2.0. But for now, this book is out of print.
The e-workbook is delivered as:

A zip file with
The book in .pdf format 8.5" x 11"
and the CD as an ISO image

You get the entire book and CD as they were originally published. That means all the forms in both .pdf format and .doc/.xls format, so you can customize them, update them, and add your logo.

If you do not have Roxio, Nero, or another CD burning software that easily creates CDs from ISO images, we recommend the ISO Powertoy at http://isorecorder.alexfeinman.com/isorecorder.htm.

We all say we need to document that network someday. Well someday is here!

The Network Documentation Workbook came out of the standard procedures of KPEnterprises, a small business consulting firm in Sacramento, CA. The "Consultant Edition" allows you to document all of your clients' networks. You get all the forms on CD-ROM in both Word and PDF format.
You can customize them for your operation, including putting your own logo on the forms.

Product Description

This book is guaranteed to improve your business. Thousands of companies have used this book to improve and standardize their processes, document their client networks, and take their businesses to the next level -- and so can you!

Buy Now! Only $79.95

Book Specs:

Paperback: 8.5" x 11"
Consultant Edition includes all forms on CD-ROM
Publisher: Great Little Book Publishing

	Download Table of Contents	Download the Beginning of the Book	View a Sample form (Router Configuration)
	pdf	pdf	pdf

- What's the password to the firewall?

- Which IP address should I assign to the new printer?

- How much memory's in the boss' PC?

Everyone knows you have to document your network, but everyone hates doing it! The Network Documentation Workbook will make this chore as easy as can be.

Whether you are a Network Administrator looking to document one domain, or a Professional Consultant looking for a standard approach to documenting dozens of networks, this workbook is for you.

This is not a big fat book of theory. It includes the forms,with explanations and examples, and best practices for documenting small business networks.

My approach is to create a binder that includes all the important documentation for your network: Windows domain information, server configurations, IP addressing, password — Everything! You'll get everything from a Table of Contents to a Monthly Maintenance Checklist, all ready to be copied into your binder.

The Consultant Edition includes a CD with all forms in Word and PDF formats. You can customize the word docs with your logo, etc. The Consultant Edition allows you to document all of your clients' networks.

Buy Now! Only $79.95

What They Say About
The Network Documentation Workbook:

"When my laptop got stolen the thing that upset me most was the loss of your Network Documentation Workbook CD-ROM. My documentation has never looked better!"

— Kristina Baker, MCSE, CCNA, ASE, etc…
System Design Engineer
HealthTech Solutions, Inc.

"We've used Karl's documentation book for roughly three months and in that time we've been:"

"Able to reduce call volume for basic questions when other vendors needed to interact with the network (when the new copier was installed for one of our clients they were able to find the documented SMTP server along with the SMTP auth username and password)"
"Able to provide an off-site copy of the network infrastructure so we could plan the upgrade without an on-site visit. Because the template was filled out and stored on our SharePoint we were able to review the network and find out exactly how many components, connectors and cables we needed to bring to order."
"Able to bring the new techs up to speed much faster by letting them review network topology, settings and inventory from our SharePoint."

— Vlad Mazek,
The SBS Show, Exchange Defender, Own Web Now

"Karl's approach is great. He has taken a monotonous, boring task and turned it into a sales tool."

— Beatrice Mulzer, Author,
Microsoft Small Business Specialist Primer & 70-282 Exam Preparation Guide, and other books

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SOP Friday: Running Regular Financial Reports

2011-12-09T06:00:00.000-08:00

It always strikes me as odd that business owners hate dealing with money. I know, we didn't get into business to count pennies, balance QuickBooks, and mess with the messy side of finances. But this is not a hobby. We did go into business. And businesses exist to make money for their owners.

I've written several articles about finances, especially some year-end commentaries. You should add them to your SOP reading (see "Related Articles" at the end of this post).

This article is about the Financial Reports you should be running on a regular basis. "Regular" does not mean every report needs to be run every month. There are weekly reports, monthly reports, quarterly reports, and annual reports.

Setting Up QuickBooks

As you know, you need to set up QuickBooks with the correct categories so that you can track money. Your details will be different from my details. But however you set up your categories, you need to keep track of three primary elements: Income, Expenses, and Profit. For our purposes, income and revenue are interchangeable.

Never, ever, ever confuse revenue with profit. Revenue - Expenses = Profit. Everyone wants to brag about the client that pays them $10,000 a month. I'll take a buncha those. But no one brags about the client who costs $9,500 a month to support. Here's why.

Let's say client #1 brings in revenue of $1,000 a month and costs $500 to support. Profit = $500.

Let's say client #2 brings in revenue of $10,000 a month and costs $9,500 to support. Profit = $500.

Which client would you rather have? Client #1 - because they're a LOT easier to support. That "big" client is a pain in the butt. I know that because they used to be my client. I fired them because they were taking all the administrative time in our company and producing the majority of stress in my life.

How do you know whether a client is profitable (and how profitable)? Well, you need to set up your QuickBooks properly. Then you need to use it religiously. You need a good PSA system, and you need to use it religiously.

One of the key things we had to work out with both ConnectWise and Autotask is the accurate tracking of time spent on a client. This includes all the unbillable or "covered" time that's included in managed service agreements and projects. We like to run flat-fee projects. It is critically important to keep track of time so that we know whether a project (or a month of managed service) is profitable or not.

I have covered this extensively in the Super-Good Project Planner for Technical Consultants and in various articles and audio programs.

If you spend 40 hours on a project that brings in $5,000, are you profitable? How do you know? What do you track? What's your real cost? Between QuickBooks and your PSA, you should be able to figure this out.

Weekly Reports

Your only real immediate need for information has to do with cash flow. Can you pay the bills coming up? Later this month I'm going to present our Cash Flow Weekly Procedure. Bascially, you need to track all the money that's coming in and going out so that you know what needs to happen between now and the next payday, or between now and the end of the month. Keeping track of finances in real-time will give you great clarity on what you should be doing with your time.

Another weekly report you should run is employee utilization. It's not as critically important as cash flow, but employee utilization reports provide you with some very important variables you need to track profitability -- and to make accurate estimates for future profitable projects.

Employee utilization reports tell you how much money you're making on each technician. To do this, you need to have your PSA set up properly . . . and you need to be using it.

Employees need to keep accurate track of their time. That means they need to be working in real time. When that happens, you can accurately track time spent on administrative tasks, managed service labor, and truly billable labor.

For small shops, don't be surprised at all if your technicians are about 50% billable. That sounds low, but there are all kinds of reasons for it, especially if you don't bill for travel time. When technicians drive all over the county doing small jobs, the billable percentage goes down. When they sit at their desk doing remote support, billability goes up.

Let's say you have a tech who is paid 40 hours a week. You have one big service meeting and two little ones in a week. That's two hours. He spends an hour each day checking email (4 x 15 minutes). That's another five. If it takes 20 minutes to drive to the average client and he visits two clients a day, that's 400 minutes a week or about 6.5 hours. And, because you're a nice boss, you pay him for half an hour a day to study for the Small Business Specialist exam. That's another 2.5 hours. Total non-billable time is 16 hours.

24 billable hours divided by 40 hours = 60% billable.

(Note: That "billable" time might be covered by managed services. Don't confuse yourself around this. You are being paid for it. You need to track it as billable time to differentiate it from truly not-billable time.)

How do you use this number? We'll have a separate SOP article about that. But here's a quick example. Let's say a project takes 60 hours. Your tech is 60% billable. Therefore, you need to pay your technician for 100 hours in order to have 60 available to sell on the project.

Monthly Reports

In the End of Year Finances - Pt 2 article referenced below, I talk about some of the monthly reports you need to generate. These include:

1. Largest Months. This is a list of the largest sales months in your business history. I produce a list of the twelve largest months. Ideally, these will be the twelve most recent months, but that's just not the case. If the month just finished is on the twelve largest ever, then you have an update to this report. Otherwise, no update.

2. Most Profitable Months. Remember, the largest sales months are not the same as the most profitable months. Ideally, they will, but that's not the reality of the business world. This report is interesting because it keeps your analytical mind aware of the fact that revenue and profit are not the same. When your emotional mind gets excited about a large sale, your analytical mind will step in and inquire about profitability.

3. The Largest Clients. You might report this for the previous twelve months, three months, or one month. In fact, you could substitute "Most Profitable Clients" for largest clients. The report you choose to generate is not as important as the fact that you generate it. You and your employees should know where the money comes from.

Sometimes, loud and troublesome clients are not the largest, or the most profitable. Don't leave a $5,000/month managed service client hanging because a break/fix pain-in-the-butt client is making a lot of noise.

There are many other reports you can generate, but don't get too fancy unless you business is large enough to actually get value from the reports. This might include

- The total number of service requests opened and closed in the previous month
- A breakdown of Priority 1, 2, 3, and 4 service requests in the previous month
- Clients with the most SRs in the previous month
- Clients who consumed the most hours in the previous month
- Average time to close a P1 service request (and P2, P3, P4) in the previous month
- Earnings per employee
- Sales per sales person
- EBITDA % (earnings before interest, taxes, depreciation, and amortization)

Quarterly Reports

You can do a number of these reports on a quarterly basis, whether calendar quarters or a rolling 3-month report.

But the most important quarterly report you can generate is a simple 1-2 page "Quarterly Report" to deliver to your company at a meeting. This report is more of a narrative to let them know how you're doing, what's working, the challenges you face, and where you want to go in the quarter ahead. Here's the kind of thing you might include:

- Overview. For each of the major goals for the quarter, how did you do? Report on employees hired and departed.

- Profitability. Are sales up, down, or even? Are they on target? Is profit up, down, or even. Is it on target?

- Major goals for the new Quarter.

- A reminder or two about the vision and mission of your company. Tie these into the quarterly goals and activities.

- If you have written 1-year and 5-year goals, how are you progressing? How will the actions of the next quarter affect that?

Annual Reports

Annual reports are another thing. There's an old maxim that you have to start acting like the company you want to be. I've seen clients who will never be publicly traded, but they acted as if they were because they wanted to grow their companies significantly, and big companies make annual reports to their shareholders.

An annual report is a combination of all of these. It presents the finances with a little deeper analysis. It also presents a discussion of the goals and vision/mission with a deeper analysis. You might not write out your annual report for your employees, but you should absolutely go over it with all stockholders (including your spouse) and managers.

The end of the year/beginning of the New Year is an "obvious" time to get started on these reports. But there's never a bad time.

Of course i recommend a binder with tabs. Once you have someone to help with your finances, you can just show them how to run the reports you want and put them in the binder for you. That way all you have to do is review the information.

Sole Proprietor? To be honest, generating all these reports yourself is a GREAT exercise in understanding how money flows in, through, and out of your company.

As always, you need to find a system that works for you. But you should put significant emphasis on the financial side of your business. Remember two key lessons. First,

You will get better at whatever you put your attention on. (Palachuk)

and

What gets measured gets done. (Peter Drucker)

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On related cash flow topics, see SOP Friday: Cash Flow: Dealing with Late Payments and SOP Friday: Cash Flow: Getting Paid in Advance.

Related Articles:

- End of Year Finances - Pt 1

- End of Year Finances - Pt 2

Your Comments Welcome.

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About this Series

SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.

Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.

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Next week's topic: Activating and Registering Client Software and Hardware

:-)